Senate Budget and Fiscal Review Subcommittee No. 4 on State Administration and General Government
No chapters available yet
Legend
Transcript markers
- text Sentence being played
- text Search result
- text Intervention cited by the link you opened
Click a sentence to play the video from that moment. Select text to quote it with the speaker, timestamp and link.
More options
Speaker 5
That's an initiative statewide initiative where we're trying to put those principles into practice. Since 2022, GOBIS and our partners at the labor agency, we've worked very closely on this to make sure we're addressing both the business and the labor side. We've spent $400,000,000 through the regional investment initiative to support regional planning, project predevelopment, shovel ready projects from health care and child care to workforce training, and small business assistance among other initiatives. In February 2025, the governor released the California Jobs First Economic Blueprint, and hopefully, you all received a copy of that. It is the state's first economic development strategy statewide in more than twenty years, lifting up priority sectors that have been identified through that regional process with the goal of retrain with re retaining, attracting, and increasing access to good paying jobs for our people.
The strategy that was outlined in the blueprint was developed through a community led bottom up process. So we basically divided the state into 13 regions, and then we spent time working with the local partners in each of those regions to design and draft regionally based strategies that could speak directly to the unique identities of each of those regions from the Central Valley to the Inland Empire to the North State to our big urban cores in LA and the Bay Area. So together with those 13 regional working groups, we received feed feedback from over 30,000 Californians, probably more, but we're conservatively saying 30,000 residents and experts and stakeholders to and their input into each of those regional development plans, and they've all been certified now as comprehensive economic development strategies by the US economic and development economic development administration, which means they're eligible for additional federal funding. That's never been true in the state of California before. So you have in front of you what we call the placematter.
It reminds us of toddler placemats for protecting from cereal bowls. But, anyway, it kinda lays out the main tenets of the jobs first approach. You know, it's critical to recognize that our nation leading economy, $4,250,000,000,000 economy. Right? There's, you know, only China, The US, and well, maybe maybe now Japan.
We might be fifth now, have larger economies, but we're very, very proud of of the economic output. But each of the sectors in our, plan that you have a life cycle, and we've identified that life cycle in three phases. The first is strengthen, which you'll see on the left. Those are kind of our historically strong industries from TV and film, the tourism, things that are here, but that we need to continue to invest in and and pay attention to. The next one is accelerate.
Those are the industries where we think growth is most likely in the in the in the short and medium term, where the most job growth and investment is likely to happen. And then the final one is bet. Those are kind of the industries of the future. We don't know which of those are gonna hit, but we know some of them will, and they will be the next big economic drivers engines of California. And, again, these were these came first from each of the local regions and then up into the statewide plan.
That statewide plan, again, very much informed by input from the regions. So as many of our communities have correctly reminded us, none of this growth would be possible without targeted investments in an alignment with what we call our anchor sectors. Those are the sectors in the bottom in orange that are crucial, child care, housing, health care, you know, broader infrastructure. So keeping an eye on all of those. And one of our goals was to make sure that we that this was an all of government effort, that it wasn't GOBIS and the labor agency are leading, but that we're bringing in all the other agencies across government.
Speaker 8
So the governor stood up the Jobs First Council, which is nine cabinet level agencies, to make sure, again, that both we're we're leveraging all the tools and resources of the government and that we're that this is a process that can continue on into the future. And as we continue to implement the recommendations and tactics in the blueprint, we identified four pilot sectors with an emphasis on advanced and precision manufacturing that we think, again, could by by by focusing on them, we could do the most to drive growth and demonstrate the efficacy of this all of government approach. So those four sectors, again, these are just the first batch of priority sectors, but they are ag tech and farm equipment, space defense and satellites, which is rapidly growing, life sciences, and then semiconductors and microelectronics. We are now in the process of running sector working groups in conjunction with the Jobs First Council agency staff. So, again, an all of government effort to engage with subject matter experts and industry partners across the state in each of those verticals so that we can learn more about specific challenges that businesses are facing and then, you know, come up with specific steps and strategies to address those.
Speaker 5
We're also working hard to align all of our funding and incentives to better unify our approach so that we have, again, a unified strategy so that the incentives that we offer to businesses are targeted in in in the ways that are appropriate to those priority sectors and can build on $1,600,000,000 in state investments that we made through the broader jobs first framework in 2025. That went to train more than a 142,000 workers and help create more than 61,000 jobs across the state. We're also looking forward to further supporting our economic and job creation work through the California brand campaign. That was something that you all supported, $20,000,000 investment from s p one zero five and a b one zero seven. We believe that California has long been a place where bold ideas become global industries, and diverse communities can fuel economic opportunity.
So at a time of intense national and international competition, it's essential that we proactively communicate the facts about California's economic leadership, its entrepreneurial ecosystem, and our extraordinary quality of life. There's been a little misinformation out there in our view, and this is a chance to tell the real California story, and we're excited to take that on. We've seen other states like Michigan and Pennsylvania engage in similar campaigns aimed at bolstering business attraction and retention, and we wanna make sure we're providing the same benefits to California to make sure that our researchers and our inventors and our dreamers and doers can come here to pursue what's next. It's always been essential to who we are and to our DNA. We're still in the midst of the state procurement process to select an external campaign partner, and we're gonna make sure we we're gonna work with someone to, excuse me, leverage this brand campaign to both grow the key sectors that we're focusing on, but also the broader economy and to drive a different narrative for the state.
So we're, again, excited to get started with that once we get through the the RFP process. Let's talk a little bit about some of the other GoBiz BCPs that we also wanna make sure that they we we worked intentionally to make sure that they align with the kind of the jobs first strategy and approach. The budget request crossed a number of programs, but, again, they're all aligned with the mission of investing in strategic sectors that will help drive economic growth and generate good paying jobs for Californians. And, we called it jobs first for a reason. So, for example, CalCompete's tax credit, which I'm sure you're all familiar with, it launched in 2014.
It's our strongest deal closing tool, and it supports many of California's key industries sectors while also ensuring accountability from awardees. And it's been recognized multiple times for, again, for the accountability that's built in. To date, the program has awarded credits to over 12,000 1,200 businesses. I wish 12,000. Supporting the creation and retention of more than 160,000 quality full time jobs.
The proposed five year extension would not only carry that process forward but help create certainty within the business community that's so important and reinforce the state's dedication to helping to create and protect those high quality full time jobs. Our international affairs and trade team's budget request for cal export would enable our department to continue providing dedicated support for small business export promotion activities, which allow businesses to successfully enter international markets and find new opportunities to grow and invest here. That's been an ongoing successful program since 2022. The department has helped nearly 400 businesses generate over a $142,000,000 in export sales with over 650 jobs created and retained. Importantly, the proposal will also support supply chain resiliency, in this turbulent global environment where we've seen California share exports decline a bit, which we don't wanna let continue.
We've also asked to add three permanent staff to the California Film Commission to help administer the film and TV tax credit program, which, as you all know, is a program that we believe is really in in instrumental in protecting our leadership in the creative economy. It has generated more than $1,900,000,000 in economic activity since 2019 and will really help expand and improve delivery of the goals of keeping those good family supporting below the line, mostly union jobs in California. Lastly, supporting our innovation and emerging technologies team. As an ask, it creates it'll help us create a much needed capacity for our office to more thoughtfully engage with companies in the bet sector in in particular, the ones that we know are gonna produce the breakthroughs and and revolutionary new industries of the future. So those are industries like quantum and fusion.
And as they commercialize, we wanna make sure that they keep their, you know, focus and their investment and their growth in California. So through the jobs first lens, go business budget request will help to continue to drive meaningful and long lasting investment in job creation within every region of the state. And that was our directive from the governor in the very beginning to make sure that prosperity wasn't just in one part of the state, but that was shared from east to west and north to south. Finally, a little update on the California Civic Media Fund. In addition to our work with the Jobs First Council, my team has been working to stand up the California Civic Media Program, which was formally signed into law last October.
So we come to the table recognizing that our state's newsrooms are businesses. They're nonprofit and business and for profit, small and large. And they are that they provide invaluable services to the communities that we are also trying to serve. So in the short term that we've been managing through this program, we've done taken a few critical steps. We've named members to the advisory board.
We've held two board meetings, and we've secured the James b McClatchy Foundation as our third party grant administrator. Now we're work working actively with board members and other stakeholders and members of the public to stand up a program that will prioritize California based news organizations that meet our baseline program standards and equitably serve newsrooms and, obviously, citizens across the state. We're looking forward to our next advisory board meeting, will be in May, where we'll continue to share details about exactly how the program will be structured. So finally, well, ultimately, I think we're sort of talking about, again, kind of a our our our mission, if you will, is still to supporting good paying jobs across the state, whether that's journalism or the arts or space and defense or ag or ag tech. We're really excited to continue that work.
We really appreciate your support, and we're happy to answer any questions that you have about it. So thank you, chair Hurtado, for the time. And, again, happy to answer any questions you all might have.
Speaker 1
Thank you for the presentation, director. At this, moment, we'll take any questions or comments from, the department of finance. Penny?
Speaker 3
Jesse, don't mind department of finance. Nothing further to add. If you have any questions.
Speaker 1
Thank you. Questions or comments from committee members? Senator Small with Cuevas.
Speaker 3
Thank you. And I know we're gonna get more into this, during the hearing, but wanna really appreciate the overview of very vast, large, complex
Speaker 3
Agency and really appreciate the infographic. I love infographics. I I do have a few questions regarding the civic media, which we know our journalism is has taken quite a hit over these past two decades. And, certainly, under this administration, we've seen just an all out assault on freedom of speech and the right to have a free press. And so, really appreciate the administration prioritizing this.
I will say in this era of just an abundance of misinformation, straight up lies, propaganda to dissuade public engagement in this democracy, it is really important that we're investing in ethnic media, in those outlets that are trusted messengers, and outlets that really understand the nuances and the history of communities and and and how to put some of what's happening in the world in context that help people make good decisions about how to govern themselves. I think this initiative is a good one, but is not reaching some of those smaller outlets, ethnic media outlets. At least that is what I'm hearing from a number of our papers. And I represent South Central Los Angeles, and I'm proud to say we have four competing black newspapers. We have La Pignon that borders our district, which covers millions of of of Californians.
And so my question is what specific outreach are you doing in particular to black and Latino media? And how do you see because McClatchy and these are sort of the bigger as a former journalist, the consolidation of the industry, you know, these are very large outlets. But how do we get some of the resources into these communities? Because, unfortunately, many of those community stories are not told by the larger outlets. The conversation about these communities doesn't happen there.
So, what are you doing to engage them?
Speaker 5
Yeah. Thank you for that question. First of all, the we haven't started giving out money yet. So it's you know, this is a new program. So we're taking some time to make sure we set it up thoughtfully.
The makeup of the advisory council, which is in statute, has a seat for for black media sorry, Derek. I mean, what's the organization? Sorry. I'll get it. It's a there's a very specific seat for for a black news organization and also for a Latino facing news organization.
So that's one. I mean, that was very much part of the mission of this was to make sure that underrepresented communities who are often underserved by news organizations are are supported. The second thing is we again, the the focus on this is is is to make sure that peep communities that have been underserved get more resources. So we are trying to build guardrails around the money to make sure, again, that it goes into those to provide preferences for organizations that have have been overlooked in the past. That's still a work in process, but we're probably gonna put a ceiling on the amount of money anyone news organization can get.
And we're gonna put a floor so that even the smallest news organizations there there will be certain requirements that they'll have to show to make sure that we're funding news organizations and not other maybe well intentioned nonprofits or what have you. So that's in process. We chose the Maclatch John and b Maclatchy Foundation is a foundation. It was obviously funded by the Maclatchy family. It's no longer associated with the broader company, but they have a lot of experience in this work, and one of the reasons we chose them, one of the things that we it was a competitive process, but one of the things they put forward that we thought was really compelling was their ability to reach out.
They have relationships with news organizations, smaller news organizations. They've done grant distribution, so they know how to reach those smaller organizations to make sure that they know there's an opportunity to apply and then to provide the technical assistance so that those those smaller serving operations that don't have resources dedicated to doing things like filling out grant applications will have the resources to do it. So that's very much top of mind. That's top of mind of the council, and it's a big focus of the work that we're doing.
Speaker 3
And I am appreciating that, and and I wanna say there are outlets that serve a vast number of ethnic media Yeah. Outlets up and down the state. I think about black media news, for example. I think they have over, you know, a 100 different publications and online outlets. And then I think there is the Maynard Institute, which has a long history in the Bay Area of training journalists of color and is connected to many of those those outlets.
I'm hoping that those are the types of organizations that can be included. What's your timeline for this? Because, I want to say some of these outlets are hanging on by a thread, especially right now.
Speaker 5
Yeah. We do wanna move as quickly as we can do so responsibly. So we're hoping that we'll be able to set some of the program guidelines by our May and then open the grant process in July and provide technical assistance and then be able to award the grants by early fall.
Speaker 3
Thank you for that. And then my my other question has to do with California brand. I sit on the senate oversight committee for the Olympics and large sporting events. Last year we had our inaugural hearing. Was exciting to hear from California about their plans for investing resources into really engaging local and profiling local communities that were in and around some of the venues for the Olympics and that they saw resources that had been allocated to them as part of that work.
Then we saw that those dollars were then moved, I believe, into the California brand initiative. So, my question is how much of the total funding now is then being allocated specifically toward tourism promotion? And, you know, and and and what portion of that is is not directed toward tourism? And what activities and priorities is that funding being used for? And I wanna, you know, sort of drill down on the timeline and urgency of community.
So, I represent, as I said, South Central Los Angeles. Thanks to the governor and California Arts Council, we now have a historic black cultural district in the state of California. We hadn't had one until last year, as all the other districts have been thriving for the last, you know, ten, fifteen years. And this cultural district is in very close proximity to the venues for the
Speaker 3
Is a part of that. My my the this cultural district stretches from the sort of the Black Beverly Hills area to Crenshaw Corridor to the historic Central Avenue up to the West Adams historic community. And so it's a vast area, and it sits right, you know, in very close proximity to where the Olympics and World Cup and, you know, Super Bowl and all of the the the events. So, you know, as we as you mentioned, this the goal of ensuring that communities are able to be promoted as part of the California story. I'm just curious how will California brand really focus on these kinds of communities?
And I say you know, I would say South Central is a global cultural content Mhmm. Maker, and it is a destination that should be invested in as we've given so much to the world in terms of arts and culture. Yet the story of California doesn't include that narrative at all. In fact, people, you know, drive to the beach because most of the ads are about beach and coastal communities, and then they drive over us to, you know, downtown, which is a thriving part of my district. I'm very excited about the work that is going on there, but, you know, doesn't get all of the promotion and support that we get on some of the coastal areas.
So I'm curious how do you prioritize where these resources go, and is equity and underrepresentation a part of that?
Speaker 5
question about funding, the the $20,000,000 was allocated by the legislature, and it originally went into the fund that funds Visit California. Visit California is almost totally funded by an excise tax on tourism related industries, rental cars, hotels, restaurants. And so they're really a kind of a public private, mostly private entity. They're I did I'm on the executive committee of Visit California. I think executive California and their leader, CEO Carolyn Bettetta, have done a fantastic job generally, and I think will continue to do so.
The $20,000,000 was I think the intention of it was a little bit broader than the sort of the tourism driving kind of work that California that Visit California does so well, unlike the best destination marketing organization in the country for sure. We I think the intention was a little bit more to to not only to drive tourism, but to make sure that we're focusing on the narrative of the broader business and economic development work that needs to be done here, making sure that we're not that all the great work that we're that you're doing and that we're doing together doesn't get distorted by disinformation, misinformation, and lies that are out there. And so slightly different purposes, but and we're gonna build that the the strategic campaign with the partner. We, again, are continuing to work through that process. We hope to have it done soon, we hope to be able to move as quickly as we can because we we can't afford to waste any more time letting untruths, half truths, mistruths, intentional lies sit out there.
So, again, slightly different than driving tourism. That said, we wanna make sure that we lift up all the opportunities in California through this campaign that we talk about the narrative. In you know, inclusion is is is kind of at the heart of everything that we do. And so how can we make sure that we're telling the story of California in a way that lifts up all the different opportunities? So we will be working with our partner on that.
We're definitely interested in that. We think, again, there's so many under just we just haven't talked enough about some of the places where investment could really, you know, be be a win win situation for the communities as well as for the businesses and job creators that wanna come. And so happy to to share more of that as we go forward if if that's ever helpful, but it's definitely part of our strategic thinking.
Speaker 1
just wanna briefly interject. I believe the director has only fifteen more minutes left with us as but I understand it's a hard stop in fifteen minutes. So I wanna just make sure that we have an opportunity for everybody. Okay.
Speaker 3
My last point. And I hope that we can do more than share but collaborate because we have our story has not been told. I mean, this cultural district was just designated, so there had not been a black cultural designated area in the state of California.
Speaker 5
And I I hope that's something that that you you we can work with on the Visit California side as well.
Speaker 10
Yeah, just two quick ones, and I very much appreciate that the director is here with us.
Speaker 10
I wanted to turn to the placemat for a moment to with because both my questions fall in that space. So the first is the I I know at the, you know, at the local level, it's true here too, though, that we you know, our interest in economic development is has at least two important dimensions, maybe three, but we wanna it's jobs. It is the jobs that support our people and our communities. It is sort of overall economic activity including taxation.
Speaker 10
And then it is the the sort of the economic foundation for all the rest of, you know, other companies and other the rest of the economies. Right? So, we're trying to support all three. The local level, we've grappled a lot with the the challenges in some of these areas of the increasing automation has kind of pulled the the Jenga piece out of the first one. And so we're still we we often still sort of mechanistically because it's our habit.
Like, we wanted we wanna do this thing, but the factory is entirely automated and our tax structure doesn't really capture we're not we're not so we're not generating jobs. We're not getting income taxes. The local jurisdiction's not getting generally much more in terms of property taxes because of our constitution, what have you. As you put this together, how did how do you apply the lens of what are the what are the core interests of the state in advancing these? Because I do know some of these areas, you and I have talked about shipbuilding as an example, where there there are there are sectors that are moving into into more and more levels of production automation, which isn't necessarily a bad thing, but it does it does change the calculus for how we might value them in an economic development perspective.
Speaker 5
Right. You know, I I obviously, the the first of the of the three buckets you talked about is job creation. Right? Because that is the foundation of our of our work. The others are are are also equally important.
So if you look at incentives like jobs, I mean, at the the Calcompetes credit. Right? That is content contingent on creating a specific number of jobs that a company commits to in a specific, and and there there are there are benchmarks that those jobs have to meet. They have to be they have to have benefits. They have to you know, it's not a race to the bottom.
So that's so a lot of our incentives and we have the employment training panel and some of the other incentives that we that that are part of this broader program and conversation are in fact focused on and require job creation. There are industries increasingly that come that that are becoming more automated. This is definitely a concern, and we hear a lot about it from our labor partners as well. One of the things we try to just look at and think about is what are the supply chain? What are the other ancillary benefits of some of these industries?
Right? So I was just at the space symposium in Colorado because our space industry is growing so fast. We had a chance to talk with a company like Lockheed Martin that was a big part of the Artemis space project. We said we had we thought 500 California companies had been engaged in that. He said he thought there were 7,500 who supplied Lockheed Martin's work on on the Orion capsule alone.
And so those are some of the kind of things we try to think about and incorporate. What are the ancillary benefits? And those are a lot of small businesses that create jobs in our local communities and are the spine of our local communities. But I think more broadly, we do need to constantly be conscious of that. Are these the kinds and and and to to your point, we we talked about shipbuilding opportunities because those are some of that can be automated, but a lot of that just brings good family supporting kinds of manufacturing jobs back to California, which is a big focus of us.
How do we make sure that we're doing what we can, creating opportunities, incentives for those kinds of jobs to locate here in California? So that answer your question?
Speaker 10
It does. It does. I I mean, I think that that to me, thinking about, like, making sure that we are where where a particular one of these sectors or whatever is that is not producing the kind of jobs that that we want. That doesn't necessarily mean we don't do it, but it better be way better than some of the others on on tax revenues, supporting other supply chain. I mean, it it should be we should be expecting higher things from it in every other dimension if it's not significantly contributing there.
Speaker 5
And the other piece of all this that I I mentioned on, but only briefly, is the workforce development and workforce training components. That is a big part in why we work so closely with with the labor agency. Right? Because one of the things we know is that particularly in these some of these higher quality jobs, these manufacturing jobs, there's a lot of competition. Other states are on to, like, the value that California provides, they want those jobs, and they're providing a lot of incentives.
But one of the things we have is we have a really great workforce, but we need more. Right? And and we know that if we can provide a really good pool of not just four year degrees or PhDs, of which we have more, I mean, more engineers and more PhDs and more Nobel laureates than any place in the country. But what about the technician level? What about those good two year or certificate kinds of programs that can train people for career track family supporting jobs all over the state and help us continue to attract the businesses that we want here?
High road businesses that pay a living wage, that manufacture things that we need and the country needs that will continue to drive our leadership. So think about that a lot. We partner with the labor agency and others and industry industry we talk to a lot. And even in these priority sectors, one of the conversations we have is, okay, what are the skills you need and how can we work together with our community college community colleges and other partners to make sure we're doing everything we can to drive the training that will, again, provide the qualified workforce that will allow us to continue to build.
Speaker 10
Great. Appreciate it. And my other question, and we can go offline too if Okay. Is just in the so to senator Smallwood Cuevas' TV and film interest, which is also happening in my my district as well, not quite as much. But my equivalent is the wine is wine.
And so and it fits in this map if I really try to make it. But our problem in wine isn't that we're not producing enough.
Speaker 10
Right? So that so ag tech and other solutions could could change the cost structures and what have you. But it's relate but it's like the TV and film industry. It's a fundamental part of the California brand Yeah. As well.
And so I'm just trying to locate it in in in the chart and understand because I know it's a priority for you as well.
Speaker 5
Yeah. I would put it in the strength in sector, you know, just kind of in our ag production, food processing, kinda just generally, but it also fits and the Visit California folks are very aware of the value of that as a brand supporting a world leading industry, but also something that's unique to us and very important to protect. It's I mean, the demand side is is a big part of the problem. Right? And when you alienate the Canadians, it doesn't help.
Speaker 4
Thanks. On that point, I have quite a different view relative to the film credit, but we can talk about that when the item comes up. I'm curious about a comment you made. You said combating the lies that are out there. Can you tell me what lies you're concerned about?
Speaker 5
Yeah. I there there are a lot. I think people have tried to malign California using distorted facts that simply don't hold up. So, I'll give you an example. I'm sure all of you have heard about how people are fleeing California.
People are leaving in droves, and record numbers of people leaving the state can't get out fast enough. Well, according to the US Census Bureau in their 2024 report, California has the fourth lowest on a per capita basis of people leaving the state. It's just not true. People who are here are staying because they're part of the community, they like living here, and they can be successful here. So that's one example of of the kind of misinformation that's, I think, intentionally put forward to distort what's happening here.
People say businesses are fleeing. Some businesses leave, but what may have all seen the PPIC report recently. They leave, but they don't take jobs with them. I mean, you can Tesla's a perfect example. It relocated to Texas, didn't take any employees with, in fact, employee base here in California, and then came back.
Elon Musk came back a year later to create a second headquarters in Palo Alto for all their r and d robotics, you know, driverless applications, things like that because they couldn't get the workforce in Texas that they needed. You never hear about that. You never hear about the fact that we have we create more business businesses, more small businesses in California every year. We have more unicorns than any state any place else else in the world. Those are start up companies worth more than a billion dollars.
62% of venture capital that went to American companies last year went to California companies because the the the kind of creative, innovative culture here is like no place else. We have more Fortune 500 companies than any state in the country. And so those are just some of the facts that you don't hear about that I think tell a much more complete picture of California. We were just with a start up company in the space industry who's based in in in Los Angeles County, and he said there's no place in the country with a technician workforce like Los Angeles County. You just don't hear those kinds of things.
So we wanna make sure not just because we're proud of the of of of our state and and we're proud of the brand that we've built, but because it's important to our economy that our job creators, that the business leaders, and decision makers around the country have a clear picture of the benefits of being here. There's some challenges, senator. I would not dispute that, and we could talk about that anytime if you'd like. But the benefits are real, and they're large, and it's important that we protect that because we need we want people to come here. We welcome them to come here.
Bring your ideas. Bring your new industries. Invest bring parts you know, you want your supply chain. We have 40,000,000 people here. People wanna be here because we have an incredible consumer base.
So for all those reasons, we wanna push back against the misinformation and the distortions that I think have have tarnished our brand, and we're not gonna take it anymore.
Speaker 4
Let me, state, first of all, that I love this state and I am committed to its success. I have a sizable business interest here in the Sacramento area that we couldn't move out of the state if we wanted to. So the success of the state is very important. And it pains me when I hear some of the negative facts that are stated. You say that that people say that or some say that people are leaving in droves, that businesses are leaving in droves.
Well, when you qualify it like that, it's easy to dismiss it. But it is very difficult to dismiss the fact that California around the country is not rated as exactly the best place to do business. There have been businesses that have relocated out of California. I happen to know personally a number of people who have moved to Texas and Tennessee and the like, and there are statistics that support that, not in droves, but people leaving. We're losing congressional seats because of population distribution being different.
Speaker 24
So my concern about that is to attempt through a PR campaign to just cut off any debate and therefore ignore the possibility that we have a regulatory burdens here that are make it difficult sometimes to do business. I have stated that one of the concerns of this of our state is that we don't have what I call a a true economic development ethic, which means that when we develop a regulation, we assess the costs of the burden of that regulation on equal fitting with the benefit. Benefit's usually to one of three classes, employees, consumers, or the environment. So but we tend to overvalue that benefit and not pay a much as much attention to the cost of of complying with that. And and my concern is that this PR campaign is going to attempt to cut off any debate of that sort.
Speaker 4
And I think the debate is important because if you don't recognize the things that might hamper businesses being successful here, you'll never be able to cure that problem. Whether it's great or not or or minimal, you and I can disagree on that. Right. But it's a legitimate debate.
Speaker 5
I I I very much agree with with really everything many of the thing almost everything you just said, senator. Almost everything.
Speaker 5
I don't wanna block myself. Yeah. Exactly. I I I I would that would be that would be troubling for both of us. But I do I did this you know, the California brand campaign is not intended to stop debate or conversation.
We are very we we worked really hard to try to work with our private sector partners to help understand what are the biggest obstacles to investment and job growth. We know that they're the job creators. We're not the job creators. We wanna be the job supporters. And so to do that, we have to really have honest conversations.
We know that sometimes the regulatory environment is challenging. We're trying to streamline that by things like, you know, making it easier to build. We're trying to accelerate the time to permits. We're working with our we're gonna work with local governments on creating a permitting academy so that we can help them we can help share best practices that we've learned to help them share best practices with each other so we can accelerate, you know, move these things at the time cost of money, we know is is is can can be challenging here. So it's not in any way to say, we don't recognize the challenges that we face and we're not trying to focus on them, whether it's, you know, having enough skilled workforce or having a regulatory environment that makes it too challenging.
I'd be interested to talk to you more about adding how do we make sure we consider the cost to business of certain regulations? I think that's an interesting conversation that we should have. I'd be delighted to to have that conversation with you. We're working really hard, you know, to in in in places to how do we bring these jobs back, and that forces us to have those conversations with with our private sector companies who say we wanna be here, but we have these challenges. So we we we really want them to come.
So we have to solve those problems, not ignore them.
Speaker 1
I appreciate it. I know you had a hard stop, so I will try to make my questions quick. I but I appreciate you taking the time to answer everybody's questions here today. I I I kinda wanna build off of a little bit of the the California brand campaign. And specifically, I mean, I I appreciate the the answer that you've provided and really to help me understand what exactly it entails.
I I don't necessarily disagree with you that there is a need to improve the image of California. I also don't disagree with with my colleague, with our vice chair in terms of, you know, what else we need to do to improve some I guess, the business environment for businesses to stay. But I I guess I also wanted to to mention that, you know, we have seen other states play a role in the state of California trying to lure business businesses to their you know, to those states through billboards, through through ads. Do you see do you see this California brand campaign as something similar or in addition to adding that kind of component, or is that separate?
Speaker 5
You know, it's gonna be nationally focused, and we're still building it. So but, yeah, I I wouldn't rule that out we would have some kind of activation that might do something that would both advertise the benefits of relocating to California in another state or, you know, trying to to you know, as as you do in a brand campaign, you try to do some some things that are, you know, focused and some things that are attention grabbing, and it'll be a combination of things in in that line. But I we wouldn't we we do that all the time. You know, we try to attract companies to be here. It's one of the things that the Calcompete tax credit is for.
It's for companies that are either that wanna expand and grow, either they wanna move to California or they are thinking about moving out of California. We wanna keep them here. So the answer is yes. And and other states, you know, Pennsylvania, Michigan, others have done similar kinds of campaigns. States like Texas and Florida have come here and tried to do stunts, right, to try to attract businesses away.
We don't want anyone to leave, so, we try to fight that. But I wouldn't rule out any tactics like that. I mean, I wouldn't say the I mean, I think it's more we're we're trying to change the narrative and to try to really communicate with decision makers around the country. So I don't think it'll be focused necessarily on one particular state and and stealing businesses from them, but I wouldn't rule out that there'd be some component of it that's got a little bit of that in it.
Speaker 5
Oh, for sure. Part. Mean, that's our goal, and I I think it will. I think we correcting the misinformation and reminding people all the advantages of doing business here, it will be will be really helpful. I mean, people forget that, you know, we we have a we have a really strong supply chain.
We're our ports in LA and Long Beach and and Oakland. We do 40% of the country's imports and, you know, a third of the exports. And those are all things that go into business this you know, the the the the proximity to the innovative capital of the world in both Northern And Southern California. Those are the kinds of things that are really important for business success being in the middle of the ecosystem. Right?
Being where the where where they have more access to capital, being where there's skilled workforce. You know, our higher education system is second to none, and it is the foundation, I think, of our economic success. So, yes, to all of the above.
Speaker 1
Okay. Well, and then the last question I had is over, in the last four years, we've seen a significant increase in in, funds under GO Biz. What would you say are the top five areas of concentration of these funds?
Speaker 5
Well, just in no particular order. Obviously, we had big increase in the film tax credit, which we we see early signs of of success. So we'll be watching that space, but we feel good about how it's going so far. We obviously had money through what's now called the Jobs First program was originally the Community Economic Resilience Fund. We've so that's been a big addition to to our budget, and one we think that has has been really, really helpful.
Really, really pleased with what what we've been able to do with that. What are the other big areas of increase? We've had some increases in our international affairs and trade group, which we think is important again given California's proximity in the world. We've had a lot of we've had programs that that that, you know, we've worked with you all on, including the California media fund. Just new things that are new in our portfolio, but that we think are additive to the work that we do.
So the California media fund, the brand campaign sort of fits into that as we see budget grows there. We've had just increase in in staff again to to which one of things we're asking for today is more staff for the film commission to be able to do its work. We doubled the size of the program, but didn't provide additional analysts and staff for them to manage the the big spike in applications. So I think that's important. We've added a couple of other functions.
We've added our innovative industries work. It's not an well, it's a it's a different position, so we've gotten some new funding around that. We're asking for more today because we wanna take advantage of all the things that California has to offer. So those are some of the things I know that are top front and center for for us as we wanna additionally have the resources to continue to do the work that you all have tasked us to do.
Speaker 1
Well, we appreciate your time today and for answering all of our questions. And that wraps that wraps it up. I don't have any additional questions for you at the moment. But unless there's anything else that you wanna add
Speaker 5
I would just say thank you for giving us the opportunity to to to share what we're working on with you. We look forward to continuing that. Please reach out to me at any time if if if you have additional questions or wanna talk through something, collaborate together, I hope, and just really think I'm I'm very bullish on California's future. I know we have challenges, and part of that bullishness is, I think, our commitment to solving them. So thank you.
Speaker 1
Thank you, director Myers, for your presentation. And, this item was information only. We'll go ahead and move to the next item, agenda item number two, which involves updates and oversight on the California office of small business advocate, also known as CALOSBA, generally, and three highlighted programs in particular, California Rise, the Performing Arts Equitable Payroll Fund, and the Technical Assistance and Capital Infusion Programs. We are grateful to be joined by representatives of of Cal OSPA, as well as representatives from the organizations of Kalosba partners with to operate these programs. Thank you for being here.
Speaker 1
thank you for being here, and and please proceed with any initial remarks you would like to make.
Speaker 8
So, morning Chair Hurtado and members of the committee. My name is Claire Whitmer. I'm deputy director of the California Office of the Small Business Advocate. And I will be presenting on behalf of our office today, our director, Emily Bermejo. I extend her apologies for not being present today but she had a previous commitment that couldn't be rescheduled.
I think that we are going to change the order slightly because we have someone else with a time crunch and we will have our program partner, Julie Baker, present first, and she will be on Zoom. Is this correct?
Speaker 14
Terrific. I I thought maybe, Claire, you were gonna share some of the statistics first, but I will go ahead.
Speaker 8
So, CALO at OSBA's mission is to represent and elevate the voices of California's 4,300,000 small business owners, the largest small business community in the country. And, we do that in four core ways. We administer grant programs that are assigned to us by the legislature or by the governor's office. We curate, fund, and oversee a network of small business support centers across the state which we call SCALE, Success Capital Access, and Leadership for Entrepreneurs. We work to increase the pipeline of loans and capital access for small business owners, and we support the resiliency of our small business owners after natural disasters and other business interruptions through business resiliency training.
And, today, I'm going to report on some economic outcomes of three of our programs that we have administered this year, starting with California RISE. And, we are currently implementing version two point o of this program. Today, I'll summarize the outcomes of the inaugural cohort of the California Regional Initiative for Social Enterprises, which is what RISE stands for. It is the first statewide program of its kind in the country. We had a total appropriation for this inaugural cohort of 25,000,000 and we deployed 16,900,000 of that in grants to 61 recipients across the state.
Grant amounts ranged from 150,000 to 500,000 based on revenue ranges from under 2,000,000 to over 5,000,000. Now, these recipients include nonprofits and for profit businesses, but they all meet the criteria of employment social enterprises. And that is organizations that reinvest all of their earned income into jobs, training, or support for individuals facing barriers to employment. Now California Rise is designed in that way to support workforce inclusion, but also to support business development of these organizations, these recipient organizations. And that approach is reflected in the outcomes.
For example, forty six of the 61 increased their earned revenue over the course of the two year program. 20 ESCs reported revenue growth that exceeded 50%. 36 of them secured new public sector contracts or con or grants, and 42 expanded their business in some way, a new location, a new product or service. So in four years from 02/2021 to 2025, these 61 grant recipients collectively employed 14,301 individuals with barriers to employment, and 3,887 of these were new employees hired during the course of the program. So the program helps create new jobs for people from a wide variety of lived experiences looking for a second chance opportunity.
It does that. Yes. But it also supports through $6,000,000 in technical assistance, the growth and scalability of these organizations themselves. So, it expands their capacity to support and create those jobs beyond the performance period of the grant. It also creates awareness of that ESE model and helps make sure the ESEs are set up for success in California.
So now we have a second round of funding, $17,000,000, and we have already executed a grant agreement with Redefine Alliance, formerly Rediff, and Greg will speak to that. And our project plan calls for the grant portal to open this summer. My team's current task is finding and naming a third party administrator who will do the grant making component, and that RFP closes April 23. So Greg will speak more to this, but we are expecting a maximum grant size of 300,000 for eligible ESEs for new grants. But we've also learned some some things, and version two point o will incorporate two new lanes of services, continuing services for original 61, and an incubator program for organizations looking to become ESEs.
So moving on to performing arts equitable payroll fund, and I'm very happy today to report that as of this week, the state controller's office has now issued checks to all 100 recipients of the $11,600,000 in payroll reimbursement funding. So, this program works by looking at actual payrolls representing specific payroll employees and reimbursing the organizations for the expenses that they represent. So these 100 awardees represent a cross section of California's artistic community with budgets ranging from $45,000 to $1,900,000. Our grant awards ranged from $11,471 to $296,295. That was the largest grant.
The average award size was a 124,000. So they reached organizations in 29 senate districts, 42 assembly districts, and they supported 4,700 production jobs. That's people directly involved in producing and performing productions. But it also supported an additional 7,406 downstream jobs. Think about ticket sellers or concession workers.
So, importantly, 46 of the grants went to organizations with annual revenue of less than 500,000. That was deliberate, and it was part of the program design. The grant formula was intentionally weighted to make sure that the smallest groups received the highest percentage of the grants because we wanted to have this grant money have the most impact on the organizations that received it. The committee members are rightly interested in knowing how the I think you can still hear me. How this sector is faring now, the performing arts sector.
And the honest answer is that the performing arts sector sector's COVID recovery is incomplete and fragile. California's performing arts sector grew at twice the rate of the broader economy between 2009 and 2019. And as we know, the pandemic erased all of that growth within a few weeks. So most recent data indicates that we are still below those pre COVID and '19 baselines. Ticket revenue is recovering because the big shows have higher ticket fees, but that middle sector of of ticket costs have not recovered and subscriptions, which a lot of organizations depend on, remain 30% below pre pandemic levels.
And many performing arts organizations just didn't survive. The San Francisco Chronicle has reported that 25% of Bay Area theater companies are permanently closed. So to speak on behalf of the recipients, the deployed funds, I'll quote from a thank you letter sent to California for the Arts and shared with us that said the performing arts equitable payroll fund grant from the state of California has made a meaningful difference for a fairy hunt. It is helping to support the payroll of the 10 artists and staff who bring our magical performances to life. Since 2020, a fairy hunt has been struggling financially to stay open.
Support from this grant will help ensure that our small nonprofit can continue providing meaningful arts employment, and that is signed my fairy best from Debbie Rothstein, the producer of a fairy hunt, which is named the best children's theater in Los Angeles. So, lessons that we learned from this program. So, the eligibility requirements were very prescriptive and specifically designed in statute. So, we learned a lot about how to implement those and support the statute. And, because of the scaled down appropriation from the original ask, we made a deliberate choice to favor grants over administrative fees.
And, although our intent was good in that decision, it is fair to argue that it did prolong the timeline of our ability to deploy the grants. So verifying payroll data is very labor intensive compared to income tax data, for example, and we did learn a lot about how to do that. On the other hand, I will say a good thing that we learned is that the partnership with a public facing organization that really enjoys the established trust of the arts community was a very good choice because it allowed us to keep that channel of communication open even though the timeline of the program was delayed. I'll move on to to our flagship program for technical assistance, which is the technical assistance program, also SIPP, the capital infusion program. So I'll just start by summarizing the economic impacts of the 2425 tap year.
We have a lot of data on this, so I'm only going to hit some highlights. I'm I'm happy to provide more complete reporting if the committee would would like that. So this is only a subset of the metrics we collect. Over seven program years since TAP, now known as TAP, was created, we have supported more than 853,000 businesses. In this past year, unique businesses supported were a 112,016.
Speaker 21
That included 3,788 brand new business starts. And just to speak to capital, we were able to support $54,748,000 in loans being landed with those businesses, as well as 432,000,000 in equity capital. So, to just mention briefly demographic metrics, of those a 112,000 businesses, 33,000 were owned by women, 36,000 are owned by minority small business owners, 3,000 owned by veteran businesses, 6,000 in rural communities, and 11,932 in low wealth communities. So we do feel that we are serving our mission of providing services to underserved business communities across the state. So SIP or the capital infusion program is only a fraction of that funding, 23,000,000 for TAP, 3,000,000 for SIP, and it is reserved exclusively for the five regional SBDC networks.
Speaker 8
So, again, I can provide a breakdown by region of the outcomes of those, but they are additive and similar to what I've just quoted for TAP. So just to humanize these numbers a little bit, we've worked hard this past year on expanding our database of small business success stories, which I would invite you to peruse from the homepage of our website. And I'm happy to say that there are examples from all four of your districts of a wide variety of businesses who have been reached and supported by the services that I've described here. So these stories may include a bakery, but they also include a company that supports EV infrastructure and an on demand transportation company for for low income communities. I believe that the subcommittee is interested in hearing about our capacity to meet the demand for federal drawdown.
It is a hard thing for me to calculate, but I will say that when the Trump administration took office, we did calculate the amount of federal match that is represented by that $23,000,000 of state funding meets $56,000,000 in matching federal funding. And the bulk of that is from the SBA. Yes. But also from the departments of transportation, commerce, department of defense, etcetera. So there is a significant multiplier effect associated with TAP and SIP and that it allows these organizations to stack their funding.
TAP represents the scale program, represents the large federal centers, and you'll hear from the SBDC shortly, but also represents nonprofits, chambers of commerce, economic development organizations across the state. And we are deliberately recruiting new organizations every year to meet demands that we observe, needs that we observe. I I know that our centers are doing a lot right now, for example, to provide training about how to mitigate the impact of tariffs, which have obviously had a very detrimental effect on California's small businesses and small businesses across the across the state. We've also deliberately recruited CDFIs to our network, and that is to make sure that we are increasing that pipeline of loans, which became very significant this year when the SBA decided that they would restrict SBA loans from green card holders. But we have direct relationships with lending institutions that will provide loans to those small businesses.
Likewise, again, in anticipation of some of these restrictions at the federal level, we have recruited new members of the TAP org the TAP network to speak directly to businesses owned by immigrants and and their employees. For example, immigrants rising and public council are new recipients of TAP funding this year. And we did put specific questions into our program announcement in order to attract those those partners. So we think that there are myriad ways that we support California small businesses, and you'll hear from some of our program partners on these three programs that I've just summarized. Thank you.
Speaker 14
Thank you so much. Thank you, Chair Hurtado and members of the committee. I'm sorry I can't be with you in person. I appreciate opportunity to come here via Zoom. Julie Baker, CEO of California for the Arts.
We are here today to celebrate the inaugural round of the Performing Arts Equitable Payroll Fund, a vital program created to strengthen small nonprofit performing arts organizations across California. As one grantee shared with me last week, quote, This is literally the difference between us closing and continuing. The inaugural funding round was a significant success, affirming the vital need for this program. While we are proud to report zero cases of fraud and only 11% of applications being deemed ineligible, the overwhelming demand presented our greatest challenge. The program closed within days to oversubscription, underscoring the urgent statewide need.
Unfortunately, close to $30,000,000 in requests remains unfunded, leaving 313 eligible organizations and more than 8,000 potential jobs unsupported. The intent of this program is never simply to provide COVID relief or a one time solution. It was initially developed as a direct response to changes in employment laws, specifically AB5, which mandated that workers involved in performing arts production be classified as employees, not independent contractors. That was a result of AB five. The shift drastically increased operating expenses by 40% to 60%, disproportionately affecting the most vulnerable small budget nonprofits.
The pandemic only exacerbated an already difficult situation. This program, which came together with a broad coalition of the arts community, including labor unions, advocates, and employers, is vital because it creates the opportunity for performing arts workers to earn a living wage, a goal we should all champion, especially amid a widespread affordability crisis that impacts all workers, including those in the arts. Fundamentally, this initiative validates performing arts as a legitimate labor, recognizing the inherent value and importance of their work. The arts community is currently facing severe threats to funding, requiring immediate legislative attention. Since 2024, organizations serving immigrant LGBTQ plus, BIPOC, and rural communities have been particularly strained due to federal cuts to the National Endowment for the Arts, the NEA, and increased restrictions on equity related programming.
Many of these groups have been forced to lose federal support entirely rather than compromise their core missions. This challenge is escalating with proposed proposed arts funding cuts now appearing up at the local and federal levels. For instance, just this week, the city of San Diego has proposed a complete 100% elimination of over $11,000,000 in grant funds for arts and culture nonprofits. Nationally, the federal fiscal year 'twenty seven budget includes a proposed cut to the NEA funding, reducing it dramatically from $2.00 $7,000,000 to just $29,000,000 Since 2023, the state of California has already rescinded over $70,000,000 previously approved investments impacting cultural districts, arts in the parks, and museum funding. Furthermore, low investment in our state arts agency currently places California thirty fifth in per capita funding for the arts.
The recurring short sighted practice of disproportionately cutting arts funding during budget crises must be avoided. Instead of yielding to this age old habit, the legislature must proudly affirm support for the value of arts and culture, particularly now. This program represents a vital commitment to the arts ecosystem, which provides essential storytelling and live performances needed in an era of increasing automation and regulatory challenges posed by AI. Continuing this program is crucial for stabilizing payrolls, protecting jobs and strengthening the community infrastructure that supports California's creative economy. This expansion has growing legislative support as demonstrated by the $40,000,000 budget request submitted by Assembly Member Haney and Senator Susan Rubio sustaining this vital investment.
Speaker 18
The performing arts industry is a powerful economic driver, providing an estimated 250,000 jobs across the state. This modest funding investment generates a significant multiplier effect, with an additional 156 jobs supported in related industries for every 100 performing arts jobs. By enriching local economies, strengthening community identity, and creating accessible pathways to arts education and participation, this program is a vital benefit not just for the arts, but for all who benefit from a healthy live arts community. To ensure future rounds rounds are more efficient and serve more organizations, we have identified three critical improvements to the legislation. Eliminate reimbursement of all costs except the actual gross wages establish clear criteria and minimum standard, for example, 60% of expanses for the primary mission dedicated directly to performing arts related activities and eliminates provisions that grants must cover reimbursements for one year.
Speaker 14
This program is a crucial step towards ensuring California's rich performing arts sector remains equitable, sustainable, and vibrant for all. As another grantee shared, quote, this investment was more than financial assistance. It was an affirmation that live theater matters. We urge you to consider these improvements as we look forward to the next much needed round of funding. Thank you so much.
Speaker 15
morning Chair Hurtado and members, thank you for the opportunity to speak to you today about California Rise. My name is Greg Erickson. I'm the senior director of government partnerships and policy, now known as Redefine Alliance, formerly Redef. I'm gonna double click just quickly on who is Redefine Alliance and what are these employment social enterprises, and then I'll go into a little bit more about California Rise. So Redefine Alliance has been around for nearly three decades and our mission has been to invest in businesses that reveal and reinforce the talent of people breaking through barriers to employment.
We focus on what people bring, not the barriers that they faced. And we've built and championed a model to help that talent succeed called employment social enterprises or ESEs. At their core, ESEs are revenue generating businesses that intentionally hire people facing barriers to work. They sit at the intersection of workforce development, business, and social services so employers can so employees can earn wages while building skills and stability. And over the those three decades, redefine and Rediff has done a lot of research to why why this model, why should we invest in it.
And what we found is that employees have higher job retention, they have increased wages, they have reduced recidivism, and have greater housing stability. These businesses also operate across many different industries from food production to construction to manufacturing. And you have probably you're probably familiar with many of them in your districts. You may not know them as ESCs, but you're probably familiar with them such as South LA Cafe, Homeward Bound of Marin, Parents by Choice, Mary STEM, and all of these as the deputy director highlighted earlier, CA Rise has been a catalyst and a critical investment in not only these organizations but the ecosystem as a whole. And as you've heard, it's delivering real returns.
61 businesses generated over a $155,000,000 in earned revenue and created nearly 4,000 jobs. And I'll highlight I actually have a handout which I'll share with you after this, but I'll highlight one example. South LA Cafe, for example, expanded from one location to three with plans to go to five. Through CA Rise, they standardized operations, reduced inefficiencies, and positioned themselves for growth while increasing their revenue from 3,800,000 to 5,000,000 and hiring 14 new employees from the South LA community that they serve. In addition to that, CA RISE is embedding employment social enterprises into the California economic infrastructure, linking them directly with workforce and social service systems.
ESCs are already stepping up bringing on 238 new employer partners to expand employment employment pathways and also securing $38,000,000 in government contracts to sustain the model and to continue to hire individuals. We're also seeing the impact on the ground real time. ESCs have been part of the fire recovery efforts in LA through LA Basin cleanup. We're partnering with Caltrans to do litter abatement beautification on our highways, and we're also preparing for big external demand drivers like the Olympics, Super Bowl, World Cup, etcetera to ensure that those opportunities don't pass by and are equally accessible for everybody in all of those communities. And as the deputy director said, we're starting to launch our CA RISE two point o.
We're doing discovery days across the state. Those days will not only help build a pipeline for grantees, but also to help educate small businesses and nonprofits about what is the value of an employment social enterprise. Why would you want to embrace this model? And many nonprofits are clamoring for this because as budgets get tight and revenues get tighter, they're looking for creative innovative ways to continue their services and find revenue to support that. And I'll conclude with, you know, I think the numbers speak for themselves and I have the handout, but I really think to see the impact of these organizations, you have to see the people and the lives that are touched every day of people who have been in prison for twenty years, who now have a job and a meaningful salary, people who have been experiencing homelessness, who now take pride in the work that they're doing and also are on pathways to self sufficiency.
So, we welcome you to go visit any of the ESCs in your district. As we launch CA Rise two point o, we'll be sure to invite you and welcome you to that launch, And we'll happy to share more information about the discovery days happening throughout the state. Thank you.
Speaker 16
Good morning. I'm Susie Pryor. I am the regional director of the Central California Small Business Development Center Network. The Central California Network is one of five across the state. I thank you for the opportunity to talk to you just a little bit about what the SPDC does, what our women's business centers do, the roles we play in economic development in the state.
And, I wanna make a couple comments supporting the earlier remarks, particularly from the deputy director, about the importance of the TAP and SIP programs. My journey with the SPDC started as a small business owner. I walked into a small business development center and asked for help. As a result, over the last thirty years, I've started 10 small businesses, and my story is not that unique. So this is what we see with clients.
If we can seed success early, we see multiple entrepreneurial ventures. Some of the names that strike us in the SPDC network are places like Up on the Shelf and Spanx and Under Armour and California's own Santa Cruz Guitar Company. These are companies that are best in class, and what makes them so unique and what made my first early successes unique was that critical early guidance from professionals that actually know how to operate a successful small business and grow one. I hope today just to humanize a little bit about how we do business and why we are so critically important. I hear frequently comments in settings like this where we talk about and brag about and should brag about California having the fourth or fifth largest economy in the world.
And I always wish they would just add, and 99.8% of those businesses fueling this economy are small businesses because that's that is the case. As Claire mentioned, 4,300,000 firms in California, they employ 7,000,000 workers, account for more than 50% of private sector jobs and 90% of exporters. So small businesses we know underpin this economy. That holds true of all of the top five economies in the world. This is the secret sauce.
Right? It is small business development. Over the past three years, the California SBDCs have helped create more than 10,000 new businesses and supported over $4,000,000,000 in capital access for small businesses statewide. Oh, I might actually have a slide. I just have tiny numbers, tiny numbers.
I'm gonna try not to spend a lot of my time on numbers even though I I did put them on my slides. With and and we've also assisted nearly a 130,000 businesses and touched over 415,000 jobs in this state. So with WBCs, our system reaches tens of thousands of entrepreneurs annually. And for those of you not familiar with our services, it's generally one on one counseling coupled with efficiencies gained through cohorts and training programming. Our client base closely reflects the demographic makeup of the state.
Speaker 6
More than 60% of SPDC clients are people of color, and more than half are women owned businesses. We provide advising in 21 languages, ensuring that access to expertise is not limited by background, geography, or experience. The Central Valley, where I live, is one of the most productive agricultural regions in the world. It's also home to small manufacturers, logistics firms, food processors, and family owned businesses, businesses like sixty eight Produce in Salinas, and Medema in Modesto, and Garcia Brothers Trucking in La Grande. My organization helps these businesses modernize, access capital, meet supply chain challenges, and position for long term growth.
Speaker 16
For many, the hardest part of this journey is what we call the Valley Of Death. Right? That's that period between a great idea and a sustainable business. And when resources are thin and margin of error is really small, we help companies navigate that moment, and those who are particularly strong cross the chasm into broader markets and long term viability. That's why you see the type of innovation you see in California.
It's extraordinary in the state. I wanna make two other short points. One is about child care. California loses an estimated 35 to $38,000,000,000 annually to child care shortages. So since 2024, the WBCs in particular have played a focus in this area.
We have as well with SVDCs. Our programming has supported 12,000 child care slots, helped more than 1,400 entrepreneurs launch or expand child care businesses, enabling parents to return to work, and helping employers and communities attract a stronger workforce. So we're very focused on the problems that communities face. Finally, I wanna make a statement about disruptions. We went through this with businesses during the pandemic.
Our services become even more critical when there is a disaster. Over the past decade, California has experienced more than 60 major disasters. And in those moments, SPDCs have supported more than 23,000 businesses. During the LA fires alone, we provided more than eight thousand hours of direct client services, helping owners stabilize operations, recover, and rebuild. Through the state's technical assistance and capital infusion programs, this legislature has invested in a system that is locally embedded, it is performance driven, and it is accountable.
As Claire pointed out, you're maximizing your dollars because they are coupled with federal funding as well as with local funding that we that we cultivate through our system. It's not a new experiment. It's a proven model. We've refined it over decades. We are an accredited and nationally supported organization.
Continued investment in TAP and SIP is an investment in California's economic resilience, in competitiveness in the state, in innovativeness, which is the heart of small business and our future. Thank you for your leadership. Your continued commitment to California's small businesses is critical to this economy. Thank you.
Speaker 1
Thank you. Before we open things up to for questions from committee members, we'll go to the department of finance for any questions or comments. Do we have the department of finance here?
Speaker 1
from the LAO either. Okay. Then we'll bring it to the committee members for questions, comments.
Speaker 4
Thank you. We had some discussion of barriers overcoming barriers to employment. I'd just like to point out that the ultimate barrier to employment is low educational achievement. Any organization involved in economic development should be vitally interested in the quality, particularly of k through 12 education. And the unfortunate fact is in California, our achievement in our k through 12 systems generally is not very good.
And it is particularly bad in areas where there is the most potential for upward economic movement, disadvantaged areas, and in particular black and brown kids. And we're failing them. Again, anybody interested in economic development should be vitally interested in that. I realize that's not your official charge, but it is subpar and it seems to me getting worse. But back to the issue of stimulating employment.
If an incentive for employ for two businesses for employing people is significant enough, it will result almost always in additional employment. That isn't the issue. The issue is how sustainable it is. Do you have data that tracks the continued employment of people who who are initially employed based upon an incentive program two, three, four, five, six years later?
Speaker 8
So, there is some data on this based on earlier versions of the program. So, we've only been administering this for two years. So, we don't have any longitudinal data as you are suggesting, Senator. And, you're quite right that the sustainability of these jobs is a significant question. It is something that we have discussed and now that we have a second round of funding, this is one of the reasons why we will be continuing to provide services to the original 61 recipients so that we can observe and learn about the longer term impact of the original grant and their continued relationship with redefined alliance and with our program services.
So, we I don't necessarily have any data from this $25,000,000 investment, but there are studies in the market that Greg can speak to that imply that there is a long term factor associated with this. And, it is certainly something that we want to and are committed to looking at as we continue through the second round of funding.
Speaker 4
It would be very important and helpful if I realize we're not gonna have any data on the existing program, so to the extent that we approve additional funding, we're doing it blind with regard to this program. But it would be helpful to know what's happened in the past, which you indicated, and and that could could help us in assessing future funding of of this these particular Yes.
Speaker 8
Thank you for your question senator. And I know that Greg can speak from previous studies.
Speaker 34
Redefine has done a number of different studies one with mathematica which was an RCT. We also have worked with EDD to get base wage data to see the longitudinal impact of employment social enterprises. So not related directly to California rise but just the employment social enterprise model and the effectiveness and some of the data points that we found is that there are seven years of job retention after an individual left an employment social enterprise into their next phase of their career whether that's private sector nonprofit whatever that may be. And then to your point, our intention is because the program was only fifteen months long and data was lagging our goal is for two point zero to build in some of those to continue some of those partnerships either with EDD or others California Policy Lab etcetera where we could start to extrapolate and start to get some of that longitudinal data on wage growth retention recidivism, etcetera.
Speaker 4
I would appreciate it if you could get that information to me. Happy to. I'd like to see it.
Speaker 15
Yeah. Thanks. And we also have I didn't share it today. We're waiting for some final approvals. We we have a 80 page evaluation that we did for our CRISS one point o that doesn't go into all those, but you can look at some of the key KPIs that we had that we measured for the program and just kind of explore all that as well.
Okay. Thank you.
Speaker 3
My mic is not been well. I'm gonna borrow his mic too. That way, I'll double. I I really appreciated the information, and I feel like every legislator should have those first two paragraphs that you read through in terms of the impact and significance of small business. I don't think we understand that enough, you know, as we are looking for the big, you know, mammoth firm to come and invest and to create, you know, thousands of jobs.
It is the aggregate of these smaller, businesses that make the difference. So really appreciate that. And thank you for shouting out South LA Cafe, my favorite coffee shop.
Speaker 3
And and that brings me to my question, particularly about well, I have two questions on the on the TAP program. So there are certain savvy business owners who do and have capacity to do good research, to have connections, who have the wherewithal to go through the process. How are you reaching those different small businesses that are at different capacity? I mean, South O'Lake Cafe was just an idea, and it and it really struggled and struggled and struggled. But now the owners are just these really amazing entrepreneurs that are so community grounded.
But it takes time to get there, and sometimes that valley of death, is that what it was called? Folks don't make it. So I'm just curious. How are you reaching these businesses? And is there sort of a scaffolding or a tearing of how, what kinds of services that they get?
And I'm I'm particularly thinking about, you know, I there's a an or a a business, Napoli Naturals, for example, great, great shop, just very quaint homemade soaps and oils. They wanna open a manufacturing company. Right? And so it's like, how do you go from that to take that next step? And and how do you support them in their different stages of development?
Speaker 16
Excellent question. We so the the SBDC and and the WFC both are are structured that we have a lot of community partners. And that is really the key. We can't use federal money, for example, to market. We have very limited use of state money for marketing.
So we rely on in my case, think about in Fresno, we've got a Hispanic chamber. They touch almost every household in Fresno, even despite the fact it's such a a large city. So it is community partners that we activate. This question that was asked earlier about literacy, And we work with the United Way in Monterey on a on a financial literacy program. So we do rely on partners.
What we hope to have happen is partially we're gonna appeal on a topic. So you may say, oh, I I'm a small business owner and they got this free training on digital marketing. And we hope when you attend that training that we're able to explain to you all the many, many other things we can do. But much of it really is that one on one counseling. So your company that you're referring to, if I were working with that client personally, I would be talking about what are your aspirations?
And once I know that manufacturing is a piece of that, or once I discern that it ought to be a piece of that, that that's gonna be a practical path forward to you in terms of scalability, then we start resourcing. So yesterday, we met with the US commercial service to talk about what can we do more for producers in the Central Valley to do exporting. Right? So it really has to do with trying to be a mediator between that small business and the many, many resources that exist in the state. But for the most part, really, answer is this organic touch through the organizations that we are involved with in every community across the state.
Speaker 3
can do more of that, but I appreciate the hands on because I think that is a big part of this, helping with that relationship and building that confidence to move forward. My other questions are about the the Equitable Payroll Fund. And I in the previous panel, I talked a lot about our cultural district. We have about 4,000 cultural assets, which are essentially small businesses, whether it's dance, music, arts programs in in our district. And and this is one of the areas that have has become a vital resource.
And so I'm curious if if the state had been in a position to fund all of the eligible applicants because quite a few it closed like as soon as it opened, was closed and people were like, wait. We didn't even get a a chance. Approximately, how much funding would have been needed to meet that demand?
Speaker 8
Thank you for your question, Senator. I anticipated that, and I can tell you specifically that the total funding requested that we received while the grant portal was open was 40,789,000.
Speaker 3
So, we have a lot of our you know, a lot of these and these are small owned businesses. Some of them, five to 10 employees that they're trying to to to to keep on board and keep going. So so based on that first round, are there any statutory or programmatic changes that you would make to that implementation to make it more efficient, more timely? I I certainly, we need more resources, but is there anything in the implementation that could help us eke out more resources that could help us go further?
Speaker 8
Thank you for that. Yes, I think that we would be more realistic about the level of admin support that this particular program demands. I mentioned that the payroll reimbursement process in order to verify that documentation was very labor intensive in a way that we didn't anticipate necessarily. We learned a lot about that, but I think we would certainly want to make sure that we had an appropriate set aside for working with the fiscal agent so that we could make the checks go faster because that is always a point of frustration once you've you know you're receiving an award and you're waiting for it. So we understand that and would want to to speed that process along.
Speaker 14
in the ether. We also, as the program, you know, administrators on working directly with the applicants and in designing the program and looking at the statute. We actually have a very specific, amendments that we have proposed and would be happy to send you. But very specifically, one of the first ones that we think would help make the money go, longer, is around, just gross payroll costs. So we're we're not having health retirement workman's comp and payroll processing expenses included in that number because that's really complicated for us to review and for people to submit.
The other thing is that in the statute it says that your primary mission has to be performing arts, but it doesn't clarify how you determine that the primary mission is performing arts, except for, like, box office receipts. There's this very, very long list of things, which is also really time intensive. But instead, for example, if 60% of expenses were going to performing arts, that would be easier for them to figure out. And then the other thing is that right now it has to cover an entire year of payroll reimbursement. If we had the opportunity to maybe say just two quarters versus an entire year, that could also potentially make the money go longer.
So we have some red lines to the bill that we'd be happy to share with you as well.
Speaker 3
Thank you so much. I appreciate that. Yeah, we want to do all that we can to stretch these dollars and also make sure we're adequately funding it so that we don't have, you know, a ten day race that ends up with, you know, $40,000,000 of of applicants asking for help, and we're not able to provide that. So, thank you very much for for that overview, and looking forward to connecting with you on some of the local TAP opportunities in my district.
Speaker 8
Thank you. And, I I will be following up, senator, with all the members of the subcommittee that we do have a PDF with these small business facts in hopes that leaders such as yourselves would quote from them and also links to the small business success stories from your district so I'll be following up with your staff on that.
Speaker 1
Thank you so much for your presentation. I'd say that the role that you all play within the state of California is so important. Right? Because many rely on the work that you all do in achieving or accomplishing the California dream. People have historically come to California to accomplish that California dream.
Speaker 15
And at least on my end, wanna make sure that we continue to make sure that that is attainable, that and that people can can reach success. But I also know that Californians are feeling like it's not that it cannot be reached at the moment. And so on my end, I I want to just kinda ask a a few more questions. I know the s p t SBDC has done I'm more familiar with that that program than anything else. Even back to my days on the city council, I remember having a representative reach out and said, I'm I'm happy to come and do a, you know, workshop in your town.
Speaker 1
So it's a small little town, 27,000 people, but they came and it brought a lot of people. There's a lot of and this is a largely it's maybe like 70% Latino community. Right? And there were it was a a full room, and I did not think that the interest was there in the community to start a small business, but it very but it was. And so it it you know, so I've been kind of heavily focused in on creating those opportunities for, you know, individuals not just in my district, but, you know, across across the state.
So I wanna make sure that this works. And and I guess my question is more around the TAP and the SIP part of of your presentation. I know there was some numbers that were given. 112,000, you said. And then I didn't fully it was a little bit quick, but you said 3,788 or 37,000?
Speaker 1
so it's it seems like quite a bit. There's a 112,000 that initiated it. What would what's the gap between 01/12 and then the final being 3,788?
Speaker 8
The well, that's businesses helped is a 112,000. So those are unique clients that we have supported, and we like to say that we cover the entire spectrum of business needs from bright idea to successful exit. So, not all of those are business startups. That subset, the 3,700, are people who came in to to to get help with their business plans normally in order to in order to launch their business.
Speaker 1
So the 3,788 is what it is at just like those that opened and got started or is
Speaker 8
Well, we qualify them as business starts, so they would have come in as pre venture clients, and then at some point in that year they would have registered with the Secretary of State. Or there's a number of other criteria that count as as as a successful start.
Speaker 8
is a subset of the But you don't have that number. But I don't have that number. But we do collect a lot of metrics for this program, so I'm happy to compile a report and send it along. This is just kind of a snapshot of metrics that we collect.
Speaker 1
Okay. Well, that's in a way kinda good to hear because I was worried. And I'm I'm really interested in the in in the gap because in my experience and what I've, you know, experienced from even my city council days is that there's a lot of interest, but there's not a lot of and and I there's a lot of support. I I know that they're putting the business plan together, even help putting, like, the financing part of it all together. But I just think that there's a little bit more support in terms of being able to get the financing to open the business.
And I think that's if there is a huge gap, I think that's probably what it is. And so I just I don't know in terms of if there's more that needs to be done on on that end or if there's already something that perhaps needs to just kinda be connected to make it work.
Speaker 16
We could. And certainly for your region, I can provide you with how many are are pre venture that just never they don't launch this year. Right? They might launch next year. But among those others, it's folks who just need help with QuickBooks or they need help with digital marketing or I'm working with a client right now who wants to sell their business, so we're helping her figure out how to value it.
So there's lots of things happening in that other 112,000 businesses that they could well be existing businesses with really unique needs that we're working on. Could be procurement or exporting. Yeah. So lots of stuff.
Speaker 1
Well, I'm I'm really much more interested in making sure that we make, you know, again, achieving and accomplishing the the the California dream. And it's not just about the interest, it's about how do we, you know, make them make that dream complete. So if there is any gaps, I'm interested in learning a little bit more of and how to make that a little bit better.
Speaker 8
So, senator, I think that you've rightly perceived that this is what we think is the secret sauce of the ecosystem that we've built. You're quite right. Lots of people say that they would like to start a small business. But, what often makes the difference is conversation with a person. I always say that people come in thinking they need capital and that that's a math problem.
But, it's really a relationship problem. The pathway to getting the capital for those launches is through a trusted advisor who can speak on your behalf to a lending institution. So, this is why we think it's so critical to provide these services, because they really can make the difference between someone who has an idea and that just vegetates and an actual business launch.
Speaker 1
Yeah. And, I think that it's definitely about needing capital to get started and going. But I also think that when we're talking about disadvantaged communities, we're talking about communities that are disadvantaged. Meaning that there's historically been high unemployment rates in in those in those communities. It means that someone is struggling with food.
It a household is struggling with food or it's struggling with rent. It means that they're struggling to pay their bills. And if they're struggling to pay their their bills, then, I mean, does that mean that they can get a loan? Right? And so does that mean that we exclude them in terms of the opportunities?
I mean, that is that where the gap is? I'm just trying to kind of figure it out because I think that we're we're missing a huge component in in making that dream available to all. And I don't think we're just there yet, but I know that, you know, as we move along, we'll I'm sure we'll we'll get there at some point. Right? Okay.
That's that's any other questions or comments before we wrap up? Any final remarks? Thank you
Speaker 8
for your support of small business, and and thank you for your interest in these programs today.
Speaker 1
You got it. Thank you all. We're moving on to agenda item three. Continue with go biz film and television tax credit program. And I'll I know that for the items still under GOBIS, the direct director Myers provided a a great overall information on on on the package.
So if you don't mind just stating your restating the issue and anything that that she missed, and we can continue on to questions and comments from there.
Speaker 19
Thank you. Thank you chair Hurtado and committee members. My name is Lauren Greenwood and I serve as the senior legislative and external deputy for GOBIS. Our California Film Commission under GOBIS requests 472,000 general fund to support three permanent positions in 2627 and $472,000 general fund ongoing to support the expansion and modernization of the California film and television tax credit program made possible by the legislature and the administration last year. As detailed in the BCP, these positions include one motion picture production analyst who will assist in reviewing applications for the film tax credit program, one analyst who will assist in implementing the new DEA provisions in program four point zero, one research data specialist who will support in tracking, collecting, and analyzing data in the tax credit program, And then I'd like to introduce Leah Medrano, deputy director of the film and tax credit program for the film commission.
Speaker 20
We both are available for any questions. Thanks for the opportunity to present.
Speaker 1
Do we have any comments or questions from the Department of Finance? Aliyo?
Speaker 7
Rowan Isaacs, Aliyo. Yeah. Given the increase in the size of the program as well as a b one one three eight, which increased the program's generosity and expanded it to a wider range of applicants, we think this is definitely a, you know, valid request, and we recommend approving it.
Speaker 1
Okay. Thank you. Questions or comments from committee members? Go ahead, senator Smallwood Cuevas. So,
Speaker 3
thank you for that for the update. And, we worked really hard on the film tax credit. And, when I say we worked really hard on it, we we work to make sure that we keep the jobs here in California, that we are competitive with other states in an industry that we created. And at the same time, we wanted to make sure that we understood how all Californians could get access to the opportunity created by our tax dollars. I did a bill in particular that looked at, you know, the tracking, mechanisms that could be put in place and making sure that we had some data and transparency to understand who was being hired, where were they being hired from, and whether the public subsidies was expanding the opportunity.
How how are you all ensuring that our efforts, and particularly our efforts around the inclusion, both geographic, gender, racial, how are we making sure that those efforts are tied not just to the goals but to real outcomes? And where are you measuring them, and are you looking at are we are we able to will we be able to see trends in terms of disparities?
Speaker 20
Absolutely. Well, I'll hand it to Leah. Thank you for the question, senator Small with Cuevas. I'll hand it to Leah to just provide a brief overview of the career pathways training program and then Leah or I are happy to go into the data that the commission's tracking.
Speaker 18
Good afternoon and thank you for that question senator Smolod Cuevas. We as Lauren had mentioned we post our demographic information available on our website. Even though the numbers may not be where we would want them to be at the moment, we are cognizant of that information. However, we are very grateful to the efforts of the legislature making sure that we have specific information about what are the accountability measures that approved projects receiving the tax incentives are doing in terms of demographic reporting. So, at the moment, we had approved about a 147 productions, and we are seeing a positive response in terms of productions opting into the new diversity provisions.
And, to date, we have about 90% of the productions opting into the diversity provisions. And with that specific provision opting into the program, we want to make sure that these productions are giving specific information and their best practices, inclusive hiring, equity education, what are the industry capacity building that they are providing when they are writing up these work plans and the interim assessments, and also the supplier diversity information that they would include in the work plans.
Speaker 3
And are we able to see the career pathway for those individuals who are in this data? How how like, that that's the outcome I'm also very curious about.
Speaker 20
Absolutely. So as you probably remember, the film tax credit projects have to contribute to career pathways and career readiness programs, and career pathways provides apprenticeship training opportunities for those from underserved areas, And I believe we worked with your office among some others in 2024 to increase the reporting on the career pathways program. And so this includes trends and participation from our participants where the students are employed in California if they're working in another state, aggregated self reported and voluntarily provided ethnic racial gender disability status of individuals and to the extent the information is available, we'll be tracking this over five years. And then we're also including uplifts for projects that up to 2% of the initial credit amount for projects that employ trainees from a career pathways program. So I think, you know, career pathways are in round two program four point o.
The first awards are announced 08/27/2025. Productions have a hundred and eighty days to start principal photography, so we're still in the process of kinda gathering this information, but we'll have a report on the work plans as well as career pathways in 2027. So next year.
Speaker 3
And I know part of our bill was making sure that the reporting came to the legislature.
Speaker 3
Not like on a dashboard somewhere where, you know, we'd have to dig and try to figure it out ourselves. But when do we get our the report, the analysis? And is it I mean, I know I'm hoping that it's not sort of a piecemeal, but it's gonna be something that kinda tells us a fuller picture.
Speaker 20
Yeah. Thank you for the question. That I can't remember. It's June or July 2027, so we'll have that major summary of career pathways and then some of the additional data like data points like zip codes, veteran status, which thank you for helping us kind of think through how do we be more inclusive in our reporting and data tracking, along with set safety and other program metrics in terms of program performance.
Speaker 3
Great. And, last question. Apprenticeships, are you tracking specifically the apprenticeships and trainee? And, also, I'm wondering how they're being utilized. So, you know, in some sectors, they they track, when folks come into a program, but that they are only there for two hours.
It's not real impact. So it's also, like, how they're being utilized, how many hours of a project are they getting. Are we getting that sort of specific? I know we had talked about different models of tracking and different tools that are used. I know we our staff, we worked with you all on that, but I'm just curious where did where did we land?
Speaker 18
So in terms of apprenticeship, we are working closely with the California Department of Education. The apprenticeship program is one of the ideas that we have to include in the permanent regulations process as part of the career readiness program. Currently, have five different options in our career readiness. Productions are able to hire an intern and these interns are paid and they must perform at least three hundred hours for the production. And they could also have teachers visit the set and provide professional skills tour and or do a panel.
Speaker 1
For these types of engagements, we do have a minimum eight hours to make sure that the individuals are gaining a full day experience and not just a two hour set visit. But senator, I wanted to go back to your initial question about the actual numbers for career pathways. Since that program started back in March, we've had 830 total participants under that program. And productions have contributed $8,100,000 in order to fund these training programs that we currently have. And out of those, those are 329 projects that have contributed to support those organizations.
Speaker 3
All productions that are a part of the program are in the internship or in the apprenticeship program pathways program. Okay. Alright. Well, I wanna continue to track. It's, looking forward to the reporting.
Glad that we have some of the metrics in place to be able to see how our tax dollars are working to, keep the industry here, but also to make sure that it includes all Californians from all over California. So really appreciate that.
Speaker 4
I do I have a question for LAO. You probably knew this was coming. Last year when we considered this item in a budget committee, you had some things to say that I believed was quite relevant, but no comments today.
Speaker 7
Well, I I think our position thank you, sir. I think our position is given the legislature has decided to increase the size of the program and subsequent legislation has, you know, increased the pool of applicants that will be applying. You know, we think it is, you know, only only just for, you know, the department to have additional resource to review all those applications that are coming in. What we don't want to see is them not having the, you know, the the manpower to actually, you know, thoroughly assess those applications and maybe make worse decisions on who should get those credits. Conditional on the size of the program being increased.
But like you mentioned, we did make some comments about the proposal to increase the size of the program in itself. And but those notwithstanding, you know, we think given that the legislature did vote to increase the size of the program, then this additional staffing is justified.
Speaker 4
Thank you. I I will point out you were somewhat taken to task for those comments, and there have been times when I have disagreed with the LAO, but I don't take you to task for it because you do what you're paid to do. In this case, I just happened to to agree with the the comments that you made back then. The the problem with this program there's several problems. One is it's it's fleeting.
We're we're providing incentives for a very limited period of time, a production. And to provide incentives for, as an example, manufacturing facilities make much more sense because once they're established, they stay. They're not fleeting. And we've talked about maintaining the industry here, and I understand the desire for that. We feel that this is sort of part of our protective existence.
Hollywood is here. That's film production. But I fear that that's a bit of nostalgic aspirations, actually. The Wall Street Journal wrote an article about this, and it said, it it turns out that bribing studios with taxpayer dollars isn't a strategy to create a healthy industry. It's a way to be out bribed.
It's kind of a race to the bottom. We offer tax credits and Georgia undercuts us. That's why I say it's fleeting. And in particular, the state of Georgia hemorrhages money on this credit, and that's who we're competing with. Auditors estimated that every dollar the state awarded studios, $5,200,000,000 between 2015 and 2022, Again, that's our competition.
Returned only 19¢ in tax revenue and 81% loss. Again, it's fleeting. It's a race to the bottom. And I realize we wanna maintain the industry, but at what cost? So I realize I'm in a super, super minority on this.
I was the only no vote on the floor on this. But I believe that, personally, that my arguments are much more persuasive relative to the advisability of this tax credit. We're just gonna be undercut. I think I don't we don't have any other questions or comments. So our chair has left me in charge, which is The
Speaker 3
only the only thing I would add, senator Nilo, is is just, you know this is also about making sure that Californians continue to work. And I think that part of this a good part of this effort is not to be nostalgic, is to make sure the current workforce remains in California because it's significant not just to Los Angeles, but to the entire state. And so, you know, I think we have over 3,000,000 folks this that are working in this sector, in this industry. There's a whole supply chain around it, and every, I would say, part of the state participates and benefits from it. And so, you know, I think it's still a hun you know, hundreds of billions of dollars in terms of what gets produced by the film and television industry, and California does benefit from it.
Is it restructuring? Yes. Do we have to figure out how we keep it here? Yes. I think the legislature all agreed on that, and I think it's important for us to keep Californians working.
I just wanted to to add that because I I I don't think it's a sentimental endeavor. I think it's one in which we are wanting to make sure that California continues to work and work strong in this sector.
Speaker 4
I am quite mindful that I lost the debate. And and I agree with you principally with regard to the main maintenance and development of job opportunities. But, you know, sometimes industries restructure and you need to look perhaps elsewhere, and there has to be a return on the investment. And I think I just believe in this case, as I said, it's a race to the bottom. Our competition is willing to keep on undercutting us and that'll continue to happen.
We'll go back and forth on that. So I would suggest we put the money perhaps in other areas that would produce more sustained job development with a better return. Senator Cabaldon, I can see you're itching to utilize your microphone.
Speaker 10
Itching is probably a little I've I've I'm more like LAO on this one. I'm not sure how much of a super minority you are in, but I just I think we're making a lot we're making a big deal out of one analyst to one research analyst one and one motion picture production analyst. That's all this that's all we have before us today. The that battle on the underlying tax credit is done. We we do wanna make sure it's administered appropriately, that the law is followed, and that with the resources that we have, that we outsmart Georgia at every possible turn given those dollars.
So, I I I support I support this particular item. It's the it's necessary. And as as even LAO has said, this is it's well justified. So
Speaker 4
Thank you. So I think that is the end of this item. Right? Are we moving on to item number four?
Speaker 9
Thank you, mister vice chair, and thank you committee members for the opportunity to be for you today. Batting cleanup for director Myers on GOBiz programs is a is a nice job to have, we appreciate the opportunity to share more about GOBiz proposals. My name is Emily Desai. I'm the chief deputy director at GOBIS. Our next proposal for your consideration is to renew the California Competes Tax Credit in its current form for an additional five years through fiscal year twenty thirty two, twenty thirty three.
Assisting me with the presentation of this item, we have the CalCompete's deputy director, Scott Dossick. To provide a quick review, the CalCompete's tax credit first launched in 2014. It's designed to attract and retain businesses in California and full time jobs by extension. It's the state's strongest deal closing measure. It's strategically structured and administered to ensure that tax credit awards are a meaningful act a meaningful factor in an applicant's decision to decide to expand or locate in California.
Speaker 25
Rather than awarding applicants on a first come, first served basis, awards are determined based on evaluation factors, including the number of jobs projected to be created or retained, compensation paid to employees, the business's strategic importance to the state, and again, the extent to which the credit influences the applicant's decision to re relocate jobs to California and more. Even when a business is awarded a credit, the efficacy of the credit continues to be tracked through a five year contract in which the business agrees to hit certain employment and investment milestones. If those milestones are not met, we have a system in place to either withhold or claw back the awarded credits, which are then recycled for future use. As director Myers noted, to date, the programs awarded over 1,200 businesses supported the creation and retention of more than a 160,000 full times full time jobs. Extending the program an additional five years would help create certainty that we know businesses are looking for and reinforce the state's dedication to ensuring high quality, full time jobs are created and protected.
Speaker 10
Yeah. Nick Thomas, Department of Finance. No additional comments, but available available for any questions. LAO.
Speaker 7
Rowan Isaacs, LAO. So, we are recommending that the legislature approve the extension of Cal Competes. You know, the program is generally well designed as we've, you know, testified in recent years, and there is recent empirical evidence suggesting that there is a net increase in job creation, not just jobs created in industries or for those firms that have been given awards. So that's a positive note for the program. One feature of the program that we've been asked about is the recap is the credit pool that exists within CalCompetes.
Speaker 33
And so one of the features of the program that actually is maybe a better can be described as a good thing or a benefit is this recapture process where if firms who make agreements with GOBIS don't follow through or are unable to for whatever reason, GOBIS can recapture those credits so that there's no explicit downside to the state in terms of, you know, award making agreements for credits in excess. You know, historically, you know, almost half of those credits that have been awarded have never been actually claimed or have been recaptured. And so because of that, those credits are allowed to typically be rolled over into futures of the program. And that combined with the fact that awards in recent years have been below average, this has led to a really quick increase in the size of the total credit pool that's available in recent years and now stands at over 900,000,000 for this fiscal year. And so thinking about the pros and cons of that, you know, there is a strategic benefit to Calcompetes to having this big pool in that, you know, macroeconomic conditions could change in the future, and there might be a year or, you know, a number of years where there just happen to be lots of very good competitive viable applicants who would, you know, generate a net benefit for the state who we want to approve.
Speaker 7
And if we have this big pool of credits we can assign, then we can take advantage of those conditions. On the other hand, the sort of downside or the the trade off here is that there is a potential for the program's fiscal cost to spike. You know, if there was a year where, you know, GoBiz was able to allocate a large portion of those of those $909,100 or so million credits that are available, that would significantly increase the fiscal cost of the program over the next several years. And so it's really about thinking about the trade off of that. And so, you know, play one thing, you know, legislature could just approve this program and not make any changes.
There are if the legislature is interested in potentially making some changes to, you know, place some guardrails on how much the fiscal costs could increase in this scenario where a lot of the credits are drawn down in a single year or over a few years. It could consider limiting how much like, what percentage or what fraction of that pool could be drawn down in any given year. Or it could consider, like, placing a cap on the maximum size that the pool could grow to. So in the former case where we placed a limit on how quickly you could draw down that pool of $900,000,000, that would sort of smooth out the fiscal costs over the years and wouldn't have a big spike. You know, if a lot of credits were awarded in a single year, placing a limit on the size of the total pool of credits that could be accumulated would sort of would limit the total fiscal impact of the program long term, but wouldn't alleviate sort of particular spikes in the fiscal cost of the program.
And so just considering the state's, you know, long term budget situation, we just wanted to provide those options. If the legislature wants to, can approve the extension of CAL competes. Thanks.
Speaker 10
Yeah. Thank you. Thank you, mister chair. Thanks. I have pretty serious concerns about this proposal.
I I've had the opportunity to serve in some capacity in the administrations of five different governors, every all the way back to p Wilson. And, there are two things that I'm the two things that I know are to be true. One is that every incoming governor decides to approach economic development in a somewhat different way, sometimes radically different. The economic development is so close to their their sense of driving the state's economy and its future that everyone puts a a distinctive stamp on it. I've been through 16 different versions of every economic development agency, trade agency, commerce agencies, the COBIS in its various forms.
And then the other truism is that every outgoing governor wants to fix for the several years after their term their approach to economic development. And so we this is only the first of item that we have that are in this category of the administration is proposing to tie the next governor and legislature's hands into the future with respect to some of these programs. I I'm I'm a huge fan of Calcompete. I've been persuaded of it partly because of LAO and its and its rigorous analysis here, but I don't see any any benefit to us as a legislature or the next administration to today pre extend the program for five years when it's not even expiring in the budget year. It already lasts for another year after, correct, the 2728.
So, I don't really see what the benefit is to doing this. Over that five year extension, we'd be committing ourselves to nearly $1,000,000,000 of additional funding into that program. So, it's not trivial. It's not like we're talking about three analyst positions. We're talking about nearly $1,000,000,000 of a commitment.
And, given other folks in LAO constantly reminding us that we can't afford out your commitments of of even 10 or $20,000,000. $900,000,000 is just not it is it is not well justified in this particular case. So, so I'm not I I I I'm if it were to if we were voting on this, I would not be prepared to support the the extension and let the additional two years that we already have on the program and the $360,000,000 that comes with that plus the $900,000,000 that's already in the account that seems sufficient to the task and we we don't have an interest in any single year in having 1 and a half billion dollars of tax credits cashed in anyway. So, we don't we don't need that level of capacity. We don't need to keep we don't need to pre fund a five year extension two years in advance either, and we should so, my own view is that as we get closer to this, I hope the governor reconsiders, but if not, then we should consider rejecting this proposal.
Speaker 3
Thank you, mister vice chair, and thank you for for that overview. I I agree in the support of Cal Competes and as a program and and the work that's been done. I do know there was a proposal before us maybe a session ago about our aviation fuel and how we could use transportation tax credits to sort of fill the gap. And to me, that sort of, you know, was trying to solve one problem, but then maybe, you know, creating another coming from Los Angeles where we rely heavily on our roads and and highways. So, you know, I I I think about, you know I I think we have to to think about ways to be more creative when we have such a large carryover and to think about other gaps that need to be filled.
And I think maybe that is one that we could we should explore as we are in this crisis around an energy crisis that doesn't seem to be going away anytime soon that we sort of look to that option of maybe reallocating and shifting some of these credits into to that space. The the other question I had is just, you know, we're waiting for the big corporation to come that we can drop, you know, a huge investment in. I feel like we're we all we we just had the presentation about how important small businesses are and also how they are struggling to be able to expand to grow. And I'm curious if, you know, it's sort of like, in organizing, we have this model where it's like the little fish, you know, a million little fish eat the big fish. Right?
Speaker 17
Could we think about bundling some of the smaller some of the small businesses in a way and seeing them as a collective enterprise that regionally, you know, could, you know, uplift and really create, you know, the job growth and the economic development outcomes that we're seeking. I mean, not certainly at the scale of, you know, and bringing a huge, you know, international firm that would, you know, open a manufacturing plant with maybe, you know, a thousands of workers, but certainly, we could sort of stitch these kinds of empowerment zones together and see some some some outcomes that can help, one, address some of the shortfalls in the other funding sources of small businesses, but, you know, at the same time, help to scale those enterprises regionally in a way. So I I just I just wonder, you know, how have has GOBIS considered whether there should be some additional updated metrics to better measure outcomes and how it can maybe be tied to more regional growth and participation with the small business sector in a different way.
Speaker 11
Senator, thank you so much for the question. Scott Dostick, deputy director of the California Competes program. The one of the so a couple of different nuanced answers to your question. When the TAP program for OSBA was first created, it was actually pulled out of Cal Compete Resources. The annual allocation was reduced to create the TAP program, recognizing that a program like Cal Compete, a nonrefundable state income tax credit, tends to not provide a lot of upfront economic benefit or monetizable benefit to small businesses that really need both direct technical assistance and seed funding in order to be able to grow.
The tax credit by its very nature is delayed gratification, you will, delayed monetization. That said, we've actually seen quite a few of the smaller smaller businesses taking advantage of California competes. There's no we really do look at the opportunities for any business that can demonstrate that this credit is a material factor in their ability or willingness to grow in California, and that they don't directly compete with other local businesses that provide the same products or services. Right? So, the retail retail service sector is gonna struggle with the program.
But for other small businesses, we've started to see them, especially the ones that like maybe they've done the R and D and they're ready to go to scale manufacturing and really trying to a go of it. We've seen them start to take advantage of California competes. The other fun synergistic opportunity we have is when we have a larger manufacturer coming, having the conversations with them about where are your suppliers located and who are your suppliers and how could we get them to apply to CalCompetes and bring your supply chain into the state, which then provides some benefits to you both, you know, in terms of the ensuring the supply chain is working, but also cost effective within the state.
Speaker 3
And that's I I I see the the the challenge. And I guess then my question is is there is is there a way of is there a way the the way that you pull the tax credits out of Calcompetes and into TAP, they were somehow reformulated to be utilized in a way that did address the needs of small businesses. I'm I'm assuming that they they were converted or I don't wanna say liquidated. I'm not sure if that's the right term, but they were they were tran they were turned into more cash grant type
Speaker 11
So funds. Legislate I don't wanna oversimplify legislation, but the long and short of it is the Cal Competes appropri allocation was reduced, and then a new program was created unrelated to Calcompetes. It was other than we were the budget source for those funding because there had been a small business set aside for Calcompetes, and the the both the LAO and the legislature's concern at the time was that the majority of the small businesses that were applying were the local businesses that are really reliant on local demand for their growth, really, and were at not a nonrefundable tax credit didn't provide the benefit. So that the notion was reduce the Calcumbytes allocation, and then ignoring tax credits altogether, taking that reduced allocation and taking those funds for the new for the new program to directly benefit small businesses.
Speaker 3
Well, I guess in a budget year like we're in now that, you know, sort of taking a hatchet to the 900,000,000 in tax credits that you have and then really trying to I'm gonna use the term, and this is not the right term, liquefy them so that they could be cash, right, grants or funding to support businesses might not be something that can happen in this budget year, but it doesn't mean that in other years when you get such a huge carryover that there wouldn't be an opportunity to turn those funds into more accessible resources for for smaller businesses and enterprise. That's what I'm I guess, I'm sort of reading between the lines of what you're saying, but that's what I'm kind of taking away from this, that it is possible. It just you know, it's a decision that needs to be made, obviously, by another administration and certainly in a different budget time. And then on the staff question, what it where where what is that ability to sort of can you shift can some of
Speaker 3
aviation, shortfalls for aviation fuel is it possible to re sort of utilize these tax credits to address some of that gap that is existing?
Speaker 11
So not being intimately familiar with that proposal, any business in California that can demonstrate that this credit would be a material factor in job creation, in full time job creation in the state, is gonna have the opportunity to be competitive in the in the application process. So whether it's the aviation sector or manufacturing services, IT, whatever it happens to be, we would love to see that application. And, you know, we'd be happy also to work with your office if there are specific industries or businesses you're working with and you wanna be able to get a little more into the nitty gritty offline, we'd be happy to walk through what that application process would look like for them.
Speaker 4
Of the applications you receive, total applications you receive, how many do you accept?
Speaker 5
So we receive any given round and it varies. Typically we get a hundred hundred plus applications. The significant majority of the applications and I don't have the specific numbers, but an overwhelming majority of the applications that we receive are from businesses that are not really very competitive and that they are reliant upon, like, local retail, retail service sector employers that compete with one another for market share and as opposed to looking for net job increases for the state of California. So any company is eligible to apply, but they're not extraordinarily competitive. And so for those businesses, we reach out to them afterwards, encourage them to reach out to the to a local SBDC, through the OSBA, or perhaps through one of other state programs that would better benefit their ability to grow.
Speaker 11
And then the total number of awards at the end of it can be anywhere from as low as two, three, or four to a dozen or two dozen.
Speaker 4
Separate aside from the example you gave of those that you view as being maybe not appropriate to this sort of incentive, but others that you don't accept, do you ever keep track of those and and and analyze how many jobs they might have created if had they received the assistance?
Speaker 11
So a big aspect of our evaluation process is asking the business to explain to us the role that this credit is going to play in their ability to create those full time jobs. So while we don't have the I would say either the expertise or the resources to do long term tracking, we do use, you know, very high-tech tools like Google searches, right, to keep track of some of these businesses and to see what's happening. A lot of the thing times what we see is the the an applicant might make the case why they could choose not to expand in California if they're not awarded the credit, but then as part of our evaluation process, we're doing pretty deep research to figure out have they already moved forward with their project? Have they already secured a lease, a long term lease? Have they already purchased the property?
And and oftentimes in that conversation with them is explained in how CalCompete's work like, hey. It's not just us evaluating, but there's a public meeting of our committee, livestreamed public meeting with five members where they might be asked questions. Are they prepared to go in front of this committee and say, yes. We did sign a twenty year long term lease, but we are willing to assert publicly the jobs are still at risk. Oftentimes, the answer is never mind.
Thank you. We'll we'll withdraw our application from consideration at this time. But we give them every opportunity to show us the credit's truly a material factor. But if it looks like the all the evidence is pointing to the fact that jobs are coming anyway, It's very important to us that we don't have that windfall effect that has assumed other economic incentive programs in the past that we're truly looking at this credit being the difference maker, the deal closer. Okay.
Speaker 4
And do you do any analysis of the sustainability of jobs that are created by past incentives?
Speaker 4
The the the the assistance is intended to result in increased employment. Right?
Speaker 11
Excellent. Yes. We do, senator. And thank you very much for that question. So any company awarded a California Competes Tax Credit signs a five year contract, and that contract lays out how much credit they can claim each year if they hire the people, create the net new jobs they committed to, the wages that they committed to, as well as the capital investments.
So they report to us each year for those five year periods and three subsequent maintenance years. So, basically, for eight full years, we get reports from them on their job creation, wages, and capital investments that they've made in the state. On top of that, the franchise tax board is has the oversight of this program, and they will conduct multiple times of what they refer to as a books and records review. It's basically a limited scope audit to validate that the jobs really were created, that the wages were paid, and the investments were made.
Speaker 1
Do we have any other questions, comments? Okay. Well, thank you so much for your presentation. We're gonna hold this item open, and we'll move on to agenda item number five.
Speaker 9
Thank you, chair Hurtado. The next item GOBIS has for your consideration is for our international affairs and trade team. The international affairs and trade team requests 1,400,000 ongoing to support our export promotion efforts and the California export program. This program is an existing program within the international team, one that was historically federally funded. It is a program that supports small businesses looking to expand into global markets, helping shoulder some of the risk, but providing that opportunity and benefit for small businesses as they do engage in exporting.
So the success of this program, because it was built off of federal grants, we have good numbers in terms of the overall impact and the number of businesses served. That federal funding is not currently being provided to states anymore. Not only that, given the volatility of the federal funding, we've always had unmet demand as a result. And if you look at the original intent of the program when it was first established under the Obama administration, it was originally intended by legislative intent to be one also supported by state dollars. It's something that across the country all states have have historically participated in.
So we appreciate the consideration of continuing with dedicated step funding, state funding for our export promotion. We request 1,400,000 to do so. Thank you, and and glad to take any questions. Do
Speaker 6
Jesse Romine, Department of Finance. The administration would just add that the objective of the request is to provide ongoing funding for GOBIS to promote international trade by supporting small firms and giving them access to global markets as it's unanticipated that the federal state trade expansion order will be available in the coming years. Ongoing funding of this program will provide GOBIS a stable complement of resources to support this workload rather than relying on a federal war to materialize.
Speaker 7
Rowan Isaacs, LAO. So, you know, there are legitimate concerns about the future of many federally funded programs at the state level, which is, you know, as the proposal is written and one of the main motivations for requesting the money. You know, when we made our initial comments on this, you know, there was no indication that the STEP program was under threat. It's possible that, you know, in in more recent information, it might be unlikely that the program is available for this upcoming year. But we think in the broader context of the state facing reductions in lots of federally funded programs, know, iMedical, you know, they're gonna have three priorities made by legislature about which programs we should backfill with state money.
And so then the question for the legislature is where on that priority list does this proposal fall? And so, you know, there are a couple of options that we had given in our comments that if we wanted to try and maintain the state's export promotion capacity while, you know, we wait for the eventual, like, future of the STEP program at the federal level to unfold with the current federal administration, the legislature could consider funding this program on a limited term basis to give us more time to see, you know, if the step program is continued at the federal level long term or make it conditional on the federal money not being available.
Speaker 1
Thank you. We'll go ahead and take questions and comments from committee. Mister vice, sir, do you have any? Senator Smallwood Cuevas.
Speaker 3
And I this I'm gonna keep it short on this. I had a opportunity to visit South Korea recently, and they talked about how Texas and one other, state had offices of development there. This is a country that says they want to invest $350,000,000,000 in The US economy, and they see California as a core partner. And they wondered why we didn't have an office of development in South Korea. And so I'm just curious how, you know, how how how are we positioning businesses to be successful when we know there are international partners who want to do business with us?
And, you know, how many of these businesses have received support through the program, and is there a sense of tracking how many have actually secured partnerships or contracts? And, you know, how do you determine is it based on the business that you determine where you plant the flag, or do you plant the flag and then business and then identify businesses that could partner with international entities and and help to bring resources back to California. I'm trying to understand how this works, and I was surprised. And I it was a very small state aside from Texas that was there, and it shocked me that we didn't have any formal sort of footprint in the region. Given that's I wanna
Speaker 3
also Koreatown is in my district. So we have the largest Of course. You know, Korean population outside of South Korea in my district. So it just was surprising to me that we don't have a formal, you know, footprint there.
Speaker 9
Thank you for the question, senator. This is one that our international team gets quite regularly because other states do have international offices. California, back in the early two thousands and and I think into the nineties, did have international offices, and those were shuttered in the early two thousands. They were found to be quite expensive, and the ROI perhaps was not maybe what was expected. International offices are quite expensive, very expensive to maintain.
I think California is in a good position that our brand recognition is such that when we think about doing business with inner overseas markets, there is opportunity. There is, you know, recognition of, you know, where there's, you know, opportunity to engage with with California. It's why we are, you know, the top if not for for Texas and and oil, we're the top exporting state. So California I mean, there's an incredible number of of jobs supported by by international trade in California, and I don't think it's a position of this administration that we need international offices to continue to capitalize on that opportunity. But I would highlight that that's why this program is so important is because small businesses need to get access to that, and that's where we offer support.
You asked about the number of businesses we've supported. We have you know, with a small number of of of funding, we've actually supported 362 businesses over the past three years. Those businesses you asked about impact. Those businesses collectively have generated a 143,000,000, just shy of a $143,000,000 in export sales. So those are the types of metrics that we look to quantify success when we work with a small business.
The way the program works is a small business might be looking to do compliance testing. Perhaps they're a medical device manufacturer that's interested in expanding into South Korea because they do have such a clear market for, you know, health care and medical devices. That company might need additional support to explore that market, but they might need to get their products licensed for the FDA equivalent, you know, in South Korea. Our funding and it's maxed out at $10,000 for a small business. So it's these are microgrants.
That funding can help that small business test the waters of of, you know, the medical device up you know, market in South Korea. So we provide funding like that. We're actually doing a a health care trade mission to South Korea, we hope next year, where we are gonna be bringing up to 10 small businesses that have innovative solutions in health care, and that our trade and investment representative who oversees Asia. We have three trade and investment representatives, and I should mention that because in the absence of having international offices, Diana is one. We have three dedicated staff with expertise within the regions of oversight to facilitate that trade and investment between strategic markets like South Korea.
Hanan, our trade investment representative for Asia, will be leading a a trade mission for 10 small businesses focused on the health care sector. We bring the convening power of the state. We do a California pavilion. We do business to business matchmaking. We help those businesses really sort of shoulder the risk of what it might look like to expand in in Korea.
I I don't know if I tracked the last part of your your question, but I hope that that helps explain a bit more about the program.
Speaker 3
You you shared the part part you did share the partnerships, but you did share the what revenues were generated in the number of businesses. So I appreciate it. Thanks. Absolutely. And and I wanna make sure that my district is connected.
And if there are industries and businesses and small businesses that are gonna be part of this match to match and mission that you all are going to do, we'd love to be in touch with you on.
Speaker 9
We would love to provide follow-up information about all of our planned activities. Thank you.
Speaker 12
I was just gonna add. As Emily said, Diana Dominguez, I'm trade investment representative, and I cover The Americas and Oceana. So much of the way that we get around to not having boots on the ground in market is also leveraging our ecosystem of stakeholders. So we leverage our partners at the US embassies worldwide to service our California companies across all industry sectors. We work with American Chambers of Commerce that are on the ground, and there are many US based trade show organizations that have platforms in foreign countries that we leverage.
And through those networks, we also build relationships with in market experts like business consultants who then help us to build out these relationships. So we think creatively in our as as do other states who don't have boots on the ground to maximize our presence and market. Thanks, Diana.
Speaker 10
Yeah. Thank you. I I mean, this is an important program with a lot of a lot of promise. I think LAO's comments are also important here, which is that making permanent long term commitments in this budget environment. This this has to go on our list of 800 things the administration is proposing for permanent funding, as well as the, you know, the deep needs that we're facing already in in programs of of you know, ongoing programs that serve Californians and the impacts of HR one.
So although I'm I'm I'm open to the idea, I'd I I don't It can't simply be the federal government's withdrawing funding, and therefore, we sort of automatically autopilot need to take over because we're we're we're actively telling everybody else we're not doing that for food. We're not doing that for health care. We're not doing that for anything And it's gotta go into that into that into that same bucket. I do appreciate the structure of the program. I mean, is it is the case that Wyoming does have to go.
You know, when I'm in The Philippines or in Taiwan or they they Wyoming has to they do need an office if they don't have one because nobody ever heard of them. No shade on Wyoming, but everybody knows California. So we have other we have other challenges that other states don't have, but sort of our visibility is not one. This one, when when the the trade and commerce officers were closed, it wasn't a big deal after that in California. But, that's partly because, you know, to return to this gubernatorial musical chairs, Arnold Schwarzenegger, you know, one of the world's biggest stars, was the governor of California.
You really didn't have to convince people in Vietnam of you know, you didn't have to tell them where what California was. You didn't before that, but especially with him as governor. So, it just gets to this point about the the economic development is a very at this it's analytics, very data driven. A lot of us who've done like, for a long time don't wanna accept that. We wanna think we just need to set up a table at the CES in in Vegas and we're done or at the International Shopping Center Convention.
And that's not the case. Like, data analytics, insurance card. There's a whole lot of other stuff that is now accounted for and all of that. That being said, some mechanism for relations does matter too, and it's why the programs like this don't need to be $10,000,000,000, but they are but they are important. So, I hope we will have the resources to be able to grapple with, but we do need to keep this open so that we can weigh it against the many, many, many other general fund priorities that we're going have to grapple with.
Thanks, Benhamshire.
Speaker 1
Thank you. Can you speak a little bit to the return on investment in in regards of the funds that have already been invested into? What is it? CalExport?
Speaker 9
Oh, go ahead. Sure. So we we track success in the program by export sales. So that is a a business that's signed a a dollar value agreement perhaps with an international partner. Perhaps they signed an agreement with a distributor.
Maybe they got a procurement opportunity with a foreign government. But I referenced in the past three years by when under which we've been administering the program, it's just shy of a $143,000,000 in collective export sales of those 362 unique businesses that have participated in the program.
Speaker 1
Is there anything in your budget change proposal that is different from, you know, the you know, last year's request? Or anything that is different in the STEP program specifically.
Speaker 9
Oh, in in terms of the like, how this program would be administered versus how the STEP program is currently administered? Correct. Yeah. No. It we we feel like it's a really successful model.
It has strong accountability standards, strong metrics. So we would continue it as as planned in large part. It, you know, focused on California companies, 51% US content, etcetera, the the criteria that we established to oversee the program. Okay.
Speaker 1
Alright. Well, thank you so much for your presentation today. Appreciate it. And we will hold this item open. Thank you.
Moving on, agenda item number six.
Speaker 9
Excuse me while I navigate my brief here. Thank you, chair. This our department requests $400,000 general fund ongoing to support one permanent position, which would be an assistant deputy director, and then one graduate student position to operationalize and expand GOBIS' work to attract, retain, and grow innovation in emerging technology sectors, including quantum and fusion in California. Director Myers talked earlier about the place that you all had in front of you. Bets and accelerate sectors that include things like AI and quantum, cloud and data platforms, robotics, have tangible revenue streams, immediate benefit business use cases, and the potential to cut across all industries due to the ability to leverage decades of digitization, data growth, and access to cloud computing.
Accelerating innovation cycles and the proliferation of record years in venture capital have led to the average lifespan of and P 500 companies decreasing from sixty one years in 1958 to just about eighteen years today. This BCP to support our innovation and emerging tech team is really focused on supporting a repeatable statewide cadence of things like targeted sector convenings, demo days, monthly working groups, in region activities, support for federal funding bids, and marketing and resources to support and advance these emerging and important sectors. So I'll stop there, but would just say that with one senior position who's here to my right supporting this work currently, the additional staff capacity will better position GOBIS to meet the demand to retain and attract these really important firms and businesses to grow and expand in California. Thank you.
Speaker 7
know, as part of our broader comments on, you know, making ongoing commitments to spending in light of the budget.
Speaker 1
Thank you. Questions from committee members, chair? Senator Cabaldon or senator Smallwood Cuevas? No? Okay.
I I just have one. It should be kind of brief and quick. It so in is there, like, a reason what I mean, I know earlier we we there was a request for 20,000,000 for the brand campaign. Is there a reason why this is different or this is, you know, dish you know, why some of those funds potentially could not be used or integrated? I mean, that they're and I know they're, again, they're different items, but they almost kinda seem very similar as well.
Speaker 9
Thank you, chair. I I think you're right in there in that they're similar in the sense that we feel that these would be very complimentary to one another, but the 20,000,000 is one time funds dedicated for a broader brand campaign. This request is to support permanent and ongoing staff positions to help with the emerging tech sector. So while the brand campaign, once designed and implemented, certainly, we hope we'll we'll celebrate and attract these kinds of businesses with that one time funding with the brand campaign. This is really about permanent staffing to work with those businesses, to help them navigate incentives, to work through and convene stakeholders and working groups to do those things that we outlined like, you know, support on federal bid requests, etcetera.
Speaker 1
Okay. Alright. Sounds good. Thank you so much for the presentation, and we'll hold this item open and move on to agenda item number seven. Continuing with go biz.
And this is for, the reappropriation of Jobs First administrative resources. Please proceed when you're ready.
Speaker 13
Good afternoon, chair Hurtado and senators. My name is Derek Kirk. I'm the senior adviser for economic policy at GOBIS. This request is for an extension of the encumbrance deadline on the administrative funds for the Jobs First Regional Investment Initiative. In the fiscal year twenty four budget, the legislature and the governor appropriated $50,000,000 a year a year plan for three years and extended the encumbrance and expense deadline for the program through 06/30/2030.
This request would ensure that GOBIS, the labor agency, and the employment development department have the administrative funds necessary to support our grantees on the execution of their grants as well as the long term implementation of their regional plans. I'm happy to take your questions.
Speaker 1
Okay. Do we have questions or comments from committee members? Senator Kabalin?
Speaker 10
I'm gonna stipulate again about long term commitments to for ex extensions. I understand the nature of the program. We wanna invest wanna I would before I could even consider being supportive of it, though I wouldn't wanna be I would wanna know much clear more clearly what what is absolutely what is the baseline minimum necessary in order to achieve the the the the fiduciary and other obligations of the state. I'm not prepared to support a full program extension with technical assistance and everything else that's that's a that should be a decision for the out years, not for us making a long term commitment in the end of this administration.
Speaker 14
I appreciate the comment, senator. If I can, I I wanna just specifically note that the request on this extension is for it's for the administrative funds, which is legislatively capped at 5%? So just for your records and and and knowledge that that it's 2 and a half million dollars of each of the $50,000,000 appropriations that are used, and it would be capped. The programmatic funds, which all pro all of the programmatic funds that have been appropriated are fully encumbered and granted out. We're very proud of that today.
Speaker 13
I mean, so this this is only for that 2 and a half million dollar cap, but but we totally respect your comments.
Speaker 10
Yeah. I I understand I understand that, but we're not at this stage, the our interest in assuring the grantees are are meeting the terms of their their their contracts and what have you. That's a different set of activities than the full The 5% was anticipated for program design, for program rollout, program coordination. That's a different set than we gave out all the money and now you have to do what you said you were gonna do, you have to not spend the money inappropriately, you know, the contracts all have to be legit, and the audits have to be done. That is that's not 5% at that stage.
So, I'm I would be prepared to support the the as a commitment, because we're talking about, a commitment for another several years after this administration, a commitment for the baseline necessary to assure that those grants are properly overseen. But, in terms of additional, you know, convenings and that sort of thing, that's a programmatic issue that the legislature should decide is a priority general fund commitment before we approve that.
Speaker 1
Thank you, senator Caballin. And I I just I would echo those those same comments and concerns that senator Caballin just expressed. I don't really have much more to add. I I mean, I would like to see some more detailed information about the program itself and this you know, whatever successes you've had over, what is it, a year more than more so than a year that it's been in place, and that would be very helpful in helping me make a decision on this. Thank you so much.
Speaker 1
Okay. We'll hold this item open. We'll move on to item number seven. Not seven. Eight.
Eight. Yeah. So we now we we now turn to oversight and budget proposals under the governor's office of land use and climate innovation, also known as go LCI. Director Asafa, thank you so much for for patiently waiting and and for being here, of course. And we'll go ahead and allow you to proceed with with your presentation.
Speaker 26
Great thank you chair hortardo and committee members thank you for giving the governor's office of land use and climate innovation or LCI to present our twenty twenty six twenty twenty seven budget. I am joined today by members of my executive team, and I will provide a high level overview of the structure and statutory responsibilities of LCI. And then senior deputy director, Abby Edwards, will provide specifics of the our budget items. The governor's office of land use and climate innovation or LCI, formerly the governor's office of planning and research or OPR was created by statute in 1970 as part of the governor's office soon after the CEQA or the California Environmental Quality Act was signed by then governor Ronald Reagan. OPR replaced then fragmented planning functions and consolidated them into a central governor facing planning entity.
Speaker 23
From its inception, the office was tasked with implementing the California Environmental Quality Act and structured to serve as the state's long range land use planning entity working across all sectors and levels of government. This is local, state, and also federal. At its core, the statutory purpose can be distilled into three core functions. First, long range policy planning, developing statewide goals, policies, and strategies on land use, growth, and development. Second, intergovernmental coordination acting as a bridge between state agencies, local governments, and federal entities reducing fragmentation and aligning policy.
And third, technical guidance and oversight, providing planning assistance guidelines and re review functions to local governments, including general plans and sequel implementation. Increasingly, the office has been tasked with building and maintaining data and technology that reduce the cost and time of CEQA compliance while preserving environmental quality. For the CEQA judicial streamlining program as a recent example, LCI is the lead agency which drafts guidelines, conducts outreach to potential applicants, assist applicants throughout the application and submission process, perform technical and policy review, coordinate with state agencies such as energy commission, natural resources, environmental protection agency, to name just a few, and recommend certification to the governor. LCI is also the state's comprehensive planning agency. While many agencies play a role in land use and climate, LCI is the only state entity tasked with thinking broadly and comprehensively across housing, transportation, conservation, infrastructure, ecology, public health, and community well-being.
At the local level, the general plan guides long range land use planning. LCI provides technical assistance to local governments through the general plan guidelines and monitors progress through annual progress reports submitted each year to the legislature. We are currently updating both general plan and sequel guidelines to reflect the more than 250 new laws enacted since 2027 2017 and 2018, the last time the guidelines the general plan guidelines were updated. Across all of this work, climate resilience is a through line. The corner sort of this cornerstone of this effort is ICARP or the integrated climate adaptation and resiliency program.
Aligning efforts across local, regional, and state partners. We complement grants investments with data and tools that translate climate information into action. This commitment to science is reflected in the California climate change assessments, which LCI provides every five years in partnership with key state agencies. The fifth assessment is nearly complete and will be released this October at the resilient California summit. At the federal level, LCI's military affairs function coordinates with the US department of defense, local governments, and state partners to reduce land use conflicts around military installations, strengthen installation and community resilience, and align defense related investments with California's broader land use and climate priorities.
LCI's work is also carried forward through the strategic growth council or s g c. Established in 2008 by senate bill seven thirty two s g c is housed within l c I. S g c aligns policy oversees investments and engages partners across government and communities. LCI's director serves as chair of the council, which is made up of seven members of the governance cabinet and three public members, one each appointed by the governor, the assembly, and the senate. Since its since its inception, s g c has invested more than $5,700,000,000 in communities statewide advancing transportation, housing, and climate priorities under s b three seventy five while supporting sustainable agricultural lands conservation under s b eight sixty two.
In the next fiscal year alone, s g c will award nearly $1,000,000,000 in prop eight prop four and greenhouse gas reduction fund or GGRF. Finally, I just wanna note another entity within LCI, which is the racial equity commission, which was established under executive order n 1622. The commission works to embed racial equity across state policies, programs, and initiatives. It provides guidance to address inequities facing historically under underserved communities grounded in the belief that California thrives when all communities thrive. The commission is released has released the racial equity framework this past December.
Now I'll ask Abby Edwards, our senior deputy director, to walk you through LCI's budget items. Thank you. Thank you.
Speaker 10
Yeah. Just on the overview. Right? Not on the specific items. So thank you.
Thanks. And thanks for being here. The the the state the state's role in the implementation of s b three seven five, s b seven forty three, and the other elements as part of the overall land use transportation, how climate, and then housing integration that that began just over a decade and a half ago. There have been a lot of issues raised. I I full disclosure, I'm carrying legislation in this space.
And, one of the challenges that we're grappling with is the sort of the disconnected state roles and and the role of CARB versus other entities, other state agencies in that field. And, one of the issues that's constantly come up is isn't isn't this really isn't this why we created both LCI, but also the strategic growth council in particular. And I I I so I'm I'm curious as to whether or not you you are you evaluated our progress or lack thereof on the s p three seventy five side, and if you if you if there are any insights that you might share with us about at the state operations, state government level, what we might do to improve our performance on the outcomes that we sought to achieve.
Speaker 23
Sure. I'll touch on. We haven't done specific evaluation about that. What we have done in my office is specifically the land use team consistently coordinates across CARB and all of the state agencies as well as the external entities like council of governments. So that the issue itself, s p three seventy five is a very an issue that is prime for some revision and and maybe updates.
And LCI's as LCI has facilitated for the last year or so in that conversation across state relevant agencies. Adi could add more specifics on some of the work that we're doing in that space.
Speaker 24
Thanks so much for the question. I would defer to Natalie Kuppel, who's our deputy director over land use policy. I would just I would just emphasize that we're not regulatory agencies, and so our ability in this space is is somewhat limited. So, Natalie, don't know if you wanna share anything else.
Speaker 25
Sure. Thank you. One microphone is tricky up here. So, yes, as Abby mentioned, we aren't regulatory agencies like CARB, our role is not as explicit, but we do play a role through, as Sam mentioned, the interagency coordination that occurs at the Strategic Growth Council. But then also in thinking about, you know, how local governments can do better planning, and that happens through the general plan guidelines.
As mentioned, those haven't been updated since 2018, and we are in the process of doing that work, and really think that through that update of the general plan guidelines, we'll be able to convey what it means to build more sustainable communities at the local level because ultimately land use control is at the local level, which as you know is one of the issues with implementing SB three seventy five. Sorry about that. And so that is a role that we play, and then, obviously, our role in CEQA is hugely influential. You talked about SB seven forty three, and that is a way that we can reduce vehicle miles traveled because now under CEQA, when you think about the transportation impacts that a project is going to have, you think about vehicle miles traveled. And one of the things that we are implementing at the moment pursuant to AB one thirty last year is the VMT mitigation bank, And so that will be a way to turn significant transportation impacts that a project has into infill affordable housing as a mitigation strategy.
So that will be another way that we can get closer to the sustainable communities that SB three seventy five envisioned.
Speaker 10
Thanks. Just to put a finer point on it, the recognizing that neither LCI or SCC are regulatory agencies, But the like, one of the fundamental the core elements, but also one of the big challenges in SB three seventy five is the development of the targets. And so the I mean, it's become clear to me that at least that one of the challenges is that and that that that development is assigned exclusively to CARB because it's a climate target. And, there are others that say it should go that should be done exclusively by CTC because it's about the transportation plan. There are others who would say, well, climate targets are also a function of our housing production, which is, thanks to, you know, legislation a decade ago, RINA, is also linked to to these plans.
And so, as these conversations have been happening, you know, everyone around the room everyone in the in the universe says, wouldn't it be great if there was an agency that brought transportation, climate, land use, you know, economic development together. Wouldn't that be amazing? And then we everybody looks at each other and says, we have that. And, it's it's not regulatory. It doesn't have a staff of 10,000.
But the but the but the question emerges is is that what what because the challenge is mainly process wise. I mean, it is the the targets themselves, but those targets are in context. Like, what's the what is the best achievable climate target given a transportation plan, a land use map, and all of that? So the so my my question is really about the the the potential obviously, it's not a a sign of the sign that could that could be taken up tomorrow with no additional resources, but the what the potential for one of these two related entities, LCI or SCC, to to play a different role in that constellation since it seems to line up so much with what the mission of both that law is, but also the agencies.
Speaker 25
Agree. And, certainly, the potential exists but would require developing in order to effectuate it. Any
Speaker 1
other questions or comments on overview? No? Seeing none. Okay. So at this moment, we if every if every committee member is okay with it, we can merge items number nine, ten, and 11 in in two one.
I know some folks have to catch a flight and lights and is that okay? There's consensus? Consensus online. Okay. Then we'll proceed, if you don't mind.
Thank you.
Speaker 24
Good afternoon, madam chair and members. My name is Abby Edwards. I'm the senior deputy director at LCI, and I'll be going over items nine through 11. So starting with LCI baseline resources are three baseline resource requests this year balance the need to maintain these essential services for California with the state's ongoing fiscal realities these represents functions and efforts that were previously funded on a limited term basis and do not represent any new programs or an expansion of LCI scope they are intended to maintain the minimum operational foundation needed as a state organization ensuring that we can meet our statutory duties and maintain core functions like reliable technology grant facilitation contract execution so that existing state staff can continue to deliver meaningful results for California. For information technology baseline resource request for requesting 6,200,000 in general fund in 2026 and '7 and ongoing to continue the implementation of IT services following the establishment of the IT office.
For administrative and legislative baseline resources, we're requesting $3,400,000 in general fund in 2026 and '7 and ongoing to maintain baseline support for core administrative and legislative functions. Permanent funding is necessary to ensure LCI maintains basic operational stability and compliance. And lastly, our land policy baseline resources were requesting 900,000 in general fund in 2026 and '7 and ongoing to support existing positions within our land policy unit. These staff are foundational to man, managing our core land use planning and sequel workload, providing technical assistance and ensuring that the state can effectively implement its land use priorities. Maintaining this capacity is critical to delivering timely consistent and high quality outcomes across our portfolio.
And additionally a part of this item requesting 949,000 in general fund annually beginning twenty twenty seven and eight through 02/1932 to continue supporting existing positions responsible for implementing the judicial streamlining provisions established under SB seven and SB 149. These rules are really essential to ensuring that priority projects move forward efficiently while upholding the integrity of CEQA and meeting the program statutory requirements through sunset. So that is for our baseline resources. I'll give a quick overview for the climate bond, if that's how we would like to proceed. Okay.
Speaker 27
So, for our request on the climate bond spending proposals, you know, given the shifting landscape at the federal level, the work of LCI and s g c has become even more critical, especially in the climate and community investments being proposed under the climate bond. These efforts are helping California most vulnerable disadvantaged and historically under invested in communities better prepare for the growing climate challenges ahead. The strategic growth council's transformative climate communities and community resilience center program along with LCI's Extreme Heat and Community Resilience program are in high demand and constantly and consistently oversubscribed. Together, they represent hundreds of millions of dollars in regional, local, and neighborhood level investments designed to meet communities where they are to be reflective of their needs. For s g c's transformative climate communities program, we're requesting a hundred and seventy three or thirty seven million in, 2026 and seven for around six of the transformative climate communities program.
Speaker 24
These funds will go toward grants and also technical assistance. Force the strategic growth councils community resilience centers program we're requesting 55,000,000 in 2026 and seven to make grants in the CRC program second round of funding the full 55,000,000 were requested will be going toward grant awards. And for LCI's Extreme Heat and Community Resilience Program, we're requesting 24,000,000 to make grants for the Extreme Heat and Community Resilience Program for the third round of funding. The 24,000,000 request will go towards grants and technical assistance. And lastly, on the CalHEAP score implementation BCP, we're requesting 522,000 general fund in one position in 2026 and ongoing to carry out the statutory requirements under AB two thousand two thirty eight or Cal HEAT score.
These resources will enable LCI to support local governments, tribes, and community based organizations to use the heat warning system to support local decision makers and save lives. So those are the three items. Happy to take any questions. I'm joined by my admin team and also the strategic growth council to help answer any questions if you have them.
Speaker 1
Thank you. Do we have any questions or comments from the Department of Finance?
Speaker 25
Courtney Massengiel, department of finance. No comments, but available for questions.
Speaker 7
Good afternoon, chair Hortado and senators. Goktashen Janmith, LAO. We have very short, brief remarks. As the department presented the governor proposes to increase l c i's ongoing budget by $10,500,000 from the general fund overall our review found that the administration provided reasonable justification for these proposals Cost increases have various reasons including OPR's restructuring into LCI and GoServ, LCI civil service transition, and workload increase related to CEQA, grant responsibilities, new statutory requirements. If these requests are not fully funded, LCI will not be able to provide the same level of service that it currently offers.
Speaker 19
However, on the other hand, approving these proposals would mean taking on a new ongoing general fund commitment. And in the context of the state's, projected multi year budget deficit, this would inevitably require, reductions elsewhere or revenue increases. If the legislature is not willing to do this, then it could consider done scaling LCI's grant and statutory responsibilities, revisiting program implementation timelines, or readjusting associated resource needs. Thank you.
Speaker 1
Thank you. We'll go ahead and, take questions, comments from committee members. Mister vice chair?
Speaker 4
Really, pretty quickly and very much to the point. Just recently, the governor indicated that his May revision will include spending reductions and to augment general fund expenditures as this proposal does necessitates because of our structural deficit reductions elsewhere. And so I just don't think it makes any sense at all to be increasing general fund spending frankly for anything.
Speaker 10
Thank you. Thank you, madam chair, and thanks thanks to the vice chair. I we could have finished hours ago. Just we just rejected all spending. Anyway, appreciate the presentation.
Just a couple of a couple of comments on this. I you know, the horse is out of the barn already. I I personally wouldn't have supported the, you know, LCI moving into the silver service and the changes that had happened had we known that the just the IT cost alone, we're gonna we're gonna get this far out of control. And, you know, supposed to be a it's supposed to be a purely ministerial change from the budget's perspective, and it's not turned out to be that. So, obviously, we need to keep keep an eye on that going forward.
Speaker 29
That doesn't get even further out of hand. Second, would just would simply note on the on the heat score is that at least that my understanding is the the when the bill establishing the program was before the legislature, at least our appropriations committee scored it at this amount, but it scored it at this amount for design and development of the communications plan, not for implementation. And so that the the having an on permanent ongoing cost for the program was not anticipated when the when the when the appropriations committee took this up, and I don't believe from the tape that the Department of Finance said that it was something other than what the the analysis raised. So this this is one to keep an eye on as to whether or not it's an appropriate general fund expenditure given the the the the comments of LAO, which are right on target. And then just lastly on the the the the secret side, the judicial streaming streamlining program sunsets, therefore, the money is that's that's that's here is one time cost, but the modernization project is forever.
Speaker 25
Thank you. Yes. So, the request is for one position for our data team lead who will assist with doing the data work required for the sequel modernization project.
Speaker 10
And that's that's for forever? Correct. And and why is that? So, with the with the judicial streamlining project, obviously, there's a set of a set of work that's anticipated and it's done. The modernization how how how are I mean, yes, we should all be continuously modernizing, but why do we need to continue to be doing that?
Speaker 25
That's a a great question. So this is distinct from judicial streamlining. So under statute, we have ongoing CEQA responsibilities, and that includes the creation and maintenance of a database. Some of you have maybe used it. It's known currently as Sequanet, but it's highly out of date.
So when we talk about Sequan modernization, we are talking about modernizing that system, and it will continue to require data quality and maintenance ongoing because it's an ongoing statutory responsibility.
Speaker 10
But isn't I mean, there's the modernizing and then there's the maintenance and update and that as we were talking about in a different item, I mean, should we expect that the that the maintenance and and what have you is gonna be the same in terms of requiring an entire physician as the modernization itself is?
Speaker 25
I I think maybe the the term modernization was confusing. I apologize for that. So we are currently undergoing a modernization effort, but the work will continue. So there will be a a SQNET three point o that will have to be maintained, and there will be a position that will be required to do that work ongoing.
Speaker 10
Then as the is there a we're not passing another a b one thirty, s b one thirty one this year, most most likely, I'm guessing. Is there is there a point where the curve on if the number of projects subject to CEQA declines, then we might expect that we will not be adding more money to state level CEQA implementation oversight? Or is there it's should we not expect any correlation between that?
Speaker 25
Well, one thing to note is that notices of exemption are also required to be filed with this clearing house, and they actually make up the majority of the documents that this team is reviewing and processing. So of the 22,000 documents that we receive every year, I think it's like 75% or more are notices of exemption. So, even as you have more projects becoming exempt under CEQA, this work doesn't go away.
Speaker 10
So, the and and sorry, madam chairman. So, so so if if the if the famous city of Culver City sends in a notice notice of exemption, this project that is there for which they are the lead agency, it's exempt because it's surrounded on three sides by housing. It's inside the city limits, it's it's AB one thirty exempt. So, when it arrives at your office, is it is there a human being reviewing all of I mean, that I mean, these these sort of I mean, is there no is it I mean, is there no batch processing of of of fairly straightforward ones? Or is it is it is human judgment required for each of these now these now kind of broad statutory exemptions that exist?
Speaker 16
Yes. So there's human review for every document that's submitted to the state clearinghouse. And this human review is not doing any sort of legal analysis to determine whether the exemption was appropriately used, but more from a data quality perspective to ensure that, you know, the names are correct, the address is correct, the information is correct. So everything that goes into our database and then becomes part of this public record for CEQUA, which is required by the legislature through SB 69. And every new exemption that's created like the one in a b one thirty requires that these documents be submitted to the state clearinghouse and posted on our public website.
Speaker 25
So the human in the loop is ensuring that the information that is submitted is accurate so that we are giving accurate information to the public.
Speaker 10
Okay. Okay. That I I understand that. I think the I mean, it still remains a budget priority question to me as to whether or not that compared to keeping a Medi Cal clinic is as important, like, whether whether we need state level review for that purpose in the absence of evidence of, you know, substantial non, you know, inaccurate notices of exemption. So that that would be an interesting policy question for some day other than today.
But just given this the the state of the general fund, you know, to to do that sort of activity at the state level relative to the kind of cuts that we're gonna be grappling with in the in the rest of the budget, think, a is a is an important open question. So Thanks, madam chair.
Speaker 1
Questions from committee members? No? Okay. I think that senator Cavaldi captured the majority of the questions I had. So thank you, senator Cavaldi.
I guess the only one the only other kinda question I would add to to his remarks are regarding the you mentioned the clearinghouse for the the CEQA. I mean, is there any kind of, like, audit that has been done to make sure that it's functioning to the way that we need it to be?
Speaker 25
Yes. So there have been reviews conducted by the Department of Technology about the current technology that exists and found that it was lacking and needed to be replaced. Fun. So that has been conducted.
Speaker 1
Okay. Okey dokey. Well, you so much for your presentation, and we will hold these items open.
Speaker 1
We'll go ahead and move to public comment. We will take public comment on all items on all items on the agenda, including vote only items twelve and thirteen. When it is your turn to speak, please state your name, your affiliation, and so we have time for everyone to speak. Please limit your remarks to one minute.
Speaker 21
Thank you, madam chair, and members. Eduardo Martinez here on behalf of actors equity, a national label union representing a professional actors and stage managers across California. We're one of the original sponsors of SB eleven sixteen legislation which created the performing arts equitable payroll fund. We're here to respectfully urge you to support the $40,000,000 additional funding request by senators Rubio and senator Haney for the performing arts equitable payroll fund. As you heard earlier, this program has already proven itself to be a smart and targeted investment in California's creative workforce.
In its inaugural round the funds supported 4,748 direct jobs and more than seven hundred and four seven thousand four hundred additional downstream jobs helping small nonprofit performing arts organizations keep artists stage managers technicians and staff employed throughout our state. But as you've heard the demand far exceeded available funding over 413 organizations applied requesting more than $40,000,000 while only 11,600,000 was made available. That means hundreds of deserving organizations and the workers they employ were left behind. At a time when arts organizations continue to face rising costs, high inflation, and declining federal support, California must continue investing in the workforce that powers our creative economy. For many communities these organizations are not luxuries They are economic engines, cultural anchors, and pathways to opportunity.
Speaker 2
So, we respectfully ask for you to support this critical investment in California's arts workers and cultural institutions. Thank you.
Speaker 30
Madam chair and members, Rand Martin here on behalf of a coalition of public radio and television stations in very strong support of a proposal that was submitted by senator Allen to assist public media with getting out from under the rescission last July by congress that took away all federal funding for public media. The request is for $70,000,000. It's actually $30,000,000 per fiscal year for the next two years plus a $10,000,000 appropriation to help with some infrastructure needs that were ended because of the of the federal cutbacks. Stations from one end of the state to the other have suffered staff layoffs, certainly cutbacks to their budgets. There are those especially in the more rural parts of the the state that are really at risk of shutting down altogether or at least not being able to provide the services that they're doing.
Speaker 26
I want to stress a couple of things. Number one is they're not just there to show Sesame Street. They are there as often in in many rural areas but even urban areas as emergency broadcasters. Where you can't get it from commercial TV or radio. You can get it from from public public media.
The second thing I just want to point out is that there are other requests into this committee relative to other issues for public media and traditional media. We support those, but we think that this proposal is foundational not aspirational. We need to make sure these stations stay open in order to do the aspirational things that some of the other folks have been requesting. Really strongly urge you to support senator Allen's request. Thank you.
Speaker 28
Good afternoon, chair Hurtado and members of the committee. My name is Kirk Blackington. I'm representing Capital Stage Company, which is a, professional equity theater located here in Midtown Sacramento. And I wanna talk about the, performing arts payroll equitable fund. First, we wanna extend our deepest gratitude to Senator Rubio for her leadership in requesting $40,000,000 to reopen the PAEPF.
Speaker 27
Capital stage serves over 21,000 community members annually. And as a professional union theater, we provide essential livable wage jobs for local actors, designers, technicians, arts administrators, and young professionals who are growing into productive members of the California workforce. We have an emphasis on hiring a diverse team in every sense of the word and emphasize lifting up voices that have been historically underrepresented in the arts and culture sector. Statewide, the demand for this program is undeniable. In its first year, 413 organizations applied, yet only 100 could be funded.
Capital Stage was unfortunately one of the applicants that did not receive funds due to the limited amount available. Reopening this fund with $40,000,000 would protect nearly 5,000 direct jobs and 7,000 downstream jobs that fuel California's creative economy, and specifically here in Sacramento in our case. For small nonprofits like ours, these funds aren't just a subsidy. They're a lifeline that ensures we can continue to pay artists fairly while producing bold, socially relevant theater that reflects the diversity of our state. We respectfully urge your support for this critical investment.
Thank you.
Speaker 22
Hi. I'm Lisa Tromovich, executive director of Spark, the Shakespeare and Performing Arts Regional Company, a PAEFP recipient in Livermore. With these funds, we retained our development director, Felicity, for a second year. She gave birth to a baby girl last week. To help cover her maternity leave, we hired Cheryl Lim, a recent UC Davis graduate, now piecing together part time arts jobs, including at Las Positas College.
For both women, PAEPF funding meant stability at a pivotal moment. Small arts organizations sustained the workforce behind our major institutions. Of the eight adult actors in Berkeley Rep's recent All My Sons, three have worked with Spark. One of them, Cassidy Brown, earned the final work weeks needed to qualify for his union's health insurance through our Shakespeare in the Vineyard program. Large institutions can't provide enough workweeks on their own.
Speaker 11
We make the careers sustainable. And let's be clear, major studios like Paramount and Disney receive government subsidies. In that context, 40,000,000 for nonprofits is not out of line. It's necessary. Thank you senators for hearing us and senator Rubio and the others for all the arts funding advocacy.
Speaker 28
Hello. Good morning chair, afternoon chair, members of the committee. My name is Erin Anova and I am the executive artistic director at Celebration Arts Theatre, a small black theater founded in 1986. For nearly forty years, we've told unique stories that reflect the African American experience in our country. We're also proud and appreciative recipients of the Performing Arts Equitable Payroll Fund grant.
I am here to share with you that the amount we received through the PAEPF grant is not abstract support. It has been literal. It's contributed to our survival. We are a four person team. We were finally able to hire a development manager part time.
We're creating culturally specific theater that reflects our community, and without the PAEPF F grant, we simply could not afford rising payroll costs while keeping our doors open. So many smart small arts organizations are closing, and in December we were literally on the verge. When that happens, we lose the voices and stories that make California's cultural landscape so incredibly rich and diverse. We lose spaces where young people can be on stage and see themselves on stage and have their witness, have their brilliance witness. But beyond payroll, the investment by the PAEPF grant sustained something deeper.
Speaker 31
Theater is one of the last places where a human being can stand in front of another human being and say, this is what it means to be alive. In times like these, we need the arts as sustainable containers where we can go to remind each other of what it is to be a human and our beautiful complexity. Ultimately, I'm also grateful that programs like PAPF recognize small arts organizations as assets and places to hear our stories, but we are also economic engines, employers, educators, and community anchors. We need your continued and expanded support to survive and thrive and and serve, to employ, and to strengthen the cultural fabric of this state. Thank you for your time and consideration.
Speaker 1
Thank you. And I just kind of want to reiterate, please state your name and your affiliation, and if you can please limit your remarks to one minute where we want to provide the opportunity for everyone to vote this afternoon. Thank you.
Speaker 12
Good afternoon. My name is Karen Reed Sterna. I'm executive director for Central West Ballet in Modesto. We're the only professional ballet company South Of Sacramento, East Of The Bay Area, and North Of Los Angeles, and have been in Modesto performing for almost forty years. California ranks about thirty fifth in the nation for arts funding at about 66¢ per capita.
Speaker 29
Although we are home to more artists than any state, employ hundreds of thousands of people, and contribute seven and a half percent of the state's GDP. Investment in the arts creates sustainability as our local dancers, artists, musicians, and actors don't have to move out of our communities or the state to pursue their careers and a paycheck. They'll stay in our cities and state. They'll buy homes. They'll spend money.
They'll pay taxes. We won't have local dancers, artists, musicians, and actors if we can't offer a career path and a livable wage. Equally frightening, we won't have audiences in the future if there is no one to see and no one to learn from we unfortunately did not receive the grant but it would have helped our dancers in our company immensely so I ask you to include the $40,000,000 in the 2627 budget and fund the performing arts equitable payroll fund. Thank you.
Speaker 22
Good afternoon, chair and members of the subcommittee. My name is Daniela Rodriguez with immigrants rising, a proud co lead of the economic mobility for all coalition. I'm here to request your support for a request by senator Becker and assembly member Carrillo's request of 45,000,000 over two years to reinvest in the social entrepreneurs for economic development initiative known as SEED, which is a program that provides technical assistance, micro grants, and training to aspiring and existing entrepreneurs. Small businesses are under severe economic strain, grappling with inflation among other challenges. But for immigrant entrepreneurs, these pressures are compounded by lack of traditional banking access and exclusion from federal programs.
Speaker 30
Recently produced research by immigrants rising finds that nearly 2,400 jobs have been supported by the niche seed initiatives thus far. It represents a strategic public economic development approach that generates new businesses, supports jobs, and expands economic participation among populations traditionally excluded from capital access. And just thank you, and we look forward to working with each of you to make sure that gets included in the budget.
Speaker 32
Good afternoon. My name is Dara Dada with Cameo Network, an association of more than 400 small business providers, many of which are seed grantees. Please support a 45,000,000 over two years renewed investment in the social entrepreneurs for Economic Development SEED initiative. In recent years, Latino and immigrant entrepreneurs have started new businesses at twice the rate of the general population. The SEED program provides an entrance into business ownership so these entrepreneurs can generate income to support their families and contribute to the economic vitality of their communities.
Speaker 31
Many grantees are Cameo members. For example, one member is using the grant to incubate 60 home childcare businesses with an expected economic impact of $16,300,000 in in Monterey County. Show your support for immigrant workers and entrepreneurs and renew seed four point o. Thank you.
Speaker 4
Good afternoon committee chair and staff. My name is Amy Chong. I am representing Inclusive Action for the City. We are a community development financial institution based in LA County. We support immigrant entrepreneurs, small businesses, street funders, individuals who have a dream to pursue a career through entrepreneurship.
Speaker 32
The seed entrepreneurship program is a program that will support small businesses throughout the state. We have seen this the seed program being a track record to support immigrants and entrepreneurs to ensure that they have they produce job quality for their communities, they support economic development in their in their neighborhoods, and foster growth economically. So we respectfully ask your support for the seed four point o program, and thank you for your support. Hi.
Speaker 23
Good afternoon. My name is Zen Trenholm. I'm the senior director of employee ownership studies and policy at the Democracy at Work Institute, and we're based in San Diego. I'm here today to ask for your support for the Economic Ability for All Coalition's budget request of $45,000,000 over two years to support the Social Entrepreneurs for Economic Development Initiative. As recipients of the first seed grant in 2021, we supported excluded workers in home care, child care, car washing, and taxicab industries to create and grow worker cooperatives as pathways out of poverty and exploitative working conditions.
Speaker 33
In just one year, wages increased by 36% among the four worker cooperatives that were launched. Access to health benefits doubled, and one cooperative dispersed over $18,000 in profits to its members. These examples demonstrate how with the right support, workers don't have to face lower economic prospects just because of their immigration status or the industry they happen to work in. So please help us by extending and expanding this critical program for immigrant entrepreneurs and workers in this extremely difficult time. Thank you.
Good
Speaker 20
afternoon. My name is Ashley de la Rosa on behalf of Building Skills Partnership. I am here today asking you to support economic mobility for all coalitions, but to request a 45,000,000 over two years to reinvest and recommit in the social entrepreneurs for economic development seed initiative. BSP represents a high impact collaboration between over 90 janitorial employers, 60 commercial building owners, SEIU, USWW, and the broader community. Through this holistic approach, BSP continues to pave the way for an equitable future where working families can thrive positively impacting low wage workers, low wage BIPOC workers.
Speaker 34
SEED provides an opportunity to invest in people and lead high road, high quality jobs. SEED has helped raise the bar in traditionally low wage industries. Worker owner benefits from increased wages, better working conditions, paid sick leave, and ownership. Through SEED opportunities, workers don't have to face lower economic prospects or exploitive working conditions because of their immigration status or industry they work in. Seed has set a national president in the public investment for high road business ownership opportunities for immigrant workers and invites us to imagine what increased commitment to worker ownership can do for our communities.
Thank you.
Speaker 17
Good afternoon honorable members. Thank you for the opportunity to speak today. My name is Edgar Ortiz speaking on behalf of the California immigrant policy center in support of the $45,000,000 budget request from senator Becker and assemblymember Carrillo to sustain the seed initiative the ability to work is something that not just allows individuals to be able to support themselves and their loved ones but also gives them agency over the direction that their lives will take which is something that all individuals regardless of status are deserving of the $45,000,000 request comes at a critical time as we're seeing that although the deportations and detentions that our community are facing have created significant impacts, it's not the only way that the administration has been exerting economic impacts on our communities. As they're starting to follow through on their threats to the document individuals and take away their work authorization studies, We're seeing people's economic means and ability to work be at risk across the country. This includes millions of individuals including, but not limited to, the roughly 183,000 people who have DACA in California as well as the 80,000 people from different countries like Nepal, Haiti, Somalia, etcetera, and others.
And so because of this combined with all the other Californians who don't have work authorization, if we see this fall through we're gonna be faced with a significant unemployment and unemployment crisis that quite frankly we're not talking enough about and so in order to avert this we recommend doubling down on this program which has a proven track record and has been shown to be able to support individuals with the biggest barriers thank you
Speaker 13
Good afternoon chair and members of Shanti Smith on behalf of the Silicon Valley leadership group which represents California's leading innovation economy companies and next generation of startups in AI clean energy quantum computing zero emissions vehicles, and semiconductors. CalCompetes is one of the most important tools in the state's economic development toolkit, and we wanna make sure that it is still working at full capacity. As the LAO confirmed, CalCompetes is a highly effective is highly effective at driving employment and capital investment in California. But as the subcommittee's analysis shows, the program has accumulated over $900,000,000 in available credits for twenty twenty five, twenty six, while actual awards have dropped sharply from 395,000,000 in 2021 and 2022 to just 75,000,000 in 2425. It is worth underscoring that these credits are not current general fund obligations.
Speaker 35
They are authorized allocations that they are authorized allocations that only convert into revenue impact when a company hits its hiring and investment milestones. We believe, and and just to our understanding that credit sitting unused aren't savings. They're actually lost jobs and lost investment. The reason they're sitting unused, we believe, is structural because these credits are nonrefundable. Startups and pre revenue companies in fusion, quantum computing, semiconductors, and clean tech simply cannot use them.
Refundability is the mechanism to unlock Calcompete's full potential and ensure that this growing pool of credits actually gets deployed to create jobs and investment here in California. Thank you so much.
Speaker 32
Good afternoon, Madam Chair. Megan Murray on behalf of Lucid Motors. And we echo the comments previously stated from the Silicon Valley Leadership Group and really want to stress the importance of refundability for pre profit companies that this would, by changing that program to allow refundability, really unlock those credits and, again, create more jobs in the state. Thank you.
Speaker 1
Okay. It looks like, there are no additional, individuals here in the room, to make provide comment on those items. So now that public comment is over, we'll go ahead and begin by moving to take votes on the vote only calendar, items twelve and thirteen. To begin, do we have a motion on items on item 12? Okay.
We have a motion by senator Smallwood Cuevas. Thank you. The motion is to oh, would that be me over you? Okay. The motion is to adopt staff recommendation to approve the request as budgeted.
Consultant, please call the roll.
Speaker 2
Senator Nilo? Aye. Nilo, aye. Senator Cabaldon? Aye.
Senator Smallwood Cuevas? Smallwood Cuevas, aye. Four to zero.
Speaker 1
Okay. The vote is four to zero, and item number 12 is out. And now we will
Speaker 1
13. Right? We will now move to taking the vote on item 13. To begin, do we have a motion on item 13?
Speaker 1
Thank you, Mr. Vice Chair. Thank you for making the motion on item number 13. The motion is to adopt staff recommendation to approve the request as budgeted consultant. Can you please call the roll?
Speaker 2
Hurtado, aye. Senator Nido? Aye. Senator Nido, aye. Senator Gabaldon?
Gabaldon, aye. Senator Smolokuyevos? Aye. Smolokuyevos, aye. Four to zero.
Speaker 1
Okay. The vote is four to zero, and item number 13 is out. And thank you everyone for your patience and cooperation, and for your input and testimony, and thoughtful public comment. We have concluded the agenda for today's hearing and the senate budget and fiscal review subcommittee four is now adjourned.
Ask anything about this video — I analyse its transcript to answer.