GOOD AFTERNOON AND WELCOME TO
OUR ASSEMBLY BUDGET SUBCOMITTEE
FIVE HEARING ON CONSUMER
PROTECTION. TODAY'S HEARING WILL
REVIEW BUDGET PROPOSALS
IMPACTING FOR ENTITIES, THE
DEPARTMENT OF CONSUMER AFFAIRS,
THE DEPARTMENT OF ALCOHOLIC
BEVERAGE CONTROL THE DEPARTMENT
OF CANNABIS CONTROL IN THE
DEPARTMENT OF REAL ESTATE.
THROUGHOUT THIS HEARING, WE WILL
EXAMINE THESE BUDGET PROPOSALS
TO ENSURE THAT THEY UPHOLD OUR
STATE'S COMMITMENT TO SAFE TO
SAFEGUARDING CONSUMERS INTEREST
AND UPHOLDING FAIRNESS IN THE
MARKET. THE AGENDA AND
SUPPORTING BACKGROUND DOCUMENTS
ARE AVAILABLE ON OUR COMMITTEE
WEBSITE AND PHYSICAL COPIES ARE
AVAILABLE OUTSIDE OF THE HEARING
ROOM. A FEW HOUSEKEEPING NOTES.
THIS IS AN IN PERSON HEARING
WITH ALL PANELISTS TESTIFYING IN
PERSON. WE'LL TAKE QUESTIONS
FROM MEMBERS OF THIS SUB
COMMITTEE AFTER EACH PANEL. ALL
PUBLIC COMMENTS WILL BE TAKEN IN
PERSON AT THE END OF THIS
HEARING. IF YOU ARE UNABLE TO
ATTEND THIS HEARING IN PERSON,
YOU MAY SUBMIT YOUR COMMENTS VIA
EMAIL TO ASSEMBLY BUDGET AT ASM
DOT èC DOT G. Ó VÆ DOT WITH
THAT ROLL CALL, PLEASE. I MEMBER
COURT SILVER HERE. ASSEMBLE
NUMBER, PATTERSON. ASSEMBLY
MEMBER AWARD. UH, SEE THAT OUR
OTHER MEMBERS ARE EITHER
CHAIRING OTHER COMMITTEES OR
PRESENTING BILLS. WE WILL, UH,
BEGIN AS A SUBCOMITTEE. UH OUR
FIRST ISSUE IS BUD BUDGET CHANGE
PROPOSALS, UH, DEPARTMENT OF
CONSUMER AFFAIRS. AND UH, IF YOU
AS PANELISTS WOULD LIKE TO JOIN
US, WE WILL REVIEW FIVE
PROPOSALS TWO RELATED TO
INFORMATIONAL TECHNOLOGY THREE
RELATED TO VARIOUS BOARDS UNDER
THE Dð èC UMBRELLA.
WELCOME WE APPRECIATE YOU COMING
, AND, UH, WE WILL GO AHEAD. AND
UH, HAVE YOU, UH, DO SHORT
SUMMARIES OF YOUR PROPOSALS AND
YOU CAN GO AHEAD AND I THINK
WE'RE STARTING WITH, UH, IT
MODERNIZATION IS THAT CORRECT?
HELLO. I'M TAYLORS. I'M THE
CHEAPEST LAW OFFICER FOR
EVERYTHING. FELLOW MEMBER LIKE
I'LL ACTUALLY DO A BRIEF OVER.
TO
TESTING AGAIN. THERE WE GO. SO
I'LL GO AHEAD AND DO AN OVERVIEW
OF ALL FIVE PROPOSALS. UM, AND
THEN I DO HAVE, UH, MEMBERS FROM
THE DEPARTMENT AS WELL AS EACH
BOARD, UH, PRESENT HERE IF YOU
HAVE ANY ADDITIONAL QUESTIONS.
SO AS YOU MENTIONED, OUR FIRST
TWO PROPOSALS ARE INFORMATION
TECHNOLOGY RELATED REQUESTS.
FIRST THE DEPARTMENT IS
REQUESTING 3 MILLION IN ONE TIME
FUNDING IN 2020 2024 25 TO
CONTINUE OUR BUSINESS
MODERNIZATION EFFORTS FOR OUR
COHORT, TWO PROGRAMS. THIS
INCLUDES THE BUREAU OF HOUSEHOLD
GOODS AND SERVICES THAT
CALIFORNIA ARCHITECTS BOARD THE
LANDSCAPE ARCHITECTS, TECHNICAL
COMMITTEE, CEMETERY AND FUNERAL
BUREAU AND THE STRUCTURAL PEST
CONTROL BOARD. OF THAT $3
MILLION 240 THREE. 1000 IS THE
SUPPORT CREDIT CARD PROCESSING
FEES ON BEHALF OF USERS OF
CREDIT CARD PAYMENTS. AND THEN
OUR SECOND IT PROPOSAL IS A
REQUEST FOR 14.7 MILLION IN 2425
, AN ONGOING TO CONTINUE
MAINTENANCE AND OPERATIONS OF
OUR BREED SYSTEM. UH AND THAT
SUPPORTS 18 OF THE BOARDS AND
BUREAUS WITHIN THE DEPARTMENT.
OF THIS FUNDING 9 MILLION IS,
UH, TO SUPPORT EXISTING STAFF
AND SOFTWARE COSTS AND 5.7
MILLION IS TO SUPPORT CREDIT
CARD PROCESSING FEES. OUR NEXT
THREE PROPOSALS ARE BOARD
SPECIFIC REQUESTS. WE HAVE THE
BOARD OF OSTEOPATHIC MEDICINE,
AND THEY'RE REQUESTING A BUDGET
AUGMENTATION OF 357,000 IN 2425,
AN ONGOING TO FUND INCREASING
ATTORNEY GENERAL COSTS TO
SUPPORT ENFORCEMENT OF THE
BOARD'S GROWING LICENSING
POPULATION. IN THE PAST FIVE
YEARS, THE NUMBER OF CASES THAT
THE BOARD HAS REFERRED TO THE
ATTORNEY GENERAL'S OFFICE AND
THEIR OVERALL CASE, HOURS HAVE
MORE THAN DOUBLED, NECESSITATING
THIS REQUEST. SECOND WE HAVE THE
BOARD OF PHARMACY AND THEY'RE
REQUESTING A BUDGET AUGMENTATION
OF 1,265,000 IN 2425 AND
1,225,000, ONGOING TO SUPPORT BY
POSITIONS TO ADDRESS INCREASED
WORKLOAD IN STERILE, COMPOUNDING
RENEWALS AND INSPECTIONS, AS
WELL AS TO ADDRESS AN OVERALL
INCREASE IN THE BOARD'S
ENFORCEMENT OPERATIONS. THE
BOARD HAS SEEN A SIGNIFICANT
INCREASE IN INSPECTIONS,
INVESTIGATIONS AND LICENSES ON
PROBATION THAT THESE RESOURCES
WOULD ADDRESS AND FINALLY WE
HAVE THE VETERINARY MEDICAL
BOARD AND THEY'RE REQUESTING TWO
YEAR LIMITED TERM BUDGET
AUGMENTATION OF 809,425 AND
799,000 IN 2526. TO FUND ONE
MANAGER AND FOUR ANALYST
POSITIONS TO ADDRESS THE BOARD'S
GROWING COMPLAINT AND
ENFORCEMENT WORKLOAD. THE BOARD
HAS BEEN EXPERIENCING A
SIGNIFICANT INCREASE IN
COMPLAINT VOLUME AND THESE
RESOURCES ARE NEEDED TO CONTINUE
TO IMPROVE THEIR INVESTIGATION
CYCLE TIMES. THAT CONCLUDES MY
OVERVIEW AND WE'RE HAPPY TO
ANSWER ANY QUESTIONS YOU MAY
HAVE. THANK YOU. AND THANK YOU
FOR ALL OF YOU JOINING US, UH,
WE DO HAVE I DO HAVE A QUESTION
ON THE 5.9 MILLION FOR CERTAIN
BOARDS TO PAY FOR CREDIT CARD
PROCESSING FEES? UM WE SEE THAT
OTHER BOARDS HAVE DECIDED TO
PASS THOSE COSTS DIRECTLY TO
LICENSEES AND APPLICANTS. UH,
HAS A Dð èC CONSIDERED ENACTING
A UNIFORM CREDIT CARD PROCESSING
FEE POLICY ACROSS ALL Dð èC A
ENTITIES FOR CONSISTENCY. SO IN
SHORT, UH, NÓ. WE LEAVE THAT
INDIVIDUAL POLICY DECISION ON
THE CREDIT CARD PROCESSING FEES
TO EACH INDIVIDUAL PROGRAM BOARD
OR BUREAU. UM, SOME ENTITIES
CHOOSE TO COVER THE COSTS OF THE
CREDIT CARD PROCESSING FEES TO
PROMOTE, UM, UTILIZATION OF
ONLINE PAYMENTS AND ONLINE
FUNCTIONALITIES WHILE OTHERS
CHOOSE TO PASS ON THAT EXPENSE,
UH TO APPLICANTS AND LICENSES,
AND THAT COULD BE FOR A VARIETY
OF REASONS. UH, BUT MOST OFTEN
IT'S DUE TO THEIR SPECIAL FUND
CONCERNS FOR THEIR INDIVIDUAL
SPECIAL FUND THAT SUPPORTS THEM.
I THANK YOU AND I SEE THAT WE
HAVE, UH, THE LÀ A Ó HERE AND
DEPARTMENT OF FINANCE. WELCOME.
UH, DO YOU HAVE ANY QUESTIONS OR
FOR THE TEAM HERE. YEAH. ANY
OTHER COMMENTS. ALL RIGHT, AND
WE DON'T HAVE ANY OTHER MEMBERS.
SO UH, WE WILL HOLD THIS OPEN
ITEM OPEN. WE APPRECIATE YOU
COMING AND SHARING. THANK YOU SO
MUCH FOR YOUR TIME. THANK YOU.
UH, NEXT, WE HAVE DEPARTMENT OF
ALCOHOLIC BEVERAGE CONTROL A B
èC.
WELCOME. UH, FOR THIS ISSUE, WE
WILL RECEIVE AN UPDATE ON THE
DEPARTMENT'S FUND CONDITION AND
REVIEW. ONE BUDGET CHANGE
PROPOSAL RELATED TO INFORMATION
TECHNOLOGY AND DOCUMENT UH,
DIGITIZATION. IN ADDITION TO THE
DEPARTMENT OF FINANCE, AND THE L
A Ó. I'D LIKE TO WELCOME A B
èC DIRECTOR JOSEPH MCAULIFFE.
UH, WHO IS JOINING US? AND UH,
IF YOU WOULD PRE, UH, BRIEFLY
PRESENT ON THE DEPARTMENT'S FUND
CONDITION AND THE REQUEST BUDGET
CHANGE, UH, RIGHT NOW. EXCELLENT
GOOD AFTERNOON, HONORABLE CHAIR
AND MEMBERS OF THE COMMITTEE. MY
NAME IS JOSEPH MCCULLOUGH. AND
I'M THE DIRECTOR OF THE
ALCOHOLIC BEVERAGE CONTROL WITH
ME TODAY IS MR RANDY DEANS. HE'S
THE CHIEF OF ADMINISTRATION AT A
B èC, UH, WE ARE PREPARED TO
PRESENT, UH, ON OUR FUN
CONDITION AND AS WELL AS THE
PROPOSAL THAT'S BEFORE YOU
TODAY. UH MR DEEMS IS ALL THING.
BUDGETS ALL THINGS BUDGETS AT A
B èC. SO WE'RE GONNA LET HIM DO
THE PRESENTATION. UM AND OF
COURSE, IF WE HAVE ANY
QUESTIONS, UH, FROM THE
COMMITTEE, WE'D BE HAPPY TO TAKE
THOSE AT THE END WITH THAT. I'LL
TURN IT OVER TO MR TEAMS. THANK
YOU. YOU RANDALL THEMES. CHIEF
OF ADMIN A B èC, UH, AS FAR AS
THE FUN CONDITION UPDATE THE
DEPARTMENT OF ALCOHOLIC BEVERAGE
CONTROL HAS FUNDED, UH, ALMOST
ENTIRELY FROM LICENSE FEES,
WHICH ARE DEPOSITED INTO THE A B
èC FUND FIVE YEARS AGO IN 2019
20 TRAILER BILL LANGUAGE WAS
PROPOSED AND APPROVED TO
INCREASE REVENUES BY 30% TO
ADDRESS BOTH THE STRUCTURAL
DEFICIT THAT HAD DEVELOPED INTO
FUND PROGRAM IMPROVEMENT AND
MODERNIZATION EFFORTS THE
INDUSTRY HAD BEEN REQUESTING FOR
YEARS. SHORTLY THEREAFTER,
HOWEVER, THE COVID-19 PANDEMIC
BROKE OUT AND HAS SIGNIFICANT
IMPACT ON A B èC REVENUES. AS
THE AGENT. UH, AGENDA NOTES OVER
TWO YEARS SPAN REVENUES CAME IN
AT $26.1 MILLION LESS THAN
ANTICIPATED, PUTTING A VERY
LARGE HOLE IN THE A B èC FUND
THAT ALREADY HAD A VERY LOW
BALANCE. DESPITE EFFORTS TO
REDUCE COSTS THROUGH HIRING
FREEZES AND PROGRAM REDUCTIONS,
REVENUES DID NOT RECOVER
SUFFICIENTLY TO COVER THE COVID
REVENUE HIT AND THE A B èC FUND
WAS PROJECTED TO BE INSOLVENT BY
THE END OF 2020 THREE 24 OR OR
EARLY 2024 25. THE BUDGET ACT OF
2023 PROVIDED AUTHORITY FOR THE
DEPARTMENT OF FINANCE TO
TRANSFER UP TO $20.5 MILLION
FROM THE GENERAL FUND TO THE A B
èC FUND THIS CURRENT YEAR IN
ORDER TO KEEP THE FUND SOLVENT.
IN JANUARY, THE DEPARTMENT OF
FINANCE NOTIFIED THE JOINT
LEGISLATIVE BUDGET COMMITTEE OF
ITS INTENT TO TRANSFER THE 20.5
MILLION. UH, AND IS DESCRIBED IN
THE AGENDA THROUGH DISCUSSIONS
WITH THE L, A Ó AND THE JLB èC
. ULTIMATELY A TRANSFER OF 15.5
MILLION WAS DETERMINED TO BE
SUFFICIENT TO KEEP THE FUND
SOLVENT WITH AT LEAST A MINIMAL
FUND BALANCE, AND THAT TRANSFER
HAS BEEN COMPLETED. WITH THE
TRANSFER COMPLETED AT THE $15.5
MILLION LEVEL, THE FUND BALANCE
IS EXPECTED TO BE AS LOW AS JUST
THREE TO $4 MILLION IN 2025, 26
AND 2026 27 AND THEN INCREASE BY
2 TO $4 MILLION PER YEAR
THEREAFTER AS LICENSE GROWTH AND
èC P I BASED INCREASES ARE
EXPECTED TO OUTPACE INCREASED
EXPENDITURES. FOR CONTEXT. THE
FUND BALANCE AT 3.5 MILLION IN
2025 26, REPRESENTS ONLY ABOUT
TWO WEEKS WORTH OF OPERATING
COSTS. SO IF REVENUE OR
EXPENDITURE PROJECTIONS TURNS
OUT, TURN OUT TO BE LESS
FAVORABLE THAN CURRENTLY
ESTIMATED ADDITIONAL ACTION MAY
NEED TO BE TAKEN. IF THAT
HAPPENS, WE WILL DISCUSS OUR
OPTIONS WITH THE DEPARTMENT OF
FINANCE AND COME BACK TO YOU
SHOULD LEGISLATIVE ACTION BE
REQUIRED. THERE ARE NÓ CURRENT
PLANS FOR FUTURE ACTION TO
INVOLVE THE GENERAL FUND. I
SHOULD MENTION THAT THE AGENDA
NOTES THE LAO SUGGESTION THAT A
B èC COULD REDUCE EXPENDITURES
IN ITS ALCOHOL POLICING
PARTNERSHIP PROGRAM IF THERE IS
A NEED TO REDUCE EXPENDITURES TO
KEEP THE FUND SOLVENT IN THE
FUTURE. THE APP PROGRAM IS A
LOCAL ASSISTANCE PROGRAM THAT
PROVIDES GRANTS TO LOCAL LAW
ENFORCEMENT TO ADDRESS ALCOHOL
RELATED ISSUES IN THEIR
JURISDICTIONS. A B èC DID
REDUCE THIS PROGRAM FROM THREE
MILLION TO 1.5 MILLION AS ONE OF
THE MEASURES WE TOOK TO OFFSET
THE LOSS IN REVENUES DURING THE
PANDEMIC, AND BECAUSE THIS IS A
GRANT PROGRAM TO LOCAL LAW
ENFORCEMENT AND GRANT FUNDED
ACTIVITIES CAN BE HALTED FAIRLY
EASILY. IT IS A FAIRLY QUICK,
QUICK WAY TO REDUCE EXPENDITURES
IN AN EMERGENCY, AND WE
CERTAINLY WOULD SEE THAT AS AN
OPTION IN THE FUTURE AS WELL.
HOWEVER IT IS A CUT TO AN
IMPORTANT PUBLIC SAFETY PROGRAM,
SO WE DO NOT TAKE THE REDUCTION
THERE LIGHTLY. IN SUMMARY, THE A
B èC FUND IS EXPECTED TO REMAIN
SOLVENT. BUT IF FOR SOME REASON
THINGS GET TIGHTER THAN EXPECTED
, WE DO HAVE OPTIONS IN TIME TO
ADDRESS THE ISSUE WITHOUT ANY
FURTHER ASSISTANCE FROM THE
GENERAL FUND. WITH THAT I WILL
SHIFT TO THE BUDGET PROPOSAL.
THE BUDGET PROPOSAL ON THE
AGENDA FOR DISCUSSION IS A
PROPOSAL RELATED TO ABC'S
MODERNIZATION EFFORTS. THE
PROPOSAL HAS TWO COMPONENTS
TOTALING TWO POINT THREE MILLION
FROM THE A B èC FUND IN 2024 25
, DROPPING TO 1.3 MILLION IN
2025 26. THE FIRST COMPONENT IS
AN EXISTING PROJECT THAT IS
WINDING DOWN, WHICH IS CALLED
THE BUSINESS MODERNIZATION AND
RESPONSIBLE BEVERAGE SERVICE.
UH, PRO PROJECT THIS PROJECT WAS
INITIATED IN 2019 20. CREATED
TWO ONLINE PORTALS, THE RB S¼
PORTAL TO IMPLEMENT THE RB S¼
TRAINING PROGRAM ACT, 2017 AND
THE LICENSING SERVICES PORTAL TO
PROVIDE BASIC ONLINE LICENSING
SERVICES. DEVELOPMENT COSTS FOR
THIS EFFORT HAS BEEN BUDGET
INCREMENTALLY. THIS IS THE FIFTH
E èC P WE'VE DONE FOR THE
PROJECT. UH, SO THERE IS
CURRENTLY NÓ ONGOING BUDGET FOR
SUPPORT OF THE RB S¼ AND L S¼ P
PORTALS WHEN THE CURRENT
DEVELOPMENT CONTRACT ENDS IN
MARCH, 2025 THIS REQUEST WOULD
ESTABLISH THAT ONGOING BUDGET
FOR MAINTENANCE AND OPERATIONS
FOR THE PORTALS. THE PROPOSAL
REFLECTS ABC'S PLAN TO REDUCE
CONTRACTED SUPPORT FROM FOR
CONTRACTORS TO TWO AND ADD ONE
STATE STAFF POSITION. THIS
CREATES A NET REDUCTION IN
ANNUAL COST OF APPROXIMATELY
$250,000 COMPARED TO THE CURRENT
ANNUAL CONTRACT COST OF $1
MILLION BEFORE CONTRACTORS. THIS
SHIFT FROM CONTRACTORS TO STATE
STAFF DECREASES THE COST OF
ONGOING SUPPORT AND FURTHER
REDUCES A B C'S DEPENDENCE ON
CONTRACTORS TO SUPPORT THE
PORTALS BY DEVELOPING EXPERTISE
IN HOUSE THE FUNDING FOR THE
ONGOING SUPPORT AND MAINTENANCE
OF OUR RB S¼ AND L S¼ B PORTALS
IS ESSENTIAL TO ENSURING THESE
ONLINE SERVICES REMAIN SECURE
AND AVAILABLE TO THE PUBLIC. THE
SECOND COMPONENT OF THE REQUEST
IS, UM FOR AN EFFORT THAT IS
COMPLEMENTARY TO THE FIRST.
WHICH WE ARE CALLING E RECORDS.
IT IS SIMPLY THE CONVERSION OF A
B C'S PAPER LICENSING FILES TO
ELECTRONIC FILES IN THE PURCHASE
OF A DOCUMENT MANAGEMENT SYSTEM
TO STORE AND MANAGE THEM. WITH A
B èC SHIFT TO ONLINE SERVICES
AND ONLINE APPLICATION.
SPECIFICALLY THIS IS THE RIGHT
TIME TO CONVERT OUR EXISTING
PAPER LICENSING FILES, SO ALL
FILES CAN BE STORED IN A SIMILAR
MANNER, SIMPLIFYING OPERATIONS
AND ADDRESSING VARIOUS RISKS
INHERENT WITH PAPER FILES.
SPECIFICALLY THIS REQUEST
INCLUDES ONE POINT THREE MILLION
IN 2425 AND $260,000, ONGOING
FOR THE SCANNING AND DOCUMENT
MANAGEMENT OF ALL LICENSING
FILES. UH, 12 YEAR LIMITED TERM
POSITION TO PROVIDE PROJECT
ORGANIZATIONAL CHANGE MANAGEMENT
AND ONE POSITION TO SERVE AS A
SYSTEM ADMINISTRATOR FOR THE
DOCUMENT MANAGEMENT SYSTEM
SCANNING OPERATION ON AN ONGOING
BASIS. THIS IS A FAIRLY SIMPLE,
STRAIGHTFORWARD PROJECT OF
LIMITED SCOPE. THE OBJECTIVE IS
TO CREATE AN ELECTRONIC FILE
ROOM RATHER THAN MAINTAINING 20
THREE PAPER BASED FILE ROOMS
SPREAD ACROSS THE STATE. UH,
THIS IS EXPECTED TO IMPROVE
CONSISTENCY OF FILE STORAGE AND
AVAILABILITY, SECURITY OF
DOCUMENTS THE AVAILABILITY OF
FILES TO ALL APPROPRIATE PARTIES
WITHIN THE DEPARTMENT, INCLUDING
PROGRAM PERSONNEL IN THE FIELD
OR WORKING REMOTELY. UH, IT WILL
ALSO IN IN IMPROVE
RESPONSIVENESS TO PUBLIC RECORDS
AT REQUEST. WE APPRECIATE YOUR
CONSIDERATION OF THIS REQUEST,
AND WE'RE AVAILABLE TO ANSWER
ANY QUESTIONS YOU MAY HAVE.
THANK YOU. I DO HAVE A FEW
QUESTIONS, ARE YOU YOU STARTED
BY, UH UH, STRESS, EMPHASIZING
THAT YOUR LICENSE FEES ARE, UH,
WHERE YOU GENERATE, UM YOUR
FUNDS FROM AND OBVIOUS.
OBVIOUSLY THROUGH THE PANDEMIC.
WE SAW A HUGE DECREASE IN IN
THOSE, UH, LICENSE FEES. WHAT IS
HAPPENING SINCE THE PANDEMIC?
ARE THEY CONTINUING TO GO DOWN?
UM JUST KIND OF WHAT'S TRENDING
OUT THERE IN THE A B èC WORLD,
RIGHT? SO IS THE AGENDA NOTICES
WHERE WE TOOK THE BIGGEST SORT
OF HIT IS IN OUR DAILY. UH
APPLICATIONS THIS IS FOR YOU
KNOW FESTIVALS, WEDDINGS, YOU
KNOW, KATIE AND AUTHOR CATERING
AUTHORIZATIONS THOSE TYPES OF
THINGS THAT'S $5.5 MILLION A
YEAR AND THAT ESSENTIALLY WAS
SHUT DOWN FOR ABOUT TWO YEARS.
UM THAT HAS RECOVERED TO ABOUT
80% OF THE 2019 LEVELS. WE
EXPECTED THAT IT WOULD
COMPLETELY RECOVER, BUT IT
HASN'T AND WE HAVE NOW BEEN
ASSUMING, UH, THAT LOWER LEVEL
GOING FORWARD, AND THAT SEEMS TO
BE STAYING FAIRLY STABLE RIGHT
NOW. UM AS FAR AS OVERALL
LICENSE COUNT, WHICH IS REALLY
IMPORTANT GIVEN MOST OF OUR
REVENUE COMES FROM RENEWAL. SO
THE NUMBER OF LICENSES WE HAVE
IS A IS A BIG VARIABLE HERE. UH
THAT TOOK ABOUT A 1% DIP IN
TOTAL VOLUME DURING THE PANDEMIC
, AND IT HAS RECOVERED AND WE
ARE NOW ABOVE OUR PRE PANIC
LEVEL. WE'RE JUST BEHIND WHERE
WE LIKELY OTHERWISE WOULD HAVE
BEEN. UH LICENSE APPLICATIONS
ARE LARGELY RECOVERED. MAYBE 5
5% LOWER THAN 2019 LEVELS THAT
BEING SAID. WE ALSO MADE MAJOR
CHANGES IN 2019 TO OUR LICENSING
STRUCTURAL STRUCTURES. SO
SOMETIMES THE VOLUMES DON'T KIND
OF, UM, EVEN OUT THE SAME WAY.
FOR THE MOST PART. WE'RE BACK ON
TRACK AND WITH, UH THE ACTIONS
TAKEN LAST YEAR WERE IN POSITION
TO CONTINUE THE EFFORTS THAT WE
HAVE BEEN, UM UH, TAKING ON AS
FAR AS MODERNIZATION AND PROGRAM
IMPROVEMENT WITH OUR ORIGINAL
FINANCIAL PLAN. UM WITH THE JUST
THE FEE INCREASES THAT HAPPENED
IN 2019 20. THE èC P. I
AUTHORITY THAT WE WERE GRANTED
AT THAT TIME. ALRIGHT. KIND OF
ON A MORE MACRO LEVEL IS HAVE
YOU SEEN THE HABITS OF CONSUMERS
CHANGE REGARDING TO WHAT'S
HAPPENING? AS FAR AS ALCOHOL
GOES? I MEAN, I KNOW I SEE A LOT
MORE, UH, ENERGY DRINKS, TEA
HOUSES, COFFEE HOUSES, AND ARE
YOU SEEING THAT IMPACT AS WELL?
YOU WANNA TAKE THAT ONE? SO
THERE'S CERTAINLY BEEN A LOT OF
NEW PRODUCTS THAT HAVE BEEN
INTRODUCED INTO THE MARKETPLACE.
UH, YOU HAVE, LIKE AS YOU
MENTIONED, UH, DRINKS THAT, UH,
ARE APPEARING IN OUR STORES, UH,
THAT OUR LICENSES ARE SELLING
THAT ARE, UM, AFFILIATED WITH
SOFT DRINK BRANDS AND ENERGY
DRINK BRANDS. UM, UH, FROM A, UM
A BUDGETARY STANDPOINT, IT'S
JUST ANOTHER PRODUCT THAT'S IN
THE STORES. UH SO IT DOESN'T
REALLY AFFECT US. UH, I WILL
NOTE THAT IT DOES REQUIRE SOME
TRAINING FOR OUR STAFF THAT ARE
OUT IN THE FIELD. UM BUT WE'RE
ABLE TO ABSORB THAT, UH AND
WE'RE ALSO DOING A LOT OF
OUTREACH WITH TRADE ASSOCIATIONS
IN THAT SPACE. UH, FOR THOSE NEW
PRODUCTS, I'M NOT SURE IF THAT
TOTALLY ANSWERS YOUR QUESTION OR
NOT, BUT I WAS JUST WONDERING AS
FAR AS REVENUE. UH JUST IN THAT
SPACE OF, UH UH, CONSUMERS IF
THEY'RE IN ESSENCE DRINKING LESS
OR MORE. WE DON'T HAVE THE
METRICS TO BE ABLE TO TELL ONE
WAY OR THE OTHER AND THAT, UH,
PARTICULAR CASE, UM AND WE
TYPICALLY LOOK AT THE AMOUNT OF
LICENSES THAT ARE OUT THERE WHEN
TRYING TO JUDGE WHETHER OR NOT
THERE'S A DEMAND ALRIGHT. UH
WHAT I WOULD DO IS OPEN IT UP TO
OUR L A Ó, OR DEPARTMENT OF
FINANCE ANY QUESTIONS? JARED'S
WITH THE L A Ó. WE HAVE NÓ
COMMENTS ON A B èC S¼ BUDGET
PROPOSAL THIS YEAR, AND MR DEANS
DID KIND OF SUMMARIZE OUR
COMMENTS FROM EARLIER THIS YEAR
WHERE WE RECOMMENDED REDUCING
THE GENERAL FUND TRANSFER, SO
I'M HAPPY TO ANSWER ANY
QUESTIONS ON THAT. UM AS THEY
ARISE. THANK YOU. YOU MENTIONED
IN YOUR COMMENTS THAT YOU DIDN'T
THINK THERE WAS A NEED FOR
ADDITIONAL GENERAL FUND SUPPORT.
IS THAT CORRECT? CORRECT I THINK
THAT THE EXISTING CHANCE
FORGIVES US WIGGLE ROOM TO MAKE
ADJUSTMENTS AND SOME TIME TO
MAKE ADJUSTMENTS IN OTHER WAYS
IF WE NEED TO I'M SORRY. GO
AHEAD. OH, JUST AMY ASENCIO
DEPARTMENT OF FINANCE, AND WE
HAVE NÓ COMMENT TODAY. UH, I
NOTICE ALSO THAT YOU WERE
TALKING ABOUT, UH, TECHNOLOGY OF
GOING FROM AN ESSENCE OR PAPER
TO PUTTING THESE ON, UH ERES.
UH, I KNOW IT'S UH SOMETHING
THAT WE'RE HEARING ABOUT FROM A
LOT OF THE AGENCIES ABOUT NOT
ONLY UPDATING BUT MAKING SURE
THAT UM WE HAVE THE TECHNOLOGY
FOR IT, SO I CERTAINLY THINK
THAT THAT'S A GOOD INVESTMENT.
UH, I THINK THAT'S IT. THANK YOU
FOR YOUR PRESENTATION. THANK
YOU. THANK YOU. AND NEXT WEEK
WILL BRING UP DEPARTMENT OF
CANNABIS. FOR THIS FIRST
CANNABIS PANEL. WE WILL RECEIVE
A SHORT PRESENTATION ON THE
HISTORY OF CANNABIS TAXATION IN
CALIFORNIA, AS WELL AS RECEIVE
AN UPDATE ON CANNABIS TAX
REVENUES FROM THE L A Ó. IN
ADDITION TO THE L Ó, THE
DEPARTMENT OF FINANCE WILL BE
AVAILABLE FOR ANY ADDITIONAL
QUESTIONS. THANK YOU, UH, SETH
KERSTIN, WITH THE LEGISLATIVE
ANALYST'S OFFICE, I'LL BE
PROVIDING A BRIEF THREE PART
OVERVIEW OF CANNABIS TAX
REVENUES AND I'LL START WITH
FIRST THE BASIC STRUCTURE OF THE
STATE'S CANNABIS TAXES, AND THEN
I'LL TALK ABOUT WHERE THE
REVENUE GOES. AND FINALLY, I'LL
SUMMARIZE RECENT REVENUE TRENDS
AND OUR REVENUE FORECAST. SO
CALIFORNIA STARTED LICENSING AND
TAXING ADULT USE CANNABIS IN
2018 AND THE STATE'S INITIAL
CANNABIS TAX POLICIES CAME FROM
TWO LAWS. PROPOSITION 64 OF 2016
AND S¼ B 94 OF 2017. UNDER THOSE
LAWS, THE CANNABIS INDUSTRY WAS
SUBJECT NOT ONLY TO THE STATES,
BROAD BASED INCOME AND SALES
TAXES, OF COURSE, BUT ALSO TO A
RETAIL EXCISE TAX AND A
CULTIVATION TAX AND REVENUES
FROM THESE TWO TAXES WENT TO A
NEW SPECIAL FUND CALLED THE
CANNABIS TAX FUND. THE RETAIL
EXCISE TAX RAISED ABOUT 80% OF
THE REVENUE GOING INTO THAT FUND
AND THE CULTIVATION TAX RAISED
ABOUT 20 PER THE OTHER 20. IN
2022. THE LEGISLATURE PASSED AND
THE GOVERNOR SIGNED A B 195,
WHICH MADE SEVERAL CHANGES TO
THE STATE'S CANNABIS TAXES. THE
BIGGEST CHANGE WAS THE
ELIMINATION OF THE CULTIVATION
TAX. UH SO THAT LEFT THE RETAIL
EXCISE TAX IS THE ONLY REVENUE
SOURCE FOR THE CANNABIS TAX
FUND. CANNABIS TAX FUND REVENUES
ARE CONTINUOUSLY APPROPRIATED
FOR PURPOSES THAT FALL INTO
THREE MAJOR CATEGORIES. THE
FIRST CATEGORY ALLOCATION ONE
COVERS ADMINISTRATIVE AND
ENFORCEMENT COSTS FOR VARIOUS
DEPARTMENTS SUCH AS THE WATER
BOARD AND THE DEPARTMENT OF TAX
AND FEE ADMINISTRATION.
ALLOCATION TO INCLUDES FIXED
AMOUNTS FOR SOME RESEARCH AND
PROGRAMMATIC PURPOSES. AND ALL
OF THE REMAINING REVENUE GO IN,
UH, GOES TO ALLOCATION THREE IN
THE NEXT FISCAL YEAR. SO FOR
EXAMPLE, 24 2024 25 ALLOCATION
THREE. FUNDING WILL DEPEND ON
2324 CANNABIS TAX REVENUE. UH,
THE PROGRAMS FUNDED BY
ALLOCATION THREE FALL INTO THREE
THEMATIC GROUPS, SO 60% OF THE
MONEY GOES TO A YOUTH ACCOUNT
20% TO AN ENVIRONMENTAL ACCOUNT
AND 20% TO A LAW ENFORCEMENT
ACCOUNT. SO I MENTIONED EARLIER
THAT A B 195 ELIMINATED THE
CULTIVATION TAX AND SORT OF AS
THAT WAS BEING DISCUSSED. IT
RAISED SOME CONCERNS ABOUT
FUNDING FOR THE ALLOCATION THREE
PROGRAMS AND SO IN AN ATTEMPT TO
ADDRESS THOSE CONCERNS A B 195
CONTAINS SOME ADDITIONAL
PROVISIONS. SO FIRST OF ALL, IT
ESTABLISHED A FUNDING TARGET FOR
ALLOCATION THREE AND THEN IT
CREATED SOME ADMINISTRATIVE
MECHANISMS INTENDED TO HIT THAT
TARGET. UH SO THE FIRST ONE WAS,
UH, $150 MILLION GENERAL FUND
APPROPRIATION AND THAT WAS
AVAILABLE TO SUPPORT FUNDING FOR
THE ALLOCATION THREE PROGRAMS IN
2324 AND 2425. AND SO, UH, THE
SECOND MAJOR MECHANISM WAS TO
AUTHORIZE THE ADMINISTRATION OR
NOT AUTHORIZED TO DIRECT THE
ADMINISTRATION TO RAISE THE
RETAIL EXCISE TAX RATE STARTING
IN 2526. TO COLLECT THE AMOUNT
OF REVENUE THAT OTHERWISE WOULD
HAVE BEEN COLLECTED BY THE
CULTIVATION TAX. AND SO BEFORE I
GET INTO OUR REVENUE FORECAST,
I'LL BRIEFLY RECAP THE TRENDS
WE'VE SEEN IN CANNABIS REVENUES,
SO FROM THE TIME LICENSING BEGAN
IN 2018 THROUGH ABOUT THE THIRD
QUARTER OF 2020. REVENUES GREW
EVERY SINGLE QUARTER AND THAT
GROWTH WAS PARTICULARLY DRAMATIC
IN THE FIRST COUPLE OF QUARTERS
OF THE PANDEMIC. AND THEN SORT
OF ONCE, UH, SORT OF THROUGH
LATE. 2020 EARLY 2021 REVENUE
STAYED AROUND THAT ELEVATED
LEVEL. UH, BUT THEN, IN THE
SECOND HALF OF 2021 THROUGH THE
END OF CALENDAR YEAR, 2022
REVENUES DECLINED FOR SIX
STRAIGHT QUARTERS. SO UH, FOR
SEVERAL QUARTERS, LEADING UP TO
THE PASSAGE OF BABY OF A 195 AND
THEN ALSO FOR A COUPLE OF
QUARTERS AFTER THAT, UM AND THEN
FROM THAT SORT OF TROUGH OR LOW
POINT IN FOURTH QUARTER OF 2022
REVENUES. GREW FOR THE FIRST
COUPLE QUARTERS OF 2020 THREE,
AND THEN OVER THE LAST COUPLE OF
QUARTERS, THEY'VE BEEN ROUGHLY
FLAT KIND OF STAGNANT. UH, SO I
MENTIONED EARLIER THAT A B 195
APPROPRIATED 100 $50 MILLION OF
GENERAL FUND FOR THE ALLOCATION.
THREE PROGRAMS IN 20 THREE 24
AND 2425. AND UNFORTUNATELY, UM,
2223 REVENUES WERE SO WEAK THAT
THE ADMINISTRATION ENDED UP
USING THAT ENTIRE $150 MILLION
AMOUNT, UM, TO SUPPORT
ALLOCATION THREE AND 2324, AND
IT'S STILL FELL SHORT OF THE
FUNDING TARGET. SO UM, OUR
FORECAST IS NOTED IN THE AGENDA.
IT'S UH, EVEN THOUGH WE HAD THE
BENEFIT OF ONE ADDITIONAL
QUARTER OF REVENUE DATA RELATIVE
TO GOVERNOR'S BUDGET, IT'S STILL
VERY SIMILAR TO THE
ADMINISTRATION'S JANUARY
ESTIMATE, AND UNFORTUNATELY IT
DOES FALL SHORT OF THAT TARGET
ESTABLISHED BY A B 195. SO
THAT'S UH THAT CONCLUDES MY
SUMMARY OF CANNABIS REVENUES,
BUT I'D BE HAPPY TO ANSWER ANY
QUESTIONS. JUST OVERALL YOU
THERE'S OBVIOUSLY BEEN A DECLINE
IN REVENUE THAT WE'VE CONTINUED
TO SEE. DO YOU HAVE ANY, UH,
RESPONSES TO WHY YOU SEE THAT?
THE REASONS THANK YOU. YEAH I. I
MEAN, I CERTAINLY WOULD BE
INTERESTED IN HEARING IF THE
ADMINISTRATION HAVE ANY HAS ANY
VIEWS ON THAT I? I WOULD SAY, UM
WAS AN ENTIRELY CLEAR, I. I MEAN
, I DID GET THE SENSE THAT THERE
WERE, UM MAYBE THE SOME SOME
FOLKS UH, I. I DID HEAR SOME
CONCERNS ABOUT QUITE A LOT OF
SUPPLY, MAYBE DRIVING DOWN
PRICES. UH, BUT, UH, ONE THING
THAT WE HAVE NOTICED, UH, OVER
THE COURSE OF CALENDAR YEAR.
2020 THREE WAS SORT OF THIS
REBOUND IN REVENUE SO SORT OF
HITTING THE LOW POINT IN IN LATE
2022 AND THEN PICKING BACK UP
AND CERTAINLY IN OUR FORECAST.
UH, I MEAN, WITH THE CAVEAT THAT
THIS IS A HIGHLY VOLATILE AND
UNCERTAIN REVENUE SOURCE, WE ARE
NOT, UH NOT EXPECTING A
CONTINUED DECLINE. UH, BEFORE WE
MOVE ON, WE'LL GO AHEAD AND OPEN
UP THE ROLL SINCE WE HAVE A
MEMBER HERE. A SIMILAR MEMBER
WARD. ALL RIGHT. WE DO HAVE A
FORUM. VERY SMALL AND MIGHTY
COMMITTEE, RIGHT. UH ALL RIGHT.
UH, YOU'RE JUST JUMPING INTO THE
CANNABIS PART OF YES, AND WE ARE
ON THE FIRST PART OF THAT THE
REVENUE I'M SORRY. ISSUE THREE.
AND NOT SURE IF YOU'VE HAD TIME
TO LOOK FOR ANY QUESTIONS. ALL
RIGHT WITH THAT, THEN, UH, I THE
L Ó OR, UH, THE DEPARTMENT OF
FINANCE ANY RESPONSES. NÓ BEFORE
WE START THE SECOND ONE, RIGHT?
AM I GETTING MIXED UP HERE? ALL
RIGHT. SO I'M GOING TO ASK THIS
QUESTION. DOES THE L A Ó OR
FINANCE? UH DEPARTMENT OF
FINANCE ANTICIPATE REVENUES TO
BE ABLE TO SUSTAIN THE
ALLOCATION THREE FUNDING AT THE
$670 MILLION BASELINE IN FUTURE
YEARS. CHARLENE MINING
DEPARTMENT OF FINANCE. UM THE
CURRENT PROJECTIONS FOR NEXT
FISCAL YEAR. UH, IT DOES NOT
LOOK LIKE WE WILL MEET THAT
BASELINE. UM, AT THIS TIME. ANY
OTHER. THOMAS SO, YEAH, THAT'S
THAT'S UH, THANK YOU, SETH
KIRSTINE WITH THE L A Ó, UH,
THAT YEAH. OR AS I NOTED, OUR
OUR FORECAST IS SIMILAR FOR, UM
2324 REVENUES, WHICH FUND
ALLOCATION THREE AND 2425 ARE
ARE FORECAST IS SOMEWHAT HIGHER
THAN THE ADMINISTRATION'S IN UM
THE FOLLOWING IN SORT OF IN 2425
EVAN SORT OF GONE THROUGH TO
CALCULATE IF THAT WOULD BE
SUFFICIENT. I, UH TO FUND THAT
BASELINE LEVEL. I THINK IT WOULD
BE PRETTY CLOSE. UM NOT EXACTLY
SURE, IF IT WOULD QUITE HIT IT,
AND THE ONE OTHER THING I'LL
NOTE IS YOU KNOW, I MENTIONED A
B 195 DIRECTS THE ADMINISTRATION
TO ADJUST. THE TAX RATES
STARTING AND IT DOES THAT
STARTING IN 2526, AND SO, UM
THAT ALL ELSE EQUAL SHOULD
IMPROVE THE CHANCES AT LEAST
STARTING IN 2627 OF HITTING THE
BASELINE BECAUSE THAT WOULD, UH
BRING IN ADDITIONAL REVENUE. SO
YOU JUST SAID YOU DID NOT THINK
WE'D, UH, MEET THAT BASELINE,
BUT WE HAVE SEEN THE CANNABIS
REVENUE TRENDING UP IN RECENT
QUARTERS, SO I'M UH, JACOB KN
DEPARTMENT OF FINANCE. YEAH. SO
I THINK I MEAN, WE VIEW BOTH
FORECASTS AS REASONABLE. UM I
THINK THAT'S ESPECIALLY SHOWN IN
THE SHORT RUN IN 2324. WHERE
ESTIMATES ARE QUITE SIMILAR. UM
IT'S REPRESENTATIVE OF THE LAST
YEAR OR SO OF QUARTERS AS THE,
UH, SORT OF POST PANDEMIC SLUMP
AND THEN THE TAX REFORM KIND OF
FADE INTO THE REAR VIEW. WE
THINK THE MARKETS REACHED SORT
OF A LEVEL OF STABILITY. UM YEAH
, AND THEN LOOKING FORWARD IN
THE BUDGET YEAR. I THINK WE JUST
UH, OUR ESTIMATES MAY BE A
LITTLE MORE CONSERVATIVE. WE
ESTIMATE THAT THE MARKET WILL
GROW, UH, IN LINE WITH THE
ECONOMY OVERALL IN THE L Ó SEES
A LITTLE MORE GROWTH THERE NEXT
YEAR. QUESTION. OK I THINK WE'RE
GONNA MOVE OUT TO ISSUE NUMBER
FOUR CANNABIS TAX REVENUES,
ALLOCATIONS OR PROPOSED LOAN TO
THE GENERAL FUND. UH, FOR THIS
PANEL, WE WILL REVIEW THE
GOVERNOR'S PROPOSED CANNABIS TAX
REVENUE ALLEGATE ALLOCATIONS AS
WELL AS BUDGET PROPOSAL TO LOAN
CANNABIS TAX, UH, FUNDS
EARMARKED FOR THE BOARD OF STATE
TO OF, UH, COMMUNITY CORRECTIONS
VIA èC èC TO THE GENERAL FUND.
IN ADDITION TO THE DEPARTMENT OF
FINANCE, AND THE L A. WE HAVE
WITH US B S¼ èC èC EXECUTIVE
DIRECTOR, KATIE HOWARD. AND WILL
BE JOINING US. WELCOME UH AND
ANSWER ANY QUESTIONS REGARDING B
S¼ èC èC PUBLIC SAFETY GRANT
PROGRAM. AS A REMINDER CANNABIS
TAX REVENUES ARE ADMINISTERED BY
NINE DIFFERENT STATE DEPARTMENTS
OUT OF THESE S¼ E èC, UH, WHICH
, UH, MAY NOT BE ABLE TO DIVE
INTO ALL OF THE IMPLEMENTATION.
UH, BECAUSE OF THE DIFFERENT
AREAS. UH IF AND THEN AFTER WE
WILL HAVE QUESTIONS WELCOME.
ANDREW HONG DEPARTMENT OF
FINANCE. I'LL BE WRITING AN
OVERVIEW OF ISSUE NUMBER FOUR.
PROPOSITION 64 SPECIFIES THE
ALLOCATION OF RESOURCES IN THE
CANNABIS TAX FUND, WHICH ARE
CONTINUOUSLY APPROPRIATED.
EXPENDITURES ARE PRIORITIZED FOR
REGULATORY AND ADMINISTRATIVE
WORKLOAD NECESSARY TO IMPLEMENT,
ADMINISTER AND ENFORCE THE
CANNABIS ACT, FOLLOWED BY
RESEARCH AND ACTIVITIES RELATED
TO THE LEGALIZATION OF CANNABIS
AND THE PAST EFFECTS OF ITS
CRIMINALIZATION. ONCE THESE
PRIORITIES HAVE BEEN MET, THE
REMAINING FUNDS ARE DIRECTED TO
WHAT IS KNOWN AS ALLOCATION
THREE PROGRAMS, WHICH INCLUDE
YOUTH EDUCATION, PREVENTION,
EARLY INTERVENTION AND TREATMENT
, ENVIRONMENTAL PROTECTION AND
PUBLIC SAFETY RELATED
ACTIVITIES. MAYBE ONE IN 195
REQUIRES THAT THESE ALLOCATION
THREE PROGRAMS ARE FUNDED AT A
BASELINE OF APPROXIMATELY 670
MILLION TO THE EXTENT AVAILABLE
AND INCLUDED 100 50 MILLION
GENERAL FUND APPROPRIATION TO
BACKFILL REVENUES, WHICH HAS
BEEN FULLY ALLOCATED IN 2324.
THE GOVERNOR'S BUDGET ESTIMATES.
568.9 MILLION WILL BE AVAILABLE
FOR ALLOCATION THREE IN 2425.
ALLOCATION THREE IS ESTIMATED TO
RECEIVE FUNDING. UM IN 2425 AND
THREE AREAS. 60% OF ALLOCATION
THROUGH FUNDING IS DISPERSED FOR
THE EDUCATION PREVENTION AND
TREATMENT OF YOUTH SUBSTANCE USE
DISORDERS IN SCHOOL RETENTION.
UM, THAT IS THREE 141 POINT
THREE MILLION 20% OF ALLOCATION
THROUGH FUNDING IS DISPERSED FOR
THE CLEANUP, REMEDIATION AND
ENFORCEMENT OF ENVIRONMENTAL
IMPACTS CREATED BY ILLEGAL
CANNABIS CULTIVATION. UM,
GOVERNOR'S BUDGET ESTIMATES
113.8 MILLION AND THE REMAINING
20% OF ALLOCATION THROUGH
FUNDING IS DISPERSED FOR PUBLIC
SAFETY RELATED ACTIVITIES. AND
THAT IS ALSO 100 AND 13.8
MILLION. THE GOVERNOR'S BUDGET
PROPOSES A BUDGETARY LOAN OF
$100 MILLION FROM THE BOARD OF
STATE AND COMMUNITY CORRECTIONS
CANNABIS TAX SUB ACCOUNT TO THE
GENERAL FUND IN 2425 TO ADJUST
THE PROJECTED BUDGET SHORTFALL.
B S¼ èC USES CANNABIS TAX
FUNDING TO PROVIDE GRANTS GRANT
FUNDS TO LOCAL GOVERNMENTS THAT
ASSIST WITH LAW ENFORCEMENT,
FIRE PROTECTION AND OTHER LOCAL
PROGRAMMING TO ADDRESS PUBLIC
HEALTH AND SAFETY ASSOCIATED
WITH THE IMPLEMENTATION OF
CANNABIS STATUTES AND
REGULATIONS. THE BORDER HAS MADE
FUNDING AVAILABLE ON A FREQUENT
AND REOCCURRING BASIS. BUT THE
ELIGIBLE APPLICANT POOL IS
LIMITED AND THE AMOUNT OF
FUNDING IS GREATER THAN THE
NUMBER OF ELIGIBLE AND
INTERESTED APPLICANTS. THE
GOVERNOR'S BUDGET ESTIMATES 60
THREE 0.8 MILLION OF CANNABIS
TAX REVENUE WILL BE DISPERSED TO
THE S¼ E èC IN 2425 WHEN
INCLUDING THAT DISBURSEMENT WITH
BS CS UNSPENT FUNDS FROM
PREVIOUS YEARS, B S¼ èC èC IS
ESTIMATED TO HAVE AVAILABLE
FUNDS OF 260 MILLION. THIS LOAN
AMOUNT COMES FROM CURRENTLY
UNLIT. SOURCES IN THE SUB
ACCOUNT, AND IT'S NOT
ANTICIPATED TO IMPACT THE
BOARD'S PROGRAM ACTIVITIES. THE
REPAYMENT PLAN IS PROPOSED TO BE
50 MILLION IN 2627 AND THE
REMAINING 50 MILLION IN 2728.
THANK YOU AND WE'RE AVAILABLE TO
ANSWER ANY QUESTIONS. WELCOME
THANK YOU, MADAM CHAIR. UM I'M
KATIE HOWARD, THE EXECUTIVE
DIRECTOR OF THE B S¼. èC èC.
GOOD AFTERNOON. UM MADAM, CHAIR
AND MEMBERS. I WANNA GIVE YOU A
LITTLE BIT MORE INFORMATION
ABOUT THE GRANT PROGRAM THAT THE
B S¼ èC èC ADMINISTERS. THANK
YOU FOR YOUR COMMENT A FEW
MINUTES AGO. WE ARE ONE OF MANY
STATE AGENCIES THAT ADMINISTER
THESE FUNDS AND THE GRANTS, UH,
PER THE LANGUAGE IN PROPOSITION
64 DIRECT THE B S¼ èC èC TO
MAKE GRANTS TO LOCAL GOVERNMENTS
TO ASSIST WITH LAW ENFORCEMENT,
FIRE PROTECTION OR OTHER LOCAL
PROGRAMS ADDRESSING PUBLIC
HEALTH SAFETY ASSOCIATED WITH
THE IMPLEMENTATION OF BASICALLY
THE LEGAL MARIJUANA AND, UM AS
MY COLLEAGUE FROM THE DEPARTMENT
OF FINANCE HAS SAID THERE ARE
SOME FEATURES IN THE ELIGIBILITY
FOR THESE PARTICULAR LOCAL
PUBLIC HEALTH AND SAFETY GRANTS
THAT FAIRLY, UH, STRICTLY LIMIT
THE CITIES AND COUNTIES THAT CAN
APPLY SO IN ORDER TO APPLY FOR
THE FUNDING THAT WE ADMINISTER.
THE UH LOCAL JURISDICTION HAS TO
ALLOW. UM EITHER, UH, SOME FORM
OF CULTIVATION, WHETHER INDOOR
OR OUTDOOR OR BOTH AND RETAIL
SALE. SO WITH THOSE TWO THINGS
IN COMBINATION THAT'S JUST NOT A
HUGE NUMBER OF CITIES AND
COUNTIES ACROSS THE STATE. UM I
WANNA GIVE YOU A REALLY QUICK
OVERVIEW OF THE THREE COHORTS OF
GRANTS THAT HAVE GONE OUT INTO
THE FIELD. THE FIRST RFP WAS
RELEASED IN 2020. AT THAT POINT,
WE MADE $24.7 MILLION AVAILABLE.
WE ONLY RECEIVE 10 PROPOSALS AND
FUNDED ALL OF THOSE AT ABOUT $10
MILLION. SO FOR THE INITIAL
ROUND OF FUNDING, NEW
EXPERIENCE, NOT CLEAR ON WHAT
ALL THE NEEDS WOULD BE COMING
FROM THE LOCALS. UM THE
RECOMMENDATION FROM OUR
EXECUTIVE STEERING COMMITTEE WAS
TO HAVE A MILLION DOLLAR FUNDING
LIMIT AS WE SAW THE FUNDS IN
THAT ACCOUNT WERE ACCUMULATING
OVER TIME, AND WE THOUGHT IT
WOULD BE A GOOD IDEA TO INCREASE
THE MAXIMUM THAT COULD BE ASKED
FOR, UM AND WE DID THAT. SO THE
SECOND ROUND OF FUNDING, UM,
WENT OUT. UH AND WE RECEIVED 29
PROPOSALS. I SHOULD ADD THAT
THERE WAS A CHANGE MADE IN
STATUTE TO SOMEWHAT LESSEN THE
STRICTNESS OF THE REQUIREMENT ON
CULTIVATION. I'M ASSUMING YOU'RE
SOMEWHAT FAMILIAR WITH THAT. UM
AND SO THE SECOND ROUND OF
FUNDING MADE ABOUT $52 MILLION
AVAILABLE. AND WE PUT OUT ABOUT
21 MILLION, AND SO THIS IS SORT
OF THE TREND FOR THE THIRD ROUND
OF FUNDING. WE HAD 100 AND $50
MILLION AVAILABLE THAT RFP WAS
RELEASED IN OCTOBER OF 2022. WE
DID FUND 37 PROPOSALS TOTALING
ALMOST 94 MILLION. BUT AS YOU
CAN SEE, THERE TENDS TO BE, UM
NOT ENOUGH DEMAND OUT THERE IN
THE FIELD RIGHT NOW FOR, UM, THE
RESOURCES THAT ARE AVAILABLE, SO
I THINK IT'S FOR THIS REASON
THAT THE ADMINISTRATION, UM
VIEWS THIS LOAN, UH AS
APPROPRIATE BECAUSE WE'RE NOT
IMPACTING THE CURRENT NEEDS OUT
IN THE STATE FOR THIS PARTICULAR
GRANT FUNDING. SO ONCE YOU GET
THESE GRANTS OUT TO THE LOCAL
JURISDICTIONS. WHAT DO THESE
GRANTS ACTUALLY, DO THEY? WHAT
ARE THEY APPLYING FOR? THE FUNDS
FOR, UM SO IN OUR REQUEST FOR
PROPOSALS, THERE ARE FOUR
PROGRAM PURPOSE AREAS THAT THE
GRANTS CAN BE USED FOR. THERE'S
UM YOUTH INTERVENTION, EDUCATION
AND PREVENTION PROGRAMS. UM, I
WANNA LOOK AT MY THING. SO I SAY
ALL THESE CORRECTLY, UM JUST A
SECOND. HERE WE GO. UM I'M GREAT
. I ONLY HAVE THE FIRST ONE
YOUTH DEVELOPMENT, YOUTH
INTERVENTION AND PREVENTION,
PUBLIC SAFETY FIRE, AND SO WE
WANTED TO TAKE THE BROAD
LANGUAGE THAT WAS IN THE
PROPOSITION AND REALLY GIVE THE
COUNTIES FLEXIBILITY IN WHAT
THEY CAN APPLY FOR. UM I DO HAVE
THE 37 GRANT SUMMARIES HERE FROM
THE LAST ROUND THAT WE FUNDED
AND ON A QUICK LOOK THROUGH
THOSE THERE STILL ARE A NUMBER,
I WOULD SAY MORE THAN ANY OTHER
PROGRAM PURPOSE AREA THE LOCALS
ARE APPLYING FOR PROGRAMS
RELATED TO YOUTH EDUCATION.
INTERVENTION AND PREVENTION BUT
ALSO, UM, ISSUES RELATED TO CODE
ENFORCEMENT. UM HAZARDOUS
MATERIALS, LICENSING LICENSING
CHECKS. THOSE SORTS OF THINGS
ILLEGAL GROWS. THOSE ARE SOME OF
THE OTHER SUBJECT MATTERS THAT
ARE BEING ADDRESSED IN THESE
GRANTS. SO UNDER THE YOUTH
INTERVENTION IS IT CITIES THAT
ARE APPLYING COUNTIES OR SCHOOL
DISTRICTS? IT CAN BE CITIES OR
COUNTIES ARE THE LOCAL
APPLICANTS IN OUR PROP 64 PER
THE INITIATIVE. BECAUSE THAT
SEEMS LIKE A LITTLE BIT OF, UM,
IT SEEMS LIKE SCHOOL DISTRICTS
WOULD HAVE THE MOST IMPACT OVER
STUDENTS. UH IT WAS THAT JUST
NOT WRITTEN INTO THE
PROPOSITION. AGAIN THAT'S NOT MY
PARTICULAR AREA OF EXPERTISE. I
DO THINK THERE ARE OTHER FUNDING
STREAMS UNDER PROP 47 THAT ARE
SPECIFICALLY EDUCATION FOCUSED.
SO YOU HAVE THE REVERSE PROBLEM
OF WHAT A LOT OF THE AGENCIES
ARE COMING. TO US TO TALK ABOUT
WHICH IS YOU HAVE FUNDS. UH YOU
JUST DON'T HAVE THE
JURISDICTIONS THAT ARE APPLYING
FOR THEM. AND YOU MENTIONED, UH,
THE RETAIL, UH, AND CULTIVATION,
AND THAT'S BECAUSE, UH, MANY
CITIES ACROSS THE STATE OF
CALIFORNIA HAVEN'T LEGALIZED.
THAT'S EXACTLY RIGHT. AND UH, DO
YOU SEE ANY TRENDS? OR DO YOU
EVEN TRACK IT IN ANYBODY CAN
ANSWER THIS THAT CITIES ARE
STARTING TO CHANGE THEIR METHOD.
AS FAR AS STARTING TO BRING THE
LOCAL UH CANNABIS TO THEIR
COUNCILS AND MOVING FORWARD WITH
LEGALIZING IT OR THE RETAIL PART
OF IT. ALREADY LEGAL, BUT IN THE
ARE THERE ANY ANY OF THAT? I
DON'T I WE DON'T HAVE THAT
INFORMATION. OTHERS MAY HEAR
ANYBODY. UM AS IF YOU'RE LOOKING
OVER, LIKE THE LAST COUPLE OF
YEARS, WE CAN PROVIDE THE
INFORMATION AS TO HOW MANY
CITIES AND COUNTIES HAVE COME ON
SORT OF ONLINE. THAT WOULD BE
HELPFUL. SO DO YOU KNOW THAT
INFORMATION? NÓ IF ANYBODY DOES
WHEN THEY COME UP, JUST LET US
KNOW. UH, BECAUSE IT DOES LOOK
LIKE YOU'LL STILL HAVE THIS
REMAINING PROBLEM. IF YOU'RE
GENERATING FUNDS AND THE WAY THE
PROPOSITION WAS WRITTEN, THESE
FUNDS HAVE TO GO INTO THESE
THREE CATEGORIES. AND IF YOU'RE
NOT GETTING OTHERS, UH AND SO,
UH, AS THE GOVERNOR'S TEAM,
WOULD, UH, I THINK BE SCOURING
RECORDS TO LOOK FOR FUNDS THAT
AREN'T USED. UH IT'S A GOOD
PROBLEM TO HAVE THEM. IT'S A BAD
PROBLEM THAT THEY'RE NOT BEING
USED. SO UH, I YOU KNOW, THE
GOOD OLD PHRASE IN GOVERNMENT IS
YOU USE THEM OR YOU LOSE THEM,
BUT, UH, UH, WE UNDERSTAND THE
PREDICAMENT, WHICH IS NOT HAVING
ENOUGH APPLICANTS. ANY OTHER
QUESTIONS? THANK YOU FOR THE
PRESENTATION. UM, TWO QUESTIONS
COME TO MIND, AND I THINK MAYBE
TEARING OFF OF OUR CHAIRS. UH,
COMMENTS ON THIS WOULD BS CS
PUBLIC SAFETY SERVICES PROGRAM
I'M WONDERING IS THAT WHERE
ACTIVITIES WOULD OCCUR THAT
WOULD HELP LOCAL GOVERNMENTS.
LOCAL LAW ENFORCEMENT GO AFTER
ILLEGAL OPERATORS. SOME ARE
DOING THAT, YES, THAT IT CAN BE
USED FOR THOSE PURPOSES. IT'S
FRUSTRATING JUST TO KIND OF
LOOK, YOU KNOW, FROM THIS
VANTAGE POINT THAT WE HAVE SUCH
A HIGH RESERVE THERE, AND WE
HEAR ONE OF THE BIGGEST ISSUES
THAT IS OUT. THERE IS THE
PREVALENCE OF ILLEGAL OPERATIONS
THAT IS, YOU KNOW, RUNNING
COUNTER TO WHAT WE'RE TRYING TO
SEE UNDER A POST PROP 64 WORLD,
RIGHT AND SO WHAT ARE SOME OF
THE TOOLS THAT WE HAVE? IF WE'RE
JUST DOING NOTHING BUT
ACCUMULATING A HIGH RESERVE
BALANCE TO REALLY COMPEL THIS
KID OUT THERE AND REALLY GO
TOWARDS ITS INTENDED EFFECT AND
TRY TO HELP TO STYMIE THE
ILLEGAL MARKET? AND REALLY, THAT
WOULD ONLY SERVE TO MAYBE, UM,
UH UH, ENHANCE THE GOALS OF PROP
64. WELL, I THINK IT'S A REALLY
GOOD QUESTION. AND UM, WE WANNA
REDOUBLE OUR EFFORTS TO MAKE
SURE THAT THERE'S INFORMATION
OUT IN THE FIELD ABOUT THE
AVAILABILITY OF THESE GRANT
FUNDS, AND, UM, WHEN WE PUT THE
NEXT RFP TOGETHER, WE'RE
ANTICIPATING PUTTING THE NEXT
ONE OUT IN THE SPRING OF NEXT
YEAR. WE CAN LOOK AGAIN AT HOW
TO EMPHASIZE THE WORK CAN CAN
THAT CAN BE DONE, UM, IN
RELATION TO THE ILLEGAL MARKET
UNDER THIS GRANT, TOO, OK, THANK
YOU. I THINK THAT SHOULD BE A
PRIORITY THAT SINCE WE HAVE
REALLY DEDICATED FUNDS FOR A
PURPOSE THAT THAT THAT BE MADE
UNDER THAT, UM, THAT CATEGORY
AND I'M WONDERING, CAN YOU, UH,
OR DEPARTMENT OF FINANCE COMMENT
GENERALLY FOR SOME OF THESE
ALLOCATIONS THAT ARE THERE FOR
YOUTH EDUCATION PREVENTION OR
ENVIRONMENTAL RESTORATION, YOU
KNOW, GIVEN THE TIGHT OVERALL
BUDGET PICTURE THAT WE HAVE OR
ANY OF THESE, POTENTIALLY, UM UH
UH, TRADING OFF, MAYBE WITH SOME
OTHER GENERAL FUND SUPPORTED
PROGRAMS. IN OTHER WORDS, WE
HAVE TO USE THEM FOR CERTAIN
FUNCTIONS. ARE WE SEEING A
PROPORTIONAL? UH, OFFSET IN IN
OTHER GENERAL FUND? FUNDED
PROGRAMS OF THE LIKE, OR THESE
REALLY ADDITIVE PROGRAMS ABOVE
SORT OF BASE. UM, STATE
PROGRAMS. SURE, ANDREW HONG
DEPARTMENT OF FINANCE ONE
PROGRAM THAT COMES TO MIND IS
THE DEPARTMENT OF SOCIAL
SERVICES, WHICH PROVIDES
CHILDCARE FUNDING TO COVER SLOTS
AND, UH CANNABIS TAX ONES HAVE
BEEN USED TO OFFSET SOME OF THE
IT'S ONE SPUN SOURCE TO A
MULTIPLE FUNDING SOURCE FOR THAT
PURPOSE. UM AND ACTUALLY, THE
DEPARTMENT IS LOOKING TO UTILIZE
, UM, THEIR PROP 64 BALANCE. UH,
IN THIS NEXT BUDGET YEAR FOR
THAT PURPOSE AS WE ARE IN A, UM
YOU KNOW, BUDGET SHORTFALL CHERS
IN HIGH NEED. I WELL, NOT ONE
AREA. I'D WANT TO SEE ALL I'D
WANT TO SEE IT ACTUALLY GROW,
UH, OVER TIME, BUT THIS IS, UM
KIND OF HELPFUL AS WE'RE LOOKING
AT THINGS IN TOTALITY. THANK
YOU. UH S¼ MA MEMBER, PATTERSON.
THANK YOU. UM I'M LIKE IN
BETWEEN MICS HERE. SO UM, YEAH.
I JUST WANTED TO, UH, KIND OF
COMMENT WHERE ASSEMBLY MEMBER
WARD WAS GOING IS THAT UM, YOU
KNOW, IN EL DORADO COUNTY, WE
LOST A DEPUTY SHERIFF TO AN
ILLEGAL GROW, AND WHEN WE SEE A
LOT OF MONEY BEING FORMED INTO A
FUND AND, UH THEN BORROWED, UM,
YOU KNOW, INTO THE GENERAL FUND
WHEN I WAS ON B AND P BY THE WAY
LAST YEAR, AND I ASKED TO BE ALL
WE TALKED ABOUT WAS WAS WEED. UM
BUT, UH, BUT, YOU KNOW, THAT WAS
THE MAIN ISSUE IS HOW WE KEEP
THE YOU KNOW. LEGAL MARKET
AFLOAT WAS THE NUMBER ONE ISSUE.
I MEAN, YOU KNOW THIS WAY BETTER
THAN I DO, BUT I JUST
PHILOSOPHICALLY HAVE AN ISSUE
WITH GIVING THIS MONEY TO THE
GENERAL FUND OR ON LOAN OR
HOWEVER, WE'RE GONNA DO BUT ALSO
BUILDING A RESERVE IN GENERAL.
UM I DON'T KNOW WHAT THE
MECHANISM IS TO ACTUALLY SPEND
THAT MONEY. BUT I FEEL LIKE WE
SHOULDN'T BE BUILDING A RESERVE.
WE SHOULD EITHER SPEND IT ON
KEEPING COMMUNITIES SAFE OR BE A
LOWER TAXES. AND HAD NOT
COLLECTED IN THE FIRST PLACE. IF
I IF I MAY RESPOND, MADAM CHAIR
I. I THINK YOU MAKE AN IMPORTANT
POINT, AND I WANT TO CARRY THESE
IDEAS BACK FOR THE NEXT RFP THAT
WE PUT OUT. UM AND IF THERE'S
MORE THAT WE CAN DO, OF COURSE,
SUBJECT TO THESE LIMITS THAT
WE'RE TALKING ABOUT HERE THAT
THE LOCALS HAVE TO COMPLY WITH
THAT CULTIVATION. UM AND RETAIL
SALE COMPONENT, BUT, UM YES, I
THINK TO GO AFTER PARTICULARLY
THE PUBLIC SAFETY ISSUES THAT
HAVE COME UP IN THIS HEARING. WE
SHOULD LOOK MORE CLOSELY AT
THAT. AND GETTING THE WORD OUT.
THANKS. THANK YOU, I. I WOULD,
UH, JUMP ON THAT AS WELL. I
DEFINITELY THINK THAT, UM, THE
OUTRE OUTREACH PROCESS TO LET
LOCAL JURISDICTIONS KNOW NOT
ONLY ABOUT THE GRANT PROGRAMS
BUT SOME OF THE FLEXIBILITY
WITHIN IT, BECAUSE IF YOU ARE
SEEING YOUTH INTERVENTION, YOU
MIGHT NOT THEN THINK. OH THERE
COULD BE SOME POSSIBILITY TO DO,
UH SOME ENFORCEMENT OR PUBLIC
SAFETY SUPPORT WITH THAT WE KNOW
FROM, UH, I REPRESENT NORTH
COUNTY, UH AND DID HAVE AN
OPPORTUNITY TO GO OUT ON A
CANNABIS. UM UM, ENFORCEMENT,
AND IT WAS A HUGE OPERATION THAT
WAS NOT JUST NORTH ORANGE COUNTY
. IT WAS MANY, UM, ENTITIES. UH,
EVERYTHING FROM A LOCAL CODE
ENFORCEMENT TO PLANNING
DEPARTMENT TO POLICE DEPARTMENT.
IT WAS A BIG OPERATION, AND I
REALLY DO THINK THAT THESE GRANT
FUNDS COULD BE VERY VALUABLE.
BUT IF THEY AREN'T THEY DON'T
KNOW ABOUT THEM IF THEY FEEL
LIKE OH, IT'S ONLY YOUTH
INTERVENTION. THEY MAY NOT
CHOOSE TO DO THAT, UH, SO MAKING
SURE THAT UH, THERE'S REALLY A
CAMPAIGN ON GETTING THESE FUNDS
OUT AND THE FLEXIBILITY THAT
COULD, UH MAYBE EVEN GIVE AN
EXAMPLES OF PROJECTS ON UNDER.
THAT COULD BE VERY HELPFUL. UH,
BUT BASED ON YOUR ANALYSIS HAVE
OTHER STATE DEPARTMENTS AAA
CURED LARGE RESERVES SIMILAR TO
B SCC BECAUSE I KNOW YOU'VE
MENTIONED NINE DIFFERENT
ENTITIES. SO YEAH. ANDREW HONG
DEPARTMENT OF FINANCE. WE HAVE
SEEN OTHER ALLOCATION. THREE
DEPARTMENTS ACCUMULATE, UH,
RATHER LARGE BALANCES AND KIND
OF WHAT WE'RE SEEING IN GENERAL
I. I GUESS SO. CHALLENGES WITH
THE DEPARTMENT IS THAT, UM
DEPARTMENTS FUND BALANCES GREW
DURING THE IMPLEMENTATION OF THE
CANNABIS TAX PROGRAMS, WHICH
TOOK TIME FOR THE DEPARTMENT TO
STAFF UP AND BEGIN SOLICITING
THEIR GRANTS AND PROGRAM
ACTIVITIES. UM AND ADDITIONALLY,
JUST THE ADMINISTRATIVE, UH,
PROCESS OF HOW THE DEPARTMENTS
RE RECEIVE FUNDS AND WHEN, UM,
THERE IS UNCERTAINTY WITH
CANNABIS TAX FUND REVENUES, SO
ALLOCATION THROUGH DEPARTMENTS
MUST RIGHT SIZE THEIR PROGRAMS,
POSITIONS AND GRANT FUNDING TO
ALIGN WITH TAX FUNDING ON AN
ANNUAL BASIS. UH, DEPARTMENTS
MUST ALSO SUSTAIN A CARRY OVER
BALANCE TO ACCOUNT FOR
OPERATIONAL CONTINUITY IN THE
CASE THAT REVENUES, YOU KNOW, DO
DECREASE, WHICH IS WHAT WE'VE
SEEN IN THE, UM PRIOR YEARS. ALL
RIGHT. ANY OTHER QUESTIONS
BEFORE WE MOVE ON? THANK YOU
APPRECIATE IT. ALL RIGHT. WE
WILL BE MOVING, UH TO, UH, ISSUE
FIVE. BUDGET CHANGE PROPOSAL.
DEPARTMENT OF CANNABIS CONTROL.
SO WE ARE GOING TO BE HEARING
FROM THE DEPARTMENT OF CANNABIS
CONTROL. WE HAVE ONE BUDGET
CHANGE PROPOSAL FOR THE
DEPARTMENT RELATED TO ITS LEGAL
AFFAIRS AND LABORATORY SERVICES
DIVISIONS. UH, I'D LIKE TO
WELCOME REPRESENTATIVES FOR DCC
èC FOR THIS PANEL. UH AND YOU
CAN INTRODUCE YOURSELVES. NICE
TO SEE YOU AGAIN. YES NICE TO
SEE YOU AS WELL. UH, THANK YOU,
MADAM CHAIR AND MEMBERS OF THE
COMMITTEE. UH MY NAME IS ANGELA
HILL AND I SERVE AS DEPUTY
DIRECTOR OF GOVERNMENT AFFAIRS
FOR THE DEPARTMENT OF CANNABIS
CONTROL. THE DEPARTMENT HAS ONE
BUDGET PROPOSAL BEFORE YOU TODAY
FOR DISCUSSION, WHICH REQUESTS
ONGOING RESOURCES TO SUPPORT THE
INCREASED WORKLOAD IN OUR
LABORATORY SERVICES AND LEGAL
AFFAIRS DIVISIONS AND CONTINUE
TO LIMITED TERM FUNDING FOR OUR
LEGAL SERVICES. THE PROPOSAL HAS
A TOTAL ESTIMATED COST OF 8.2
MILLION IN FISCAL YEAR 2024 25
8.1 MILLION IN FISCAL YEAR 2025
26 AND ONE POINT THREE MILLION
ONGOING BEGINNING AND FISCAL
YEAR 20. 2728 I'D LIKE TO FIRST
DISCUSS THE CRITICAL NEED FOR
THE FIVE REQUESTED POSITIONS
WITHIN THE LABORATORY SERVICES
DIVISION. THE LABORATORY
SERVICES DIVISION IS RESPONSIBLE
FOR THE REGULATORY OVERSIGHT AND
COMPLIANCE OF CALIFORNIA'S
LICENSED CANNABIS TESTING
LABORATORIES. THE FIVE REQUESTED
POSITIONS WILL BETTER EQUIP THE
DEPARTMENT TO BUILD THE CAPACITY
OF OUR STATE LAB TO TEST FOR ALL
TYPES OF PRODUCTS AND IDENTIFY
CONTAMINANTS ACROSS THE SUPPLY
CHAIN, SCALING OUR INVESTIGATIVE
CAPABILITIES TO SUPPORT MORE
COMPREHENSIVE PRODUCT AND LAB
OVERSIGHT. IN ADDITION TO THE
RESOURCES NECESSARY TO SUPPORT
CORE FUNCTIONS OF THE LABORATORY
DIVISION. THE DEPARTMENT IS ALSO
REQUESTING RESOURCES FOR ITS
LEGAL AFFAIRS DIVISION. THE
LEGAL AFFAIRS DIVISION IS
RESPONSIBLE FOR PROVIDING
CRITICAL LEGAL SERVICES FOR THE
DEPARTMENT'S 12 DIVISIONS AND
EXECUTIVE OFFICE. THE TWO
REQUESTS OF POSITIONS FOR THE
LEGAL AFFAIRS DIVISION WILL
ENHANCE THE DEPARTMENT'S
CAPACITY FOR ENFORCEMENT CASES
ALLOW FOR PROPER SUPERVISION OF
ATTORNEYS AND DEDICATED SUPPORT
STAFF TO MANAGE ADMINISTRATIVE
DUTIES THAT ARE CURRENTLY BEING
ABSORBED BY ATTORNEYS. ABSENT
THE APPROVAL FOR THESE SEVEN
REQUESTED POSITIONS WITHIN THE
LABORATORY AND LEGAL DIVISIONS,
THE DEPARTMENT WILL FALL SHORT
IN MEETING ITS MANDATED
OBLIGATIONS AND A TIMELY AND
EFFECTIVE MANNER, WHICH IN TURN
CAN IMPACT OUR ABILITY TO
PROTECT CONSUMER HEALTH AND
SAFETY. THE DEPARTMENT ALSO
REQUESTS A CONTINUATION OF OUR
LIMITED TERM LEGAL SERVICES
FUNDING. UH THROUGH FISCAL YEAR
2026 2027 THIS FUNDING INCLUDES
2.7 MILLION FOR LITIGATION
EXPENSES WITH THE OFFICE OF THE
ATTORNEY GENERAL IN 4.1 MILLION
FOR ANTICIPATED OFFICE OF
ADMINISTRATIVE HEARING COSTS.
THIS FUNDING DIRECTLY SUPPORTS
THE DEPARTMENT'S ABILITY TO TAKE
CRITICAL COMPLIANCE AND
LICENSING ACTIONS, WHICH ARE
ESSENTIAL TO OUR CORE MISSION OF
PROTECTING CONSUMERS AND
UPHOLDING THE INTEGRITY OF THE
LICENSED MARKET. DUE TO OUR
INCREASING NUMBER OF ENFORCEMENT
AND LICENSING ACTIONS, Dð Ó J
REFERRALS AND INVOLVEMENT IN
ONGOING CIVIL LITIGATION ARE
REQUESTED. LEGAL SERVICES MAY
UNDERESTIMATE OUR ACTUAL COSTS
FOR Dð Ó J ENGAGEMENT
ADMINISTRATIVE HEARINGS TO BE
ADEQUATELY PREPARED FOR THIS
SCENARIO. WE'VE INCLUDED
PROVISIONAL LANGUAGE, SO WE MAY
REQUEST AN EXPENDITURE INCREASE
FROM THE LEGISLATURE WITHIN THIS
THREE YEAR PERIOD IN THE EVENT
THAT LITIGATION AND HEARING
COSTS OUTPACE OUR PROJECTIONS.
THANK YOU FOR YOUR ATTENTION
TODAY, AND I HAPPY TO ENTER, UH,
ANSWER ANY QUESTIONS? THANK YOU
ANY QUESTIONS FROM OUR MEMBERS?
UH, BEFORE I GO ON, I DO. I
WANTED TO GO BACK TO, UM THE
LABORATORY SERVICES FOR TESTING.
UH IF YOU CAN KIND OF, UM
ELABORATE ON THAT, UH,
LABORATORY SERVICES FOR TESTING
THE QUALITY AND SAFETY OF LEGAL
CANNABIS. CANNABIS PRO PRODUCTS.
UM YEAH, HAPPY TO SO THE STATE
HAS A VARIOUS REQUIREMENTS FOR,
UM, TESTING PRODUCTS, UH,
ULTIMATELY, LICENSE TESTING
LABORATORIES DO TEST PRODUCTS
THAT GO TO MARKET AND THEN WE
HAVE IT OVERSIGHT ROLE AND
FUNCTION FOR THOSE PRODUCTS. SO
WE DO HAVE A STATE TESTING LAB.
UH, HERE IN CALIFORNIA, UH, IN
RICHMOND, AND THEN WE ALSO HAVE
A CONTRACTED LAB IN SAN DIEGO.
UH, SAN DIE. TO SUPPORT US. SO
ULTIMATELY WE DON'T HAVE THE
ADEQUATE STAFF IN THOSE, UH,
LOCATIONS TO ENSURE THAT WE ARE
ABLE TO DO SOME OF OUR CORE
FUNCTIONS, INCLUDING, UH,
DEVELOPING STANDARDIZED TESTING
METHODS. THESE TESTING METHODS
ARE VERY, UH, INTENSIVE, AND
THERE ARE INTERNATIONAL
STANDARDS THAT HAVE TO BE
SATISFIED IN ORDER FOR US TO
HAVE THOSE TYPES OF TESTING
METHODS CERTIFIED AND ALLOWABLE
FOR US TO USE SO WE CAN PROPERLY
UH OVERSEE OUR LICENSE
LABORATORIES, SO FUNDING FOR THE
LABORATORY. UH DIVISION WILL
SUPPORT POSITIONS SO WE CAN
ENSURE QUALITY CONTROL AND DO
VERY IMPORTANT THINGS SUCH AS
MAKE SURE WE'RE, UH, GETTING ALL
OF OUR CERTIFICATIONS FOR
TESTING. AND THEN ON THAT WE'RE
TALKING ABOUT LEGAL CANNABIS,
BUT ONE OF THE THINGS THAT I
NOTICED, UH NOTED GOING OUT ON
THIS ENFORCEMENT, UH, IN
FULLERTON WE ACTUALLY LIVE WAS,
UH, BECAUSE WE WERE, UH, GOING
OUT TO ENFORCEMENT FOR ILLEGAL
CANNABIS, THE HUGE AMOUNT OF
PRODUCT THAT WAS THERE. UH AND,
UH, SOME OF THE PRODUCTS, OF
COURSE. UH, THAT WE KNOW ARE NOT
LEGAL, BUT LOOK LIKE PRODUCTS
THAT UH UH, YOUNGER, UH, YOUTH
WOULD BE VERY INTERESTED. SO,
FOR EXAMPLE, THIS IS, UH, FOR MY
COLLEAGUES UP HERE, THEY
ACTUALLY HAD PACKAGES THAT
LOOKED LIKE CHEETOS, BUT THEY
WERE INFUSED WITH CANNABIS. THEY
HAD CAPRI SUN DRINKS THAT LOOKED
TO LIKE, UH, CAPRI SUN, BUT WAS
INFUSED WITH CANNABIS. UH, MANY,
MANY OTHER PRODUCTS, AND SO ONCE
THE ENFORCEMENT HAPPENS, UH, IS
THERE A PART OF THE LEGAL
CANNABIS SIDES THAT GOES OUT AND
TEST THOSE PRODUCTS? I MEAN, I
KNOW THEY HAVE TO, UH, GET RID
OF THE PRODUCTS. WHAT WHAT?
WHERE DOES THAT FIT INTO THIS?
UH AND ANYBODY CAN ANSWER THAT
HAS INFORMATION ON THAT. YEAH.
ANDREW HUNT DEPARTMENT OF
FINANCE. I THINK THAT JUST
PROVIDES SOME IMPORTANT CONTEXT
TO WHY THESE POSITIONS ARE
REALLY NEEDED WITHIN THE
LABORATORY DIVISION, AS YOU
NOTED THAT THE DEPARTMENT MAY BE
TASKED WITH PROVIDING SAMPLES ON
VARIOUS PRODUCTS, WHICH WE MAY
HAVE NOT SEEN BEFORE, AND THAT'S
WHERE THE DEPARTMENT'S PROPOSAL
WILL HAVE THESE RESEARCH
SCIENTISTS BE, UM, SPECIALIZE IN
SUBJECT MATTER EXPERTS ON THE
VARIOUS DIFFERENT
MICROBIOLOGICAL MICROBIOLOGICAL
AND CHEMICAL SCIENCE BASED
TESTS. UM BECAUSE, UM, RIGHT NOW
WITH THE DEPARTMENT IS
EXPERIENCING IS THAT WITHOUT
THESE, UM, POSITIONS THAT, UM,
PROCESSING THESE SAMPLES MAY BE
TIMELY, UH, AND THEN COULD
RESULT IN DELAYED ENFORCEMENT
ACTIVITY. UH SO YEAH, THAT'S
KIND OF WHERE COMES TOGETHER
WITH WHAT'S BEING REQUESTED
TODAY. AND THEN ON IN
RELATIONSHIP FOR THE, UH
ADDITIONAL LEGAL EXPENSES OF
ANYBODY FROM THE L. A Ó WOULD
LIKE TO SPEAK ON THAT. THANK
YOU, MADAM CHAIR, JARED. SLIP
WITH THE L Ó, UM SO JUST
GENERALLY FOR, UH, THIS PROPOSAL
WE'RE RECOMMENDING APPROVING THE
RESOURCES REQUESTED FOR THE
LABORATORY SERVICES AND LEGAL
AFFAIRS DIVISIONS, AS WELL AS
THE PROPOSED PROVISIONAL
LANGUAGE FOR LITIGATION AND
ADMINISTRATIVE HEARING COSTS.
HOWEVER WE ARE RECOMMENDING, UH,
REDUCING THE DEPARTMENT'S
PROPOSAL FOR AND ADMINISTRATIVE
HEARING COSTS. SPECIFICALLY
WE'RE RECOMMENDING REDUCING THE
A G COST FROM $2.7 MILLION TO
1.2 MILLION AND THE HEARING
COSTS FROM 4.1 MILLION TO 20
THREE 1000. IN OUR ASSESSMENT,
WE FOUND THAT THE GOVERNOR'S
PROPOSAL FOR THESE COSTS WAS
SIGNIFICANTLY HIGHER THAN PAST
EXPENDITURES AND OUR AMOUNTS ARE
MORE CLOSELY ALIGNED TO PAST
EXPENDITURES, WHILE ALSO
INCLUDING SOME AMOUNT OF BUFFER,
ACKNOWLEDGING THAT THERE IS
POTENTIAL FOR GROWTH IN THE
FUTURE, AND SO, UH, WE DO
ULTIMATELY AS I MENTIONED, UH,
RECOGNIZE THAT THERE IS
POTENTIAL FOR GROWTH IN THE
FUTURE, AND WE BELIEVE THAT THE
PROPOSED PROVISIONAL LANGUAGE
WOULD OFFER THE DEPARTMENT
FLEXIBILITY. THESE ADDITIONAL
COST MATERIALIZE ABOVE AND
BEYOND THESE RECOMMENDED AMOUNTS
SO HAPPY AND ANSWER ANY
QUESTIONS? YEAH. ANDREW HONG
DEPARTMENT OF FINANCE. I JUST
WANNA KNOW CONCERNS WITH THE
ALLIO RECOMMENDATION TO ALIGN
THE DEPARTMENT'S LEGAL SERVICES
REQUESTS BASED ON PAST YOUR
ACTUALS, UH, THE DEPARTMENT'S
PAST YOUR ACTUALS MAY NOT
ACCURATELY REFLECT THE
DEPARTMENT'S FUTURE LEGAL
WORKLOAD. THE DEPARTMENT HAS
EXPERIENCED AN INCREASE IN Dð Ó
J REFERRALS IN THE CURRENT YEAR
AND ANTICIPATES REFERRALS TO
GROW IN THE CURRENT AND FUTURE
YEARS, WHICH WILL LIKELY RESULT
IN INCREASED LEGAL SERVICES
COSTS COMPARED TO PRIOR YEARS.
DO THE UNKNOWN NATURE AND
COMPLEXITY OF LEGAL WORK IN THE
CANNABIS SPACE. THE DEPARTMENT
HAS PUT FORTH THEIR BEST
ESTIMATES AND REQUEST A
CONTINUATION OF 2.7 MILLION FOR
LITIGATION EXPENSES EXPENSES,
WHICH WAS AUTHORIZED THROUGH 20
THREE 24 AND WAS PREVIOUSLY
PROVIDED TO ITS FORMER LEGACY
DEPARTMENTS AND THE DEPARTMENTS
ALSO REQUESTING 4.1 MILLION FOR
EXPENSES, WHICH IS A REDUCTION
FROM THE PREVIOUS, UH,
APPROPRIATION OF 8.6 MILLION,
AND THAT'S REALLY, UM THEY
REQUESTED AMOUNTS ARE REALLY TO
PROVIDE THE DEPARTMENT A
BASELINE OF FUNDING TO ADDRESS
THEIR LEGAL SERVICE COSTS. ANY
OTHER QUESTIONS ON THIS, UH AND
THEN LAST, AND IT MAY HAVE FIT
IN ANY OF THESE CANNABIS. UH, WE
WE'VE HAD TWO PANELS UP HERE BUT
ON GOING BACK TO THE
ENFORCEMENT, UH WE HAVE BEEN
TOLD OR I SHOULD SAY, I HAVE
BEEN TOLD AS THE CHAIR THAT THE
ENFORCEMENT PART WITH THE
OFFICERS OUT IN THE FIELD, UH,
THAT THEY, UH, FEEL THAT THEY DO
NOT HAVE ENOUGH STAFFING. I
THINK THEY SAID THAT THERE WERE
88 POSITIONS AND THEY'RE DOWN TO
75 JUST FOR HIRING PURPOSES. BUT
EVEN IF THEY WERE AT CAPACITY AT
ABOUT ABOUT 88 POSITIONS FOR
ACROSS THE STATE OF CALIFORNIA,
THAT'S NOT EVEN CLOSE. TO WHAT
THEY NEED FOR THE ILLEGAL MARKET
. DO WE HAVE ANY COMMENTS ON
THAT? BECAUSE I DON'T SEE ANY,
UH, REQUESTS ANYTHING IN THIS,
UH, BUDGET ANALYSIS RELATED TO
THAT. ANY COMMENTS. I'M I'M
HAPPY TO JUMP IN. UM ANGELA HILL
AGAIN. DEPARTMENT OF CANNABIS
CONTROL. UM I THINK ULTIMATELY
WE ALL WILL DEFINITELY COME BACK
. UM WHEN THERE'S A PLACE OF
POSITIONS ALL BEING FILLED. BUT
AS YOU NOTED, WE CURRENTLY DON'T
HAVE A 100% FILLED POSITION. UM
WORLD IN THAT DIVISION, BUT
WE'LL DEFINITELY STAY IN TOUCH.
UM AND ACKNOWLEDGE, THOUGH, THAT
THE WORK THAT THEY DO IS, UM
REALLY IMPORTANT AND THAT
THERE'S A LOT OF WORK TO BE DONE
IN THE ENFORCEMENT SPACE. SO UM,
DO YOU WANNA JUST ACKNOWLEDGE
THE WORK OF THE SWORN OFFICERS
AND NON SWORN OFFICERS IN THE
ENFORCEMENT DIVISION AS WELL?
YES, BECAUSE I'M I'M VERY
CONCERNED THAT UNLESS WE START
TO CLOSE DOWN, UH, THE LEGAL
MARKET, UH, WE'RE GONNA HAVE
THESE ENFORCEMENTS THAT TAKE A
LOT OF EFFORT AND ENERGY AND, UM
, COALITIONS TO COME IN AND DO
THAT. AND THEN AS WE'VE SEEN, UH
, IN OUR LOCAL COMMUNITIES THAT
CAN BE RIGHT BACK UP WITHIN A
VERY SHORT AMOUNT OF TIME. SO
YOU'RE ENFORCING. YOU'RE LEAVING
THE RIGHT BACK UP, AND IT'S KIND
OF THAT, UH, CYCLE THAT WE NEED.
TO BREAK IF WE'RE REALLY GONNA
TAKE THESE DOLLARS UNDER THE
CANNABIS AND THAT BREA UH, A
SERIOUS PART OF OUR BUDGET,
BECAUSE AS THEY GO UP AND DOWN,
IT'S HARD TO PLAN. UH, WITH, UH,
THE CHANGES IN REVENUE. SO UM, I
THINK ENFORCEMENT IS REALLY HUGE
AND THEN GOING BACK TO OUR PANEL
BEFORE IF WE HAVE I KNOW WHAT
THE PROPOSITION IT WAS VERY
SPECIFIED. AS FAR AS WHAT
PERCENTAGE IS, UH, YOU COULD USE
IN THE THREE CATEGORIES, BUT AS
THAT I THINK, WAS IT, UM IN
2029. WHEN DOES THAT COME BACK
UP THE PROPOSITION? AND A FEW
YEARS IT IT IS 2028 2028. I
THINK ASKING SOME FOR SOME
FLEXIBILITY. UH WOULD BE REALLY
IMPORTANT. UH, BECAUSE, UH, IF
WE DON'T HAVE THAT FLEXIBILITY,
IT MAKES IT HARD FOR LOCAL
JURISDICTIONS TO REALLY MOVE
FORWARD. UH, ANY OTHER COMMENTS
LAST COMMENTS ALL RIGHT. THANK
YOU SO MUCH. AND WE WILL MOVE TO
OUR LAST ISSUE COMPLETELY
DIFFERENT ISSUE, UH, DEPARTMENT
OF REAL ESTATE.
OUR LAST AGENDA ITEM FOR THE DAY
, THE DEPARTMENT OF REAL ESTATE.
UH THE SUB COMMITTEE WILL REVIEW
THE REQUEST FOR A TRAILER BILL
TO INCREASE THE DEPARTMENT'S
FEES AS WELL AS ONE BUDGET
CHANGE PROPOSAL. WHAT INCREASING
FEES IN ADDITION TO THE
DEPARTMENT OF FINANCE AND L, A
Ó WE WELCOME DR RE COMMISSIONER
, CHICA SUNQUIST, UH, WHO IS
JOINING US IN THIS PANEL, AND WE
WILL GO AHEAD AND BEGIN THANK
YOU, MADAM CHAIR AND MEMBERS.
THANK YOU FOR INVITING US HERE
TODAY TO SPEAK WITH YOU ABOUT
OUR BUDGET CHANGE PROPOSAL THAT
WE'VE PUT FORTH FOR THE
CALIFORNIA DEPARTMENT OF REAL
ESTATE WITH ME TODAY IS SONIA
PALLADINO. SHE IS OUR ASSISTANT
COMMISSIONER FOR LEGISLATION FOR
THE DEPARTMENT. THE DEPARTMENT
OF REAL ESTATE IS THE REGULATORY
AGENCY THAT ENFORCES THE REAL
ESTATE LAW, SUBDIVIDED LANDS ACT
AND VACATION OWNERSHIP AND
TIMESHARE ACT. OUR MISSION IS TO
SAFEGUARD AND PROMOTE THE PUBLIC
INTERESTS IN REAL ESTATE MATTERS
THROUGH LICENSURE, REGULATION,
EDUCATION AND ENFORCEMENT AND
CONSUMER PROTECTION IS OUR
HIGHEST PRIORITY. WE OVERSEE THE
LICENSURE OF APPROXIMATELY
434,000 LICENSES, AS WELL AS THE
REVIEW OF MORE THAN 2500 PUBLIC
REPORTS FOR SUBDIVISIONS HOPING
TO SELL UNITS TO CALIFORNIA
CONSUMERS. THE DEPARTMENT OF
REAL ESTATE HAS 380 POSITIONS
AND 55 OFFICE LOCATIONS
THROUGHOUT THE STATE. WE ARE
SOLELY FUNDED BY THE REAL ESTATE
FUND. FEES CHARGED FOR REAL
ESTATE EXAMS AND LICENSES,
SUBDIVISION. PUBLIC REPORTS AND
VARIOUS OTHER PERMITS ARE
DEPOSITED INTO THE REAL ESTATE
FUND. A DAIRY DOES NOT RECEIVE
GENERAL FUND DOLLARS. IN THIS
BUDGET CHANGE PROPOSAL. WE ARE
REQUESTING AN INCREASE OF THREE
0.2 THREE MILLION DOLLARS IN FED
EXPENDITURE AUTHORITY IN FISCAL
YEARS, 2425 AND 2526 AND $2.45
MILLION ONGOING THE PROPOSAL
WILL MATCH THE EXPENDITURE
AUTHORITY WITH CURRENT COSTS,
ALLOWING THE DEPARTMENT TO
SUCCESSFULLY OPERATE AND
CONTINUE TO FULFILL OUR MISSION
EFFECTIVELY. DUE TO HIGH LEVELS
OF STAFF RETENTION, INCREASED
COST FOR CONTRACTED SERVICES AND
INCREASED RENT COSTS. THE
DEPARTMENT HAS IDENTIFIED GAPS
IN AUTHORIZED EXPENDITURES
NECESSARY TO FUND THE COST TO
OPERATE. SOME AREAS WHERE WE
HAVE IDENTIFIED FUNDING GAPS ARE
OUR CALL CENTER STAFF, WHICH ARE
POSITIONS WITH LIMITED TERM
FUNDING EXPIRING THIS YEAR.
ATTORNEY GENERAL AND OFFICE OF
ADMINISTRATIVE HEARINGS FOR
WHICH WE PAY TO PROSECUTE
EGREGIOUS LICENSE LAW
VIOLATIONS. OUR EXAM PROCTORING
CONTRACT, WHICH PROVIDES
INCREASED ACCESS TO OUR EXAMS
THROUGHOUT THE STATE. IT
EQUIPMENT. OUR SAN DIEGO OFFICE
RENT INCREASE, WHICH WAS DUE TO
A MOVE CAUSED BY THE SALE OF A
STATE BUILDING WE HAD OCCUPIED.
AND GAP FUNDING FOR LONG TERM
STAFF SALARIES. WE ARE ALSO
REQUESTING TRAILER BILL LANGUAGE
TO IMPLEMENT A NEW FEE SCHEDULE.
THAT BETTER ALIGNS REVENUES WITH
EXPENDITURES AND ADDRESSES A
STRUCTURAL FUND IMBALANCE IN THE
REAL ESTATE FUND. DAIRY LAST
ADJUSTED FEES STATUTORILY IN
1997 MORE THAN 27 YEARS AGO.
DURING THIS TIME, WE HAVE TAKEN
A PRUDENT APPROACH BY USING
RESERVES IN THE REAL ESTATE FUND
TO OFFSET THE RECENT TREND OF
YEARLY EXPENDITURES EXCEEDING
REVENUES PRIOR TO SEEKING A FEE
INCREASE. CHANGES TO THE FEE
SCHEDULE ARE NEEDED NOW BECAUSE
EXPENSES HAVE SLOWLY INCREASED
OVER TIME. THE DEPARTMENT HAS
BEEN PRUDENTLY SPENDING DOWN OUR
RESERVE. AND WE ARE NOW AT A
POINT WHERE EXPENDITURES ARE
EXCEEDING OUR REVENUES FROM
FEES. IT'S PRUDENT TO RAISE FEES
TO ALLOW FOR THE CONTINUED
EFFECTIVE OPERATION OF OUR
DEPARTMENT. THIS PROPOSAL WILL
ALLOW DEPARTMENT OF REAL ESTATE
TO BOTH MEET CURRENT COSTS AND
RAISE FEES SO THAT IT CAN
EQUALIZE REVENUES FROM
EXPENDITURES. ARE EQUALIZED
REVENUES WITH EXPENDITURES WHILE
MAINTAINING A REASONABLE
RESERVE. FOR EXAMPLE, WE'RE
PROPOSING AN INCREASE OF THE
SALES, PERSON LICENSE OR RENEWAL
FEES FROM $245 TO $350. AND THE
LICENSE IS A FOURYEAR LICENSE,
SO THIS WOULD BE AN INCREASE OF
$26.25 PER YEAR. IN ADDITION TO
SETTING NEW FEES, WE PROPOSE
CONTINUING THE HISTORICAL
PRACTICE OF SETTING STATUTORY
FEE MAXIMUMS THAT ALLOW DAIRY TO
SLOWLY RAISE FEES OVER TIME TO
KEEP UP WITH INFLATIONARY COSTS.
AND DAIRY'S HISTORY. I BELIEVE
WE'VE SHOWN THAT WE ARE
RESPONSIBLE STEWARDS OF
MAINTAINING REASONABLE FEE
LEVELS. THE CURRENT FEE MAXIMUMS
WERE SET STATUTORILY IN 1997,
BUT DEARY DID NOT REACH THOSE
MAXIMUM LEVELS UNTIL 12 YEARS
LATER IN 2009, AND WE HAVE BEEN
OPERATING AT THOSE FEE LEVELS
FOR THE PAST 15 YEARS. WE EXPECT
THE PROPOSED FEE MAXIMUMS IN
THIS PROPOSAL TO OPERATE IN A
SIMILAR FASHION. STABILIZING THE
REAL ESTATE FUND, AS PROPOSED BY
THIS BUDGET CHANGE PROPOSAL WILL
PROVIDE LONG TERM STABILITY AND
ENSURE THAT DAIRY HAS THE
RESOURCES TO CONTINUE TO
EFFECTIVELY REGULATE THE REAL
ESTATE INDUSTRY AND PROTECT
CONSUMERS. THANK YOU FOR YOUR
CONSIDERATION OF THIS PROPOSAL,
AND I'M HAPPY TO ANSWER ANY
QUESTIONS YOU MAY HAVE. UH, ANY
QUESTIONS FROM MEMBERS? NÓ UM,
THANK YOU, I. I DO HAVE SOME, UH
QUESTIONS. UM AND THEN SOME
COMMENTS AS WELL. UM I AM A
LICENSEE MYSELF. UH, I HAVE A
BROKER'S LICENSE. I DON'T DO
REAL ESTATE FOR A LIVING.
OBVIOUSLY I GOT A FULL TIME JOB.
UM BUT I WANTED TO ASK A FEW
QUESTIONS AND WHEN, UH, WHEN IS
YOUR UPCOMING SUNSET REVIEW? AH,
IT'S COMING UP THIS NEXT YEAR,
SO 25 2025 SO, UM MIGHT YOU BE
WILLING TO WAIT UNTIL THAT
SUNSET REVIEW TO REQUEST A FEE?
INCREASE SURE. I APPRECIATE THE
QUESTION AND IF WE WERE TO WAIT
TILL SUNSET, UH AND THEN
IMPLEMENT FEES THROUGH THAT
PROCESS, WE PROJECT A DEFICIT IN
THE REAL ESTATE FUND OF
APPROXIMATELY $8 MILLION, WHICH
IS ABOUT 12% OF OUR CURRENT
OPERATIONAL BUDGET. SOME OF THE
MONEY YOU'RE REQUESTING THROUGH
THE B èC P PROCESS, THOUGH,
PRESUMABLY WOULDN'T HAVE TO TAKE
PLACE NOW, LIKE THE I Tð
EQUIPMENT AND THINGS LIKE THAT,
AND THAT'S NOT AN INSIGNIFICANT
AMOUNT OF MONEY. YOU'RE RIGHT
AND THE IT EQUIPMENT IS TO
SUPPORT OUR MAINTENANCE OF
HARDWARE AND SOFTWARE SYSTEMS TO
ENSURE THAT OUR SYSTEMS AND DATA
ARE SECURE FOR OUR LICENSES. AND
FOR OUR STAFF. UM AND I
APOLOGIZE. I MISSED THE SECOND
PART OF YOUR QUESTION. OR THE
FIRST PART. UM, IT WAS PROBABLY
MORE OF A STATEMENT ANYWAY. SO,
UM DID YOU WANNA RESPOND? THIS
IS ASSEMBLY MEMBER SONIA
PALLADINO WITH THE DEPARTMENT OF
REAL ESTATE. UM I WOULD JUST
NOTE THAT THE REQUEST TODAY FOR
INCREASED EXPENDITURE AUTHORITY
IS ABOUT 3.2 THREE MILLION
DOLLARS AND THE PROJECTED
DEFICIT WOULD BE 16 SO EVEN
TAKING THAT INTO ACCOUNT IF THE
COMMITTEE WERE NOT TO APPROVE
THE INCREASED EXPENDITURE, WE
WOULD STILL BE $13 MILLION IN
DEFICIT. I THINK THE CHALLENGE
WITH OUR SUNSET IS THAT THE, UM
P S¼ WOULD NOT GO INTO EFFECT TO
SO 1ST 2026. SO WE'RE LOOKING AT
ALMOST TWO YEARS FROM TODAY'S
FROM WHEN THOSE FEES WOULD GO
INTO EFFECT. UM HOW LONG HAS THE
Dð R BEEN RUNNING? UH, YOU KNOW,
DIPPING IN A RESERVES OR RUNNING
A DEFICIT. IF IT'S WE FIRST
IDENTIFIED, UM DECLINING
RESERVES IN èC, 2001 2002, AND
IN 2002, WE TOOK THE STEP TO
INITIATE A FEE STUDY TO EVALUATE
WHAT THE COST PER UNIT FOR OUR
FEE IS 22 AND, UM, THAT WAS KIND
OF THE BEGINNING OF THE PROCESS
FOR US TO DETERMINE WHETHER FEES
SHOULD BE INCREASED AND BY HOW
MUCH? IT WAS 2022 JUST TO SORRY.
YOU SAID 2002. OK GREAT. UM,
NUMBERS ARE FLYING AROUND IN
AREA. WE HAD THE SAME ISSUE
BECAUSE HE SAID 2, 2019, 2020 OR
2019 EARLIER AND I WAS LIKE
1920. I SAID 1920, I DON'T IT
SEEMS LIKE A LOT. I HAD A LONG
TIME AGO. UM OK, SO WHEN WAS THE
YEAR YOU JUST FOR CLARITY THAT
YOU IDENTIFIED SO WE SAW
DECLINING REVENUES IN 2021 2022,
AND WE DID START THE FEE STUDY
IN 2022 AND WE ACTUALLY THIS WAS
A TOPIC WHEN WE WERE PRESENTING
P èC P S¼ IN 2022 THAT THIS
COMMITTEE DID, UM, INQUIRE ABOUT
AS WELL AND DURING THAT TIME WE
HAD SOME CONVERSATIONS ABOUT THE
FEE STUDY AT THAT JUNCTURE, WE
HAD AN RFP OUT FOR A THIRD PARTY
CONTRACTOR TO HELP US WITH A
THIRD PARTY. UH, FEE STUDY. OK
AND THEN SO 2022 AND YOUR LAST
UM, SUNSET REVIEW WAS 2021 BUT
LIKE STARTED IN 20, APPARENTLY
1920, BUT I THINK WE WERE, UM SV
800 FROM 2021 RENEWED OUR SUNSET
AND WE DO WRITE OUR SUNSET
REPORT THE YEAR PRIOR. OK SO BUT
DURING THAT TIME THERE WAS NOT
AN INDICATION AT LEAST THAT
THERE WAS GOING TO BE FINANCIAL
ISSUE. UM I DO NOT BELIEVE SO.
BUT LET ME CHECK WITH OUR BUDGET
FOLKS, AND I'M HAPPY TO CIRCLE
BACK. OK, UM SO AND THEN IN
TERMS OF THIS PARTICULAR, UM
INCREASE. YOU KNOW, USUALLY, I
MEAN THE THING WITH THE SUNSET
PROCESS, HAVING BEEN A MEMBER OF
THE BNP COMMITTEE, UM U. USUALLY
THAT'S AN OPPORTUNITY FOR A
PUBLIC HEARING ON WHAT THE NEEDS
ARE AND YOU KNOW WHAT EXACTLY
VARIOUS DEPARTMENTS ARE DOING TO
SERVE THEIR REGULATED.
INDIVIDUALS OR ENTITIES. UM AND
SO THIS KIND OF TAKES IT OUT OF
THAT PROCESS A LITTLE BIT AND,
UM SO BECAUSE OF THAT, I THINK
IT'S REALLY IMPORTANT TO WORK
WITH THE STAKEHOLDERS IN THIS
PROCESS AND, UH, WAS THERE ANY
KIND OF ACKNOWLEDGMENT PRIOR TO
THE GOVERNOR'S BUDGET RELEASE
THAT THIS WAS GOING TO BE A
REQUEST COMING THROUGH? WE ARE
VERY PROUD OF OUR RELATIONSHIP
WITH OUR STAKEHOLDERS. UM, WE
FREQUENTLY MEET WITH THEM. I
KNOW OUR PAST COMMISSIONER AND
OUR CURRENT COMMISSIONER HAVE A
MONTHLY MEETING WITH ONE OF OUR
LARGEST STAKEHOLDER GROUPS. A
MONTHLY PHONE CALL. UM WHEN WE
DID A CONTRACT FOR THE FEE STUDY
, I KNOW THAT WAS A TOPIC THAT
WAS MENTIONED AT THOSE MONTHLY
MEETINGS. WE DID ALSO HAVE THE
OPPORTUNITY TO PRESENT AT LARGE
STAKEHOLDER CONFERENCES ON THE
FEE STUDY, AS WELL AS THE
RESULTS OF THE FEE STUDY, WHICH
WE DID LAST SEPTEMBER, NOTING
THAT THE REVENUES WERE LESS THAN
EXPENDITURES, ACCORDING TO UM
THE FEE STUDY RESULTS ALRIGHT,
SO JUST A COUPLE MORE COMMENTS.
UH, IF YOU DON'T MIND, UM I
THINK, UM YOU KNOW, I HAVE A LOT
OF PHILOSOPHICAL CONCERNS ABOUT
THE COST OF REGULATING IN
CALIFORNIA. IT'S NOT ONLY
APPLICABLE TO YOU VERSUS UH
OTHER STATES, UM, YOU KNOW, SOME
EQUAL, UH, AGENCY LIKE HERE IN
CALIFORNIA, FOR EXAMPLE, UM, YOU
KNOW MUCH SMALLER INDUSTRIES
MIGHT HAVE THE SAME. I'LL JUST
USE AN EXAMPLE ACTUALLY, SINCE
IT COMES THROUGH THIS COMMITTEE
ANYWAYS, THE GAMBLING INDUSTRY,
IT IS COST MORE MONEY TO OR AS
MUCH MONEY TO REGULATE HERE IN
CALIFORNIA AS IT DOES THE STATE
OF NEVADA. IT HAS NEVER MADE.
SENSE TO ME AND I UNDERSTAND HOW
FEE STUDIES WORK IN TERMS LIKE
WE DID THEM ON THE CITY LEVEL AS
WELL. YOU KNOW, YOU KIND OF
THESE ARE THE RESOURCES WE NEED.
AND THEN YOU KNOW YOU. IT'S LIKE
YOU SAY UP FRONT, HOW MUCH MONEY
YOU NEED, AND IT'S REALLY NOT A
QUALITATIVE, UH, ANALYSIS. AND
SO I THINK WITH THIS MAGNITUDE,
I'M I'M LISTENING TO THE NEED
FOR MORE, UM MORE REVENUE FOR
YOU, I, BUT I THINK THE SUNSET
REVIEW IS SO IMPORTANT BECAUSE
IT ALLOWS THE QUALITATIVE
ANALYSIS BY THE LEGISLATURE AND
DETERMINING ON WHETHER THE FEE
IS EVEN NECESSARY. AND UH, IT'S
UNFORTUNATE I THINK THAT, UM YOU
KNOW, WE KIND OF GOT TO THE
POINT WHERE YOU KNOW THIS IS THE
FIRST I'VE HEARD OF IT, ALTHOUGH
IT'S ONLY MY SECOND YEAR IN THE
LEGISLATURE, SO, UM, BUT YOU
KNOW, AS A MEMBER OF THE B N P
COMMITTEE AS WE'RE GOING THROUGH
THIS, I WOULD HAVE, YOU KNOW
THERE'S SOMETHING WE COULD HAVE
TALKED ABOUT. YOU KNOW THINGS
LIKE THAT, BUT I THINK THAT'S
THE WHOLE POINT OF THE SUNSET
REVIEW COMMITTEE. AND SO I WOULD
JUST SUBMIT THAT THIS SHOULD BE
DONE THROUGH THAT PROCESS. OTHER
AGENCIES DO THAT. THE MEDICAL
BOARD OF CALIFORNIA JUST DID
THAT LAST YEAR. UM AND SO I
RECOMMEND DOING THAT. UM AND
THEN I ALSO HAD A TIRADE JUST
GENERALLY ABOUT FEE INCREASES,
BUT I'LL SAVE YOU THE TIME ON
THAT RIGHT NOW, BUT THANK YOU
FOR HEARING ME OUT. AND UH,
HOPEFULLY WE CAN SEE THIS
THROUGH THE SUNSET REVIEW
PROCESS AND I'M OPEN TO
SOLUTIONS ON HOW TO SORT OF
BRIDGE THE GAP. UM WHEN SOME OF
THAT WOULD INCLUDE MAYBE NOT
DOING IT EXPENDITURES THIS YEAR.
BUT UM, BUT I'M OPEN TO THOSE
CONVERSATIONS, BUT I WOULDN'T
SUPPORT YOU KNOW SUCH A HUGE FEE
INCREASE OUTSIDE OF THE NORMAL
PROCESS. YES. UH, CHARLENE
MANNING DEPARTMENT OF FINANCE. I
WOULD JUST NOTE THAT SINCE THE
LAST SUNSET REVIEW, THE
DEPARTMENT HAS BEEN, UM FILLING
ITS POSITIONS. FOLKS HAVE BEEN
STAYING ON AT THE DEPARTMENT.
ADDITIONAL COSTS HAVE INCREASED
SINCE THAT SUNSET REVIEW AND
ALTHOUGH THE TIMING DOESN'T
QUITE WORK OUT WITH THE NEXT
SUNSET, UH, REVIEW PROCESS, UM
THEY'RE HEADED FOR A NEGATIVE
FUND BALANCE. AND SO THAT'S WHY
YOU HAVE THE PROPOSAL IN FRONT
OF YOU, UM AT THIS TIME. THANK
YOU. I'LL JUST, UH, SORT OF TEAR
OFF THAT WITH MY OWN COMMENTS AS
WELL. I GENERALLY LIKE OR SINCE
THAT REVIEW PROCESS EXISTS FOR
THE REASONS THAT IT IS, AND I
WOULD PREFER THAT SOMETHING
BEING ANALYZED, UM THROUGH
THROUGH THAT AS WELL,
RECOGNIZING THAT WE MIGHT BE
UNDER A TIME CRUNCH. UH, AND
PERHAPS AT THIS, UM AS
DISCUSSIONS, GO FORWARD, YOU
KNOW WHERE TO TAKE THE FORM OF
MAYBE A ONE TIME FEE OR A, YOU
KNOW, TEMPORARY INCREASE UNTIL
SUCH A TIME. WE CAN HAVE A MORE
THOROUGH REVIEW, UH, MIGHT BE A
BETTER WAY TO SORT OF MORE
CLEANLY, UM, STAY TOWARDS A
PROCESS THAT WE'VE ALWAYS
ENJOYED, UH, THAT THAT'S
IMPORTANT. UM, BUT AT THE SAME
TIME, I'M WONDERING WHY WE HAVE
A RANGE THAT IS PROPOSED HERE AS
OPPOSED TO HAVING CRUNCH THE
MATH, UM, THAT YOU AND
RECOGNIZING THAT COSTS GO UP,
AND THESE ARE NECESSARY
FUNCTIONS THAT WE WANNA MAKE
SURE OUR OUR OUR OUR OUR
SUPPORTED, UH, THROUGH THE
DEPARTMENT. UM WHY NOT, UH, MAKE
SURE THAT WE ARE CHARGING A
MINIMUM NECESSARY TO BE ABLE TO
SUSTAIN THOSE DEPARTMENTAL
FUNCTIONS. I APPRECIATE THE
QUESTION AND YOU'RE RIGHT TO
YOUR POINT. THERE IS A OR IN OUR
FEE SCHEDULE. WE HAVE A PROPOSED
BASE FEE AND THEN A STATUTORY
FEE CAP AND THE STATUTORY FEE
CAP FOLLOWS HISTORIC DAIRY
STATUTORY PRACTICE AND THIS
PROPOSAL WOULD CONTINUE THAT
PRACTICE, AND IT ALLOWS FOR A
LONG TERM STABILITY OF THE
DEPARTMENT TO INCREASE FEES
INCREMENTALLY BASED ON NEEDS AND
COSTS. UM THE STATUTORY MAXIMUM
THAT WE'VE SET IS, UH, PROPOSED
AT 50% OF THE BASE FEE. UM BUT
IF THE LEGISLATURE WERE TO
APPROVE OUR, UH, PRO SO THEN THE
PROPOSAL WOULD BE TO RAISE FEES
TO THE BASE FEE. IS THIS DRAFTED
OR THIS? WOULD THIS BE PROPOSED
IN THE TRAILER LANGUAGE TO ONLY
ENTITLE OR AUTHORIZE THE MINIMUM
? UH FEE THEN UNLESS, UH THE, UM
INFORMATION SHOWED THAT AN
INCREASE IS NECESSARY TO SUSTAIN
OPERATIONS. CERTAINLY AT THIS
POINT, YES, WE'RE SIMPLY
REQUESTING THE MINIMUM BASE FEE
AT THIS MOMENT THAT MORE CLEAR
IN BUDGET LANGUAGE AND AGAIN. I
LIKE TO SEE HOW THIS GOES
FORWARD OVER THE NEXT COUPLE OF
MONTHS. UM, BUT LET'S LET'S MAKE
THAT WE'RE LOOKING AT CAUSE
PROPOSED INCREASES. UM, FAIRLY,
UH AND WITH GOOD RATIONALE IF I
MAY ADD TO THAT, UM, IF WE WERE
TO INCREASE FEES AND AS WE HAVE
IN THE PAST, UM WE WOULD DO THAT
THROUGH THE REGULATION PROCESS,
AND THAT PROCESS ALLOWS US TO
ENGAGE WITH STAKEHOLDERS AND
OBTAIN THEIR FEEDBACK ENSURE
THAT COSTS ARE REASONABLE THAT
WE'RE ONLY MINIMALLY AND
INCREMENTALLY INCREASING FEES TO
A REASONABLE FEE. THAT IS, UH,
MEETS OUR REQUIREMENTS OF
ENSURING REASONABLE FEES FOR THE
CONSTI. AND THEN ALSO MEETING
THAT, UH, EXCUSE ME, ENSURING
THAT THE FEE IS TIED TO OUR
COSTS. UM, SO WE HAVE ENJOYED
THAT REGULATORY PROCESS OF
ENGAGING WITH STAKEHOLDERS AND
THEN ONLY INCREASING COST TO
WHAT? WE NEED THEM TO BE GREAT.
THANK YOU FOR YOUR WORK. THANK
YOU. ANY OTHER QUESTIONS. ANY
OTHER COMMENTS FROM AND YOU
FIRST GUEST HERE. ALL RIGHT. I
THINK THEN THAT IS IT. THANK YOU
SO MUCH. UH, WE ARE HAPPY TO
ENTERTAIN PUBLIC COMMENT FOR ONE
MINUTE OR LESS. UH, MADAM CHAIR
AND MEMBERS. I'M MIKE BELO FOR
THE CALIFORNIA MORTGAGE
ASSOCIATION. SPEAKING TO THE Dð
RE ISSUE THAT YOU JUST DISCUSSED
UH, I REPRESENT AN ASSOCIATION
OF MORTGAGE BROKERS, A RATHER
NICHE. ELEMENT OF THE Dð R
LICENSE POPULATION. THEY ARE, UH
, NOT ENGAGED IN GENERAL SALES
LIKE THE REALTORS SO ABLY
REPRESENTED BY èC A R BUT FOR
CONTEXT WE ARE AN IMPORTANT
ELEMENT OF THE REAL ESTATE
COMMUNITY WITH REAL AS, UH,
IMPACTS ON CONSUMERS AND WE
SUPPORT THIS INCREASE. THIS IS
YOU'RE TALKING FOR CONTEXT ABOUT
SINCE 20 Ó NINE. UH, IT AMOUNTS
TO AN INCREASE OF $37.50 A YEAR.
WE THINK IT'S MODEST. WE THINK
IT'S JUSTIFIED. WE HAVE BEEN
CONSULTED REGULARLY. AND YOU
KNOW, IN MY VIEW AFTER 44 YEARS
OF REPRESENTING ALL SORTS OF
LICENSED PROFESSIONALS. IN MY
VIEW, THE DEPARTMENT OF REAL
ESTATE DOES PERHAPS THE BEST JOB
IN CALIFORNIA GOVERNMENT OF
KEEPING ITS EYE ON THE CONSUMER
PROTECTION MISSION OF THE
DEPARTMENT, BUT ALSO OFFERING
CUSTOMER SERVICE TO THE LICENSEE
GROUP. THEY SHOULD BE APPLAUDED.
THEY SHOULD BE FUNDED AND WE
SUPPORT THE INCREASE. THANK YOU.
GOOD AFTERNOON, MADAM CHAIR.