GOOD AFTERNOON, AND WELCOME TO
OUR ASSEMBLY BUDGET SUBCOMMITTEE
FIVE HEARING. TODAY, THIS
HEARING WILL COVER OUR TAX
AGENCIES. GO-BIZ AND DEPARTMENT
OF FINANCIAL PROTECTION AND
INNOVATION. A FEW HOUSEKEEPING
NOTES. THIS IS AN IN-PERSON
HEARING WITH ALL PANELISTS
TESTIFYING IN PERSON. WE WILL
TAKE QUESTIONS FROM MEMBERS OF
THE SUBCOMMITTEE AFTER EACH
ITEM. PUBLIC COMMENT IS LIMITED
TO ONE MINUTE FOR EACH PERSON
TESTIFYING AND WILL BE TAKEN IN
PERSON. AND WHAT WE WILL DO
UNDER EACH ISSUE AREA IS ASK FOR
PUBLIC COMMENTS. AFTER EACH
ISSUE AREA. IF YOU ARE UNABLE TO
ATTEND THIS HEARING IN PERSON,
YOU MAY SUBMIT YOUR COMMENTS VIA
EMAIL TO ASM BUDGET AT.
ASMAKA.GOV. WE WON'T BE CALLING
THE ROLL RIGHT NOW. SOME OF YOU
MAY OR MAY NOT KNOW THIS IS A
THREE MEMBER COMMITTEE. ALL OF
OUR ESPECIALLY OUR 70 MEMBER
PATTERSON HAS THREE COMMITTEES
AT THE SAME TIME, SO HE IS IT'S
HARD FOR HIM TO GET HERE.
ASSEMBLY MEMBER CHRIS WARD IS
PRESENTING BILLS AND WILL BE
MOVING BACK AND FORTH, AS I
WILL. SO BE PATIENT WITH US AS
WE MOVE, WE ARE GOING TO GO
AHEAD AND START OUR FIRST ISSUE
TIRE RECYCLING. WE ALL WANT TO
KNOW ABOUT THAT. AND WE WILL
BEGIN WITH OUR PANELISTS. PLEASE
JOIN US.
OKAY, THIS IS WEIRD, BUT IT JUST
REMINDED ME I USED TO TEACH
ELEMENTARY SCHOOL, AND I WAS
GOING TO START SINGING THE
WHEELS ON THE BUS. GO. NO. OKAY.
ALL RIGHT, HERE WE GO. ALL
RIGHT. PLEASE INTRODUCE YOURSELF
AS YOU MAKE YOUR COMMENTS. SURE.
THANK YOU. CHAIR AND ESTEEMED
COMMITTEE MEMBERS, I'M JASON
MALLET, CFO OF THE CALIFORNIA
DEPARTMENT OF TAX AND FEE
ADMINISTRATION. I'M JOINED BY
MICHELLE LINTON, OUR LEGISLATIVE
DIRECTOR, AND BRAD MILLER, OUR
HEAD OF DATA ANALYTICS. SO WE
HAVE THREE ITEMS TODAY. AND SO
THIS FIRST ONE IS ON, TIRE. SO
I'LL GIVE IT AN INTRO HERE, SO
CDTFA REQUESTS CHANGING ITS
FUNDING MECHANISM FOR THE TIRE
RECYCLING FEE FROM AN
APPROXIMATELY $2.5 MILLION
REIMBURSEMENT TO AN EQUIVALENT
BUDGET ACT APPROPRIATION FOR
FISCAL YEAR 24, 25 AND ONGOING,
THIS HAS A NET ZERO BUDGET
IMPACT, BUT IT WILL IMPROVE OUR
EFFICIENCY, OF THE $60 MILLION
REVENUE PROGRAM BY ELIMINATING
THE TEDIOUS PROCESS OF BILLING
EACH QUARTER BETWEEN OUR
DEPARTMENT CALRECYCLE, AND THE
AIR RESOURCES BOARD, THIS CHANGE
WOULD BRING THE TIRE PROGRAM IN
LINE WITH OVER 90% OF OUR OTHER,
TAX AND FEE PROGRAMS, THE WAY WE
ARE FUNDED. SO WITH THAT, I'M
HAPPY TO ANSWER ANY ANY
QUESTIONS YOU HAVE ANY OTHER
COMMENTS, ANY OTHER COMMENTS
FROM ANYBODY UP HERE RELATED TO
THIS? SEEING NONE, AND WE HAVE
NO ONE ELSE BUT MYSELF. I DON'T
HAVE ANY QUESTIONS, SO WE'LL GO
AHEAD AND MOVE ON. SOUNDS GOOD.
THANK YOU. GOOD AFTERNOON, MADAM
CHAIR. MICHELLE LINTON, CHIEF OF
THE LEGISLATION BUREAU FOR CDTFA
. THANK YOU FOR ALLOWING ME TO
PRESENT TODAY ON THE HISTORIC
VENUE RESTORATION AND RESILIENCY
ACT TRAILER BILL, THE HISTORIC
VENUE RESTORATION AND RESILIENCY
ACT ENACTED BY SENATE BILL 96,
BECAME OPERATIVE ON JANUARY 1ST,
2024. IN GENERAL, THE ACT
REQUIRES RETAILERS TO SEGREGATE
TAXABLE SALES MADE AT A
CONFIRMED HISTORIC VENUE DURING
QUALIFIED EVENTS ON THEIR SALES
AND USE TAX RETURNS, OR ON A
SEPARATE SCHEDULE. CDTFA IS
REQUIRED TO REPORT GROSS
RECEIPTS FROM THOSE SALES TO DOF
BY NOVEMBER 1ST OF EACH YEAR.
DOF IS REQUIRED TO INCLUDE A
PERCENTAGE OF THOSE RECEIPTS FOR
THE PRIOR FISCAL YEAR AND THE
GOVERNOR'S BUDGET FOR DEPOSIT
INTO THE HISTORIC VENUE.
RESTORATION AND RESILIENCY FUND
FOR TRANSMISSION BY THE
COMPTROLLER TO CITIES AND
COUNTIES WITH IDENTIFIED
HISTORIC VENUES. THIS TRAILER
BILL WOULD CLEAN UP VARIOUS
PROVISIONS OF THE ACT TO
FACILITATE THIS PROCESS
EFFICIENTLY. CONSISTENT WITH THE
AUTHORS AND SPONSORS INTENT
AMONG ITS PROVISIONS, THE
TRAILER BILL REMOVES THE
REQUIREMENT FOR LOCAL
GOVERNMENTS TO REPORT TO CDTFA
HOW REVENUES ARE USED. THIS
REQUIREMENT WAS REMOVED BECAUSE
CDTFA DOES NOT OVERSEE HOW
REVENUES ARE USED, AND THE
REPORT IS UNNECESSARY. FREE TO
CDTFA ADMINISTRATION.
ADDITIONALLY THE ACT DOESN'T
REQUIRE CDTFA TO REPORT THAT
INFORMATION TO THE LEGISLATURE
OR OTHER EXTERNAL ENTITY. CJTF
VÀ HAS CONFIRMED THAT THE
APPROPRIATE COMMITTEES HAVE NO
CONCERNS. THANK YOU AND I'M
HAPPY TO ANSWER ANY QUESTIONS.
THANK YOU. AND THEN I WILL OPEN
IT UP TO ACTUALLY THE DOF OR THE
LÀ. IF YOU HAVE ANY COMMENTS,
WANT TO INTRODUCE YOURSELVES AS
WELL. CHRIS HILL, DEPARTMENT OF
FINANCE WE HAVE NO COMMENTS, BUT
WE'RE HAPPY TO ANSWER ANY
QUESTIONS THAT MEMBERS MAY HAVE.
SETH KERSTEIN LAO, THE STAFF
COMMENTS IN THE AGENDA, RAISED
SOME VERY GOOD POINTS FOR THE
COMMITTEE TO CONSIDER, AND I'M
GOING TO GO AHEAD AND ASK THOSE
TWO QUESTIONS, WHICH IS, CAN K¾T
CDTFA EXPLAIN WHY THESE CHANGES
DID NOT MOVE THROUGH THE POLICY
PROCESS? AND WERE THE PROPOSED
AMENDMENTS RUN BY THE POLICY
COMMITTEES THAT CHANGED THE BILL
DURING THE POLICY PROCESS, CHRIS
HILL FOR FINANCE? AGAIN, I'D BE
HAPPY TO ADDRESS THAT, WITHOUT
GOING TOO DEEPLY INTO SOME OF
THE INTERNAL ADMINISTRATIVE
PROCESSES, I THINK IT'S FAIR TO
SAY THERE WERE SOME UNCLARITY
SURROUNDING, SB 96, AND AS A
CONSEQUENCE, AMENDMENTS WERE NOT
TIMELY PROPOSED TO THE, TO THE
MEMBER, TO THE AUTHOR OF THE
BILLS GOING THROUGH THE PROCESS.
THANK YOU. AND THEN THE OTHER
QUESTION WOULD BE WITH THIS
PROPOSAL, DOES THIS MEAN THAT
CDD, TFA IS GOING TO ABSORB ITS
COSTS TO IMPLEMENT THE BILL? YES
WE WILL. THE BILL INITIALLY, THE
COSTED VERSION OF THE BILL, THE
SECOND AMENDED VERSION OF THE
BILL, INITIALLY REQUIRED US TO
DIRECTLY ALLOCATE REVENUES TO
CITIES AND COUNTIES.
SUBSEQUENTLY, IT WAS CHANGED TO
HAVE US REPORTING, TAXABLE SALES
FROM THE RETURNS TO DOF AND
LIMITED IT TO THREE COUNTIES.
AND THAT MADE THE COST
ABSORBABLE. I LIKE THAT JUST
FLAT. YES. THANK YOU, THANK YOU.
ALL RIGHT. WITH THAT I HAVE NO
OTHER QUESTIONS. SO WE WILL GO
AHEAD. AND, ANY LAST COMMENTS ON
THAT ISSUE. ALL RIGHT, THEN THAT
WILL TAKE US TO ISSUE NUMBER
THREE UNDER THIS BAD DEBT
TRAILER BILL PROPOSAL.
OKAY. WELCOME. AND IF YOU'D LIKE
TO INTRODUCE YOURSELF, THAT
WOULD BE GREAT, JACOB KERN,
DEPARTMENT OF FINANCE. OKAY. WHO
WILL BE PRESENTING ON THIS ISSUE
? OKAY. SO, JACOB KERN,
DEPARTMENT OF FINANCE, I'LL JUST
START OUT WITH SOME OPENING
REMARKS HERE, CALIFORNIA IS ONE
OF ONLY FIVE STATES THAT ALLOW
LENDERS AND RETAILERS AFFILIATES
TO CLAIM A SALES TAX DEDUCTION
OR REFUND FOR SALES TAX
LIABILITY RELATED TO PURCHASES
MADE ON CREDIT, WHERE THE
PURCHASER SUBSEQUENTLY FAILS TO
REPAY THEIR LOAN. THIS BENEFIT,
THE MAJORITY OF WHICH IS CLAIMED
BY LARGE FINANCIAL INSTITUTIONS,
REIMBURSES LENDERS WHO MAY
ALREADY MAKE A PROFIT THROUGH
INTEREST PAYMENTS AND FEES, AND
IS COMPLEX FOR CDTFA TO
ADMINISTER, CREATING SIGNIFICANT
WORKLOAD FOR AUDITORS WHO
OTHERWISE COULD WORK ON REVENUE
GENERATING ACTIVITIES. FINALLY,
WE HAVE SEEN NO EVIDENCE THAT
THIS LENDER SUBSIDY DECREASES
BORROWING COSTS OR INCREASED
CREDIT AVAILABILITY FOR
CALIFORNIANS RELATIVE TO THOSE
LIVING IN OTHER STATES. THE
GOVERNOR'S, BUDGET PROPOSAL SAYS
THAT CALIFORNIA ALIGNED WITH THE
VAST MAJORITY OF OTHER STATES
AND ELIMINATE THE BAD DEBT
DEDUCTION FOR LENDERS AND
RETAILERS. AFFILIATES FOR DEBT
THAT'S WRITTEN OFF AFTER JAN
ONE, 2025. THE ADMINISTRATION IN
THE GOVERNOR'S BUDGET ESTIMATED
THAT THE PROPOSAL WOULD RAISE
GENERAL FUND REVENUES BY
25,000,024, 25 AND 51,000,000 IN
2526 AND ONGOING, SO I MENTIONED
BY THE LAO IN THE COMMENTS, SOME
ADDITIONAL INFORMATION ABOUT THE
TIMING. THERE'S A FAIRLY LARGE
CLAIMS BACKLOG, AND IT MIGHT
AFFECT THE TIMING AT WHICH THE
REVENUE GAIN IS REALIZED, AND WE
WILL BE UPDATING OUR, OUR
REVENUE FORECAST AT MAY
REVISION. THANK YOU, IF YOU
WOULD LIKE TO MAKE SOME
COMMENTS, PLEASE. THANK YOU. YES
SETH KERSTEIN, LEGISLATIVE
ANALYST'S OFFICE. SO JUST A FEW
COMMENTS TO ADD TO THE
INFORMATION THE ADMINISTRATION
PROVIDED. SO EVEN WITHOUT THIS
PARTICULAR BENEFIT, LENDERS
WOULD STILL HAVE A VARIETY OF
WAYS TO REDUCE THE LOSSES THAT
THEY INCUR FROM BAD DEBTS.
ANOTHER THING, SO I KNOW THE
ADMINISTRATION MENTIONED SORT OF
AN ABSENCE OF EVIDENCE ABOUT
THE, THE EFFECTS OF THE OF
CURRENT LAW, THE CURRENT POLICY
ON LENDING. AND THAT'S A FAIR
POINT. I GUESS. THEN THE
QUESTION IS, IN THE ABSENCE OF
SUCH EVIDENCE, WHAT SHOULD WE
CONCLUDE? AND TO US, THE
STRUCTURE OF THE POLICY DOES
SEEM TO ENCOURAGE RISKY LENDING.
AND SO THERE ARE SORT OF A
COUPLE OF DIFFERENT WAYS YOU CAN
LOOK AT THAT. ON ONE HAND,
PROBABLY, TO A SLIGHT DEGREE
INCREASE, I SHOULD SAY TO A
SLIGHT DEGREE, THE PROPOSAL
LIKELY WOULD REDUCE ACCESS TO
CREDIT FOR SOME OF THE, SOME
BORROWERS WHO ARE AT
PARTICULARLY HIGH RISK OF
DEFAULT AND AT THAT POINT, IT'S
KIND OF A POLICY CHOICE TO, YOU
KNOW, AS TO YOU COULD SEE SORT
OF PROS AND CONS OF THAT, AND SO
THAT'S JUST SOMETHING WE
HIGHLIGHTED, CERTAINLY IF THERE
WERE EVIDENCE ONE WAY OR ANOTHER
THAT WOULD, WOULD, WOULD BE THE
MAIN THING DRIVING OUR
CONCLUSION. BUT ABSENT THAT, THE
STRUCTURE OF THE POLICY SEEMS TO
, CREATE THOSE INCENTIVES. AND
THE OTHER THING, I THINK THE
ADMINISTRATION MIGHT HAVE
TOUCHED ON THIS. I THINK PART OF
THE RATIONALE FOR THE PROPOSAL,
AND ONE THAT SEEMS REASONABLE,
IS THAT THESE REFUNDS ARE
DISPROPORTIONATELY COSTLY TO
ADMINISTER. AND, SO ACCOUNT FOR
SOUNDS LIKE ABOUT, ABOUT HALF A
PERCENT OF CDTFA FIELD AUDIT
PERSONNEL, AND THEN THOSE ARE
ALL THE COMMENTS WE HAVE AT THIS
TIME. THANK YOU. AND, MY
QUESTION WOULD BE, CAN YOU
EXPLAIN HOW THIS CLOSES THE
STATE TAX LOOPHOLE AND HOW IS
THE STATE ENSURING THAT
CONFORMITY IS BEING IMPLEMENTED
FAIRLY, SO JACOB KERN,
DEPARTMENT OF FINANCE, SO THIS
ISN'T A CONFORMITY PACKAGE. THIS
IS A, SO ON THE INCOME TAX SIDE,
THERE'S THE ABILITY FOR, LENDERS
TO WRITE OFF BAD DEBTS FOR THE
PURPOSES OF THEIR INCOME TAX
LIABILITY. THIS IS A THIS IS
JUST ON THE SALES TAX SIDE, SO
THERE'S NO FEDERAL SALES TAX. SO
IT'S NOT A CONFORMITY ITEM
THERE. BUT THIS THIS GIVES
LENDERS AND RETAILERS AFFILIATES
THE ABILITY ON THEIR SALES TAX
IF THEY'VE WRITTEN THAT DEBT OFF
ON THEIR INCOME TAX, THEN, SO
JUST LIKE IN A PRACTICAL SENSE,
HOW THIS WOULD WORK IS, YOU
KNOW, I HAVE A CREDIT CARD, I
MAKE PURCHASES ON THE CREDIT
CARD, SOME AMOUNT OF THAT CREDIT
CARD BALANCE, THEN, IS RELATED
TO SALES TAX THAT WAS PAID ON
THE PURCHASES I BOUGHT. COULD BE
ON AN AUTO LOAN TO, I THINK
THAT'S A COMMON ONE, FOR THIS
DEDUCTION. BUT, IF I FAIL TO PAY
BACK MY CREDIT CARD, THEN MY
LENDER, COULD CLAIM A REFUND FOR
THE AMOUNT OF THE BALANCE THAT'S
RELATED TO THE SALES TAX THAT
WAS PAID ON THOSE PURCHASES.
THANK YOU. THAT'S A GOOD EXAMPLE
. APPRECIATE IT. ALL RIGHT, ANY
OTHER COMMENTS FROM ANY OF OUR
PANELISTS? WE APPRECIATE YOU
JOINING US. AND WITH THAT, WE
WILL OPEN IT UP TO THE PUBLIC TO
MAKE ANY COMMENTS ON THESE FIRST
ITEMS. WE HAVE HERE, IF YOU COME
UP TO THE MIC, YOU CAN MOVE THE
MIC UP AND DOWN LIKE THIS
DEPENDING ON YOUR HEIGHT. THANK
YOU. AND SPEAK INTO THE MIC.
THANK YOU, MADAM CHAIR AND
MEMBERS, EDUARDO MARTINEZ, I'M
HERE ON BEHALF OF TOYOTA NORTH
AMERICA, WHICH PROVIDES A
LENDING SERVICE AS AN AUTO
CAPTIVE FINANCE COMPANY. AND
WE'RE HERE TO RAISE SOME
CONCERNS WITH THIS, WITH THIS
PROPOSAL, THE BAD DEBT DEDUCTION
ALLOWS RETAILERS AND LENDERS TO
RECEIVE A REFUND OR DEDUCTION OF
SALES TAX FOR FINANCE SALES,
WHERE THE CUSTOMER FAILS TO
FULLY PAY. THIS SYSTEM ENSURES
TAXES ARE ONLY PAID ON THE
ACTUAL PURCHASE PRICE RECEIVED.
ALIGNING WITH TAX FAIRNESS
PRINCIPLES. UNFORTUNATELY, THIS
PROPOSAL TO ELIMINATE THIS
DEDUCTION NOT ONLY DIVERGES FROM
ESTABLISHED TAX FAIRNESS
PRINCIPLES BY TAXING BUSINESSES
ON UNCOLLECTED REVENUES FROM
FINANCED SALES, BUT WOULD ALSO
EFFECTIVELY RESULT IN A TAX
INCREASE ON THESE BUSINESSES. WE
BELIEVE THAT REMOVING THE
DEDUCTION WOULD LIKELY LEAD TO
INCREASED CREDIT COSTS,
PARTICULARLY IMPACTING CUSTOMERS
AT THE MARGIN OF CREDITWORTHY.
THIS HIGHER FINANCING COSTS OR
STRICTER CREDIT APPROVALS COULD
REDUCE OVERALL AUTO SALES AND
LIMIT ACCESS TO CREDIT,
PARTICULARLY AFFECTING LOW
INCOME AND MARGINAL CUSTOMERS.
WE THINK THIS PROPOSAL WOULD
EXACERBATE THE DISPARITIES
BETWEEN CUSTOMERS WHO FINANCE
VEHICLES AND THOSE WHO LEASE
FINANCE PURCHASES REQUIRE PAYING
THE FULL SALES TAX UPFRONT,
PLACING A GREATER BURDEN ON
THOSE WHO CHOOSE OR NEED TO
FINANCE. AND WE ALSO WORRY THAT
THIS COULD HINDER CALIFORNIA'S
ENVIRONMENTAL GOALS, ESPECIALLY
THE TRANSITION TO ZERO EMISSION
VEHICLES BY 2035, INCREASING THE
COST OF CREDIT FOR EVS CREATES
UNNECESSARY BARRIERS FOR
CONSUMERS WISHING TO TRANSITION
FROM TRADITIONAL COMBUSTION
ENGINES. WE APPRECIATE THE
CURRENT FISCAL CONDITION WE FIND
OURSELVES IN, BUT BELIEVE A
PERMANENT ELIMINATION OF THIS
DEDUCTION WOULD NOT ONLY CAUSE
UNNECESSARY FINANCIAL STRAIN ON
BOTH THE AUTOMOTIVE INDUSTRY AND
CONSUMERS, BUT ALSO HURT OUR
ECONOMIC RECOVERY AND
ENVIRONMENTAL PROGRESS, A CAR IS
A BIG PURCHASING DECISION FOR
FAMILIES. TOYOTA MAKES VEHICLES
AND OFFERS LENDING PRODUCTS TO
MEET PEOPLE'S TRANSPORTATION AND
FINANCIAL NEEDS. WE'RE HERE TO
BE A PART OF THE CONVERSATION
AND FIND SOLUTIONS THAT PUT
CUSTOMERS FIRST. WE DO TAKE
ISSUES WITH SOME OF THE CONCERNS
RAISED IN THE STAFF ANALYSIS,
BUT LOOK FORWARD TO CONTINUED
WORKING THE CONVERSATION WITH
STAFF AND THE ADMINISTRATION.
THANK YOU. THANK YOU. AND WE'RE
GOING TO KEEP OUR COMMENTS,
PLEASE, TO UNDER ONE MINUTE. AND
IF YOU SEE ME DO THIS, THAT
MEANS WE'RE GOING TO WIND IT UP
A LITTLE BIT. BUT THANK YOU.
THAT DOESN'T MEAN YOU WANT ME
JUST TO WIND IT UP. OKAY, MADAM
CHAIR MEMBERS. THEO ALEJO'S,
REPRESENTING FORD CALIFORNIA,
HAS ONE OF THE LARGEST SALES TAX
IN THE NATION. WE ALSO HAPPEN TO
SELL MORE CARS ANYWHERE ELSE IN
THE NATION. AND SPECIFICALLY,
WE'RE TRYING TO SELL A LOT OF
ELECTRIC VEHICLES. WE ALSO HAVE
A LOT OF PEOPLE BUYING VEHICLES
WITH LESS THAN PERFECT CREDIT.
IT SEEMS LIKE THIS IS THE WRONG
STATE TO CONSIDER THIS BECAUSE
OF THE COMBINATION OF THOSE
FACTORS. AND FOR THOSE REASONS,
WE'RE OPPOSED. THANK YOU. GOOD
AFTERNOON, CHAIR ROBERT WILSON,
CALIFORNIA CREDIT UNION LEAGUE,
THANKS FOR BEING HERE TODAY. I
WOULD JUST LIKE TO ECHO THE
COMMENTS THAT WERE SAID BEFORE
ME. CREDIT UNIONS WERE STARTED
TO SERVE PEOPLE OF MODEST MEANS,
AND WE'RE REALLY WORRIED THAT
THIS IS TAKING AWAY ANOTHER TOOL
IN THE TOOL BELT. AS THE LÀ
NOTED, ON THE CREDIT WORTHINESS
SIDE, WE THINK THAT IS A
LEGITIMATE CONCERN. AND WE'RE
CONCERNED THAT IT'S GOING TO
TRICKLE DOWN TO OUR MEMBERS. AND
LIKE I SAID, TAKE SOMETHING AWAY
FROM CREDIT UNIONS THAT ARE
TRYING TO SERVE THE UNDERSERVED.
SO THANK YOU VERY MUCH. THANK
YOU. GOOD AFTERNOON, MADAM
CHAIR. MEMBERS OF THE COMMITTEE,
JOHN MOFFATT, ON BEHALF OF THE
ALLIANCE FOR AUTOMOTIVE
INNOVATION, WE'RE THE TRADE
ASSOCIATION FOR THE AUTOMAKERS,
WENT TO ASSOCIATE OURSELVES WITH
THE COMMENTS BY FORD AND TOYOTA
AND JUST NOTE TWO DIFFERENCES.
WE ARE MANUFACTURERS. WE MAKE
THE CAR, WE SEND IT TO A DEALER.
THE DEALER SELL IT. THEY PAY US
FOR THE CAR. THAT MONEY GOES
RIGHT BACK OUT THE DOOR IN IN
FINANCING THE LOAN ON THAT CAR.
AND SO, YOU KNOW, I THINK WE ARE
DIFFERENTLY SITUATED THAN, THAN
PERHAPS WHAT, DEPARTMENT OF
FINANCE AND OTHERS ARE THINKING
ABOUT WHEN THEY'RE THINKING
ABOUT A TRADITIONAL LENDER,
BECAUSE WE ARE ALSO THE
MANUFACTURER OF THE VEHICLE. SO
SECONDLY, I WANT TO PIGGYBACK ON
THE ELECTRIC VEHICLE POINT. THE
STATE OF CALIFORNIA IS SPENDING
MILLIONS OF DOLLARS EVERY YEAR
SUBSIDIZING THE PURCHASE OF
ELECTRIC VEHICLES FOR LOW AND
MODERATE INCOME FOLKS. AND A LOT
OF THOSE PROGRAMS ARE DOWN
PAYMENT ASSISTANCE, MAKING
CREDIT HARDER FOR THOSE FOLKS
THROUGH A PROPOSAL LIKE THIS IS
VERY SHORTSIGHTED IN OUR VIEW.
THANK YOU. THANK YOU. GOOD
AFTERNOON, MADAM CHAIR. MARGARET
GLADSTEIN, EPILEPSY HERE ON
BEHALF OF THE CALIFORNIA
RETAILERS ASSOCIATION, CAN YOU
SAY WHICH GROUP AGAIN,
CALIFORNIA RETAILERS ASSOCIATION
, WE PARTNER WITH OUR LENDING.
WE HAVE PARTNERSHIPS WITH OUR
LENDERS, WHO TAKE ADVANTAGE OF
THIS, THIS DEDUCTION. AND WE
BELIEVE OVERALL, THIS WILL CAUSE
AN INCREASE IN THE COST OF
CREDIT AND THEREBY SQUEEZING OUT
SOME, UNDERSERVED AND PEOPLE WHO
HAVE TROUBLE ACCESSING CREDIT.
THANK YOU. THANK YOU, MADAM
CHAIR. CLIFF CASTLE, ON BEHALF
OF GENERAL MOTORS, I'D LIKE TO
ASSOCIATE MY COMMENTS WITH THE
COMMENTS OF THE PREVIOUS
AUTOMAKERS, AS WELL AS THE
ALLIANCE. AGAIN, GENERAL MOTORS
IS VERY COMMITTED TO MEETING OUR
ZERO EMISSION GOALS AND IS
ATTEMPTING TO DO EVERYTHING WE
CAN TO INCENTIVIZE, WHETHER THAT
IS TO PROVIDE BETTER FINANCING
OR ACCESS TO HOV LANES. BUT
THOSE INCENTIVES ARE BECOMING
HARDER AND HARDER AS WE CONTINUE
TO NEED TO BUILD THE GAP BETWEEN
A $44,000 AVERAGE PRICE OF A GAS
POWERED VEHICLE AND $54,000,
WHICH IS THE AVERAGE PRICE OF A
ZERO EMISSION VEHICLE. THANK
YOU. THANK YOU, WITH THAT,
SEEING NO ONE ELSE, APPROACHING
THE MICROPHONE, DO WE HAVE ANY
LAST COMMENTS FOR THIS GROUP
HERE? THANK YOU VERY MUCH,
SERIOUS MATTER AND DEFINITELY
WE'LL CONTINUE TO ASK QUESTIONS
IN THIS, TOPIC. THANK YOU, NEXT
WE HAVE FRANCHISE TAX BOARD.
GOOD AFTERNOON. MY NAME IS
JEANNIE HERMAN, CHIEF FINANCIAL
OFFICER OF THE FRANCHISE TAX
BOARD. THANK YOU FOR YOUR TIME
TODAY AND THE INVITATION TO
DISCUSS THE IRS DIRECT FILE
PORTAL. EARLIER THIS YEAR, THE
IRS LAUNCHED THE PILOT PROGRAM
ALLOWING TAX FILERS IN CERTAIN
STATES TO FILE DIRECTLY WITH THE
IRS FOR FREE. THE TOOL, ALSO
KNOWN AS THE IRS DIRECT FILE
PORTAL CALIFORNIA, AGREED TO
PARTICIPATE IN THE PILOT AND
UPON COMPLETION OF THE FEDERAL
RETURN, CALIFORNIA TAXPAYERS
WERE DIRECTED TO FTB'S CAL FILE
PORTAL TO FILE THEIR CALIFORNIA
RETURN. IN GENERAL, THE IRS
DIRECT FILE PORTAL ALLOWS
CERTAIN TAXPAYERS AN ADDITIONAL
TOOL TO FILE THEIR TAX RETURNS
FOR FREE AND DIRECTLY WITH THE
IRS FOR THIS PILOT YEAR, ONLY
TAXPAYERS WITH LESS COMPLICATED
RETURNS, TYPICALLY DEFINED AS
THOSE WITH WAGES CLAIMING THE
STANDARD DEDUCTIONS AND CLAIMING
A FEW CREDITS, SUCH AS THE
EARNED INCOME TAX CREDIT, ARE
ABLE TO USE THIS TOOL. AND OF
COURSE, THEY MUST BE A RESIDENT
WITHIN THE 12 STATES THAT ARE
PARTICIPATING IN THE PILOT.
TAXPAYERS WHO WERE NOT ABLE TO
USE THE PORTAL THIS YEAR OR
CHOSE NOT TO, FOR SOME REASON,
COULD STILL CHOOSE A FREE FILING
OPTION THAT ARE AVAILABLE IN
VIÆT SERVICES. TAX FILING
SOFTWARE SERVICES ASSOCIATED
WITH THE FREE FILE ALLIANCE, AND
OF COURSE, MULTIPLE OPTIONS
AVAILABLE ON THE INTERNET FOR
FREE FILING. LAST WEEK, IRS
COMMISSIONER WERFEL SHARED THE
FOLLOWING KEY INFORMATION ON THE
IRS TO DIRECT FILE PORTAL
EFFORT. THE FILING PILOT PROGRAM
EXCEEDED THE EXPECTED
PARTICIPATION GOAL OF 100,000
FEDERAL RETURNS FILED BY APRIL
15TH. WITH THE SUCCESSFUL PILOT
PROGRAM, THE IRS WILL NOW ENGAGE
IN FURTHER DISCUSSIONS TO
DETERMINE WHETHER THE PROGRAM
WILL CONTINUE AND, IF SO, TO
WHAT EXTENT. ANNOUNCEMENTS AS TO
THE ONGOING STATUS OF THE
PROGRAM AND ADDITIONAL STATS ARE
EXPECTED TO BE AVAILABLE
THROUGHOUT THE SPRING PERIOD.
THE IRS WEBSITE ALSO NOTED THAT
CALIFORNIA WAS THE LARGEST
PARTICIPATING STATE IN THE
PROGRAM, AND THE IRS. IRS STAFF
NOTED THAT OVER 30,000 FEDERAL
RETURNS WERE FILED IN THIS
PROGRAM FOR CALIFORNIA
TAXPAYERS, AND THOSE NUMBERS ARE
NOT YET FINAL. FTB WOULD ALSO
NOTE THE FOLLOWING INTERIM
OBSERVATION VIÆT RETURNS FOR THE
CALENDAR YEAR 2024 TO DATE WERE
DOWN JUST SLIGHTLY FROM A FULL
YEAR METRIC FOR LAST YEAR. SO I
WILL NOTE AND REMIND YOU THAT
LAST YEAR'S FILING SEASON WAS A
LITTLE BIT WONKY AS FAR AS BEING
ABLE TO FILE THROUGHOUT MOST OF
THE YEAR. SO WE DO NEED TO GET
TO THE END OF THE YEAR TO TRULY
UNDERSTAND THE CAPACITY AND THE
GROWTH CAPACITY THAT DISPLAYED
IN VIDAK: BUT SO FAR, WE'RE
ALMOST EXCEEDING IN THE FIRST
FOUR MONTHS, INCLUDING THE
FILING SEASON, THE STATS FOR A
FULL YEAR OF LAST YEAR WITH VIÆT
. SOME SAY THIS COULD BE RELATED
TO THE MARKETING STRATEGIES
ASSOCIATED WITH THE IRS DIRECT
FILING PORTAL. FTB HAS ALSO SEEN
A MARKED INCREASE IN CAL FILE
FILINGS THIS YEAR, LIKELY
RELATED TO ADDITIONAL
INDIVIDUALS USING THE TOOL FROM
BEING REFERRED FROM THE IRS
DIRECT FILE PORTAL AND THEN, AS
WELL AS PERHAPS AGAIN, SOME
GROWTH ASSOCIATED WITH INCREASED
KNOWLEDGE OF FREE FILING TOOLS,
INCLUDING CAL FILE. AGAIN A FULL
YEAR OF STATS IS GOING TO BE
NECESSARY JUST TO UNDERSTAND HOW
IT COMPARES TO LAST YEAR, IRS
COMMISSIONER WERFEL AGAIN
SUGGESTED THAT DIRECT FILE. HE
CALLED IT A HALO EFFECT THAT
DROVE UP PARTICIPATION IN OTHER
FREE FILING SERVICES. AND HE
NOTED THAT THE FREE FILE
ALLIANCE HAD AN INCREASE TO DATE
OF 11% RETURNS COMING THROUGH
THEIR SERVICE. AS FTB LOOKS
FORWARD TO THE NEXT STEPS, WE
CONTINUE TO WORK CLOSELY WITH
THE IRS. WE EXPECT THIS WORK TO
ACCELERATE AFTER THE IRS
PROVIDES INFORMATION LATER THIS
SPRING ABOUT THE NEXT STEPS FOR
THE PORTAL ITSELF, AND FTB
CONTINUES TO ENGAGE IN
DISCUSSIONS ABOUT THE OPTIONS
FOR FULL INTEGRATION OF THE
FEDERAL PORTAL AND CAL FILE TO
PROVIDE A MORE SEAMLESS
EXPERIENCE TO THOSE
CALIFORNIANS. USING THESE FREE
FILING TOOLS, FTB IS ENGAGING IN
COSTING EXERCISES, WHICH ARE NOT
YET COMPLETE AND WILL CURRENTLY
HAVE TO RELY ON CRITICAL
ASSUMPTIONS AS TO HOW THE IRS
WILL ENGAGE WITH STATES TO LINK
OUR VARIOUS FILING TOOLS
TOGETHER. WE ARE ALSO DISCUSSING
THE CRITICAL NEED FOR IRS TO
PROVIDE ASSISTANCE AND
RESOURCES. WHEN WE DO, TO ENSURE
THAT WE MEET IN THE MIDDLE WITH
OUR VARIOUS TOOLS. SO TIMING IS
GOING TO BE IMPORTANT FROM THAT
PERSPECTIVE AS WELL. THROUGHOUT
OUR DISCUSSIONS WITH THE IRS AND
AS THE YEARS PROGRESSES AND
MOVING INTO NEXT FILING SEASON,
FTB REMAINS COMMITTED TO
CONTINUING TO PROVIDE THE IRS
WITH A LINK AND REQUEST TO SEND
CALIFORNIANS TO OUR CAL FILE
PORTAL UNTIL WE CAN GET INTO
WHATEVER THE NEXT GENERATION OF
THIS EFFORT WILL BE. AT THIS
TIME, I'M HAPPY TO ANSWER ANY
QUESTIONS THAT YOU HAVE. THANK
YOU. ANY, COMMENTS FROM DOF OR
LAO? WELL, I FIND THIS TO BE
REALLY INTERESTING JUST BECAUSE
BECAUSE IT'S A NEW SYSTEM. AND
AS YOU SAID, YOU DON'T HAVE ALL
THE DATA FOR THIS YEAR. BUT YOU
DID SAY ALREADY YOU'RE CLOSE TO
100,000. IS THAT WHAT YOU SAID,
COMMISSIONER, IRS COMMISSIONER
WERFEL INDICATED THAT THE IRS
HAS EXCEEDED THEIR GOAL ACROSS
THE NATION OF GETTING 100,000
INDIVIDUALS TO USE THIS TOOL.
AND EARLY, INDICATIONS ARE THAT
PEOPLE ARE RESPONDING TO IT. SO
GOING INTO THE NEXT FILING
SEASON, WHICH, WE'RE JUST IN THE
MIDDLE OF THIS, WHAT ARE SOME
IDEAS THAT YOU HAVE TO CONTINUE
TO INCREASE THOSE NUMBERS? SO
THAT'S A GOOD QUESTION. SO THE
IRS OBVIOUSLY IS A CRITICAL
COMPONENT IN THAT THEY NEED TO,
COMMIT TO EXTENDING AND OR
CONTINUING THIS TOOL, SO WE'LL
WAIT FOR SPRING TO DO THAT. THAT
BEING SAID, WE'VE ALSO GOT A LOT
OF COMMENTS FROM INDIVIDUALS OR
WE'VE HEARD COMMENTS IN VARIOUS
MEDIA POSTS THAT THIS TOOL AT
THE FEDERAL LEVEL WAS VERY WELL
RECEIVED. IT IS EXTREMELY
INTUITIVE. I'VE HAD SEVERAL
DEMONSTRATIONS OF HOW THE TOOL
WORKS. IT IS IT IS VERY
FRIENDLY, VERY EASY FOR ITS
USERS TO USE, WHICH IS A GOOD
THING, CAL FILE IS PATTERNED OFF
OF THAT. WELL, WHICH IS ALSO A
GOOD THING, AND SO PRIMARILY FOR
CALIFORNIA, IN THE EVENT THAT
THE DIRECT FILE PORTAL CONTINUES
ON THE ISSUE IS GETTING A TUNNEL
BETWEEN THE TWO TO COMMUNICATE,
SO THAT TAXPAYERS AND THEIR DATA
CAN SECURELY COME THROUGH, AND
OF COURSE, THAT WE CAN ALSO
CONTINUE TO SUPPORT SECURITY
MEASURES SO THAT BAD ACTORS STAY
OUT, BECAUSE THE LAST THING WE
WANT IS A WEAK SYSTEM OR A WEAK
TUNNEL OF COMMUNICATION THAT'S
GOING TO ALLOW BAD ACTORS IN. SO
WE'RE CONTINUING TO FOCUS MOST
OF OUR CONVERSATIONS WITH THE
IRS ON THAT LEVEL OF EFFORT, THE
IRS IS ALSO A VERY, TIGHT, GROUP
OF INDIVIDUALS THAT QUALIFY, FOR
EXAMPLE, PEOPLE WITH HEALTH CARE
SUBSIDIES OR PEOPLE WITH 1099 IN
THE GIG ECONOMY, THEY ARE NOT
YET ABLE TO USE THIS TOOL, AND
THE IRS IS VERY INTERESTED IN
EXPANDING. SO WE'RE WAITING WITH
CURIOSITY TO SEE IF THE IRS,
WHAT THEY CHOOSE TO EXPAND TO
FOR NEXT YEAR, WHETHER THEY
MIGHT CHOOSE TO EXPAND THE
ELIGIBLE TAXPAYER WAS THAT COULD
QUALIFY, OR WHETHER THEY MIGHT
FOCUS MORE WITH THE STATES TO
GET SOME MORE SEAMLESS
INTEGRATIONS IN PLACE, THAT
OTHER STATES COULD DO IT. THE
IRS IS VERY MUCH RECOGNIZING, AS
DO WE AND THE OTHER STATES, THAT
REALLY BECAUSE TAXPAYERS HAVE
OBLIGATIONS BOTH AT THE FEDERAL
AND STATE LEVEL, IT'S A VERY,
CHALLENGING PROCESS WHEN YOU
JUST DO THE FEDERAL RETURN AND
THEN THEY HAVE TO GO FIND THEIR
OWN STATE SOLUTION. SO WE
DEFINITELY WANT THEM TO BE
INTEGRATED. SO THAT'S PROBABLY
WHAT I WOULD SAY ARE THE KEY
AREAS OF FOCUS THAT WE'RE
WATCHING. ON THE OTHER ONE, OF
COURSE, THE FINAL ONE I WOULD
JUST MENTION IS CUSTOMER
SERVICE, WE ARE WATCHING THAT
ONE VERY, VERY CLOSELY. THE
ORIGINAL PROPOSAL, THE IRS
SUBMITTED TO CONGRESS IN MAY OF
2023, INDICATED THE EXPECTATION
THE IRS HAS OF IT REALLY AN
EXTRAORDINARY LEVEL OF CUSTOMER
SERVICE THAT'S NOT BEEN SEEN
BEFORE, AND CERTAINLY EXCEEDS
EVEN OUR, LEVELS OF SERVICE THAT
WE HAVE TO ASSIST TAXPAYERS TO
FILE THEIR RETURNS AND TO PAY
THEIR DEBT OBLIGATIONS SO THAT
WILL ALSO BE A CONTINUED
UNDERSTANDING THAT WE ARE
ATTEMPTING TO GET AN
UNDERSTANDING OF WHAT THE IRS IS
DOING, AND IF THE EXPECTATION
WOULD BE THAT CALIFORNIA MIRRORS
THAT OR, OR IF A LESS THAN, A
LEVEL OF SERVICE WOULD BE
ACCEPTABLE AT THE CALIFORNIA
LEVEL, EVEN THOUGH THAT MIGHT
HARM SOME TAXPAYERS OR HAVE THEM
GO THROUGH A LITTLE BIT MORE
DIFFICULTIES IN GETTING FILED.
THANK YOU. I THINK THAT, THE
WHOLE CUSTOMER SERVICE ACCESS
AND FRIENDLINESS OF THESE TWO
SYSTEMS KIND OF, PARTNERING OR
BEING A COMPANION WILL MAKE A
BIG DIFFERENCE BECAUSE AS WE SIT
HERE IN BUDGET COMMITTEE AND
CONTEMPLATE LESS REVENUE, THE
WHOLE IDEA IS TO GET PEOPLE
MOVING THROUGH THE PROCESSES SO
WE CAN GET THESE, REVENUE INTO
THE STATE AND A TIMELY MANNER.
BUT THANK YOU. APPRECIATE IT.
ANY OTHER COMMENTS, ANY COMMENTS
FROM THE PUBLIC ON THIS ITEM?
ALL RIGHT. WELL DONE. THANK YOU.
THANK YOU SO MUCH. OH, YOU'RE
STAYING UP FOR THE NEXT OKAY.
LET'S SEE. WE HAVE NEXT
ENTERPRISE DATA TO REVENUE
PROJECT TWO. THANK YOU. GOOD
AFTERNOON. MY NAME IS TÊ LUONG.
I'M WITH THE FRANCHISE TAX BOARD
HERE TO DISCUSS ISSUE NUMBER
FIVE. SO ISSUE NUMBER FIVE IS
FTB'S VCP. THAT'S SUPPORTING OUR
ENTERPRISE DATA TO REVENUE.
PHASE TWO THE EDR TWO PROJECT.
BEFORE DIVING INTO THE PROPOSAL
ITSELF, I'D LIKE TO JUST SHARE A
LITTLE BIT OF BACKGROUND. SINCE
THIS IS A PRETTY COMPLEX
PROJECT. IN 2007, FTB CREATED A
TAX SYSTEMS MODERNIZATION PLAN
THAT OUTLINED THREE LARGE SCALE
PROJECTS OVER A 30 YEAR PERIOD,
AND EACH PROJECT WAS ADDED. IT'S
EXPECTED TO TAKE ABOUT TEN YEARS
FROM PLANNING THROUGH
IMPLEMENTATION, AND EACH PROJECT
BUILDS UPON THE PREVIOUS ONE.
THIS MULTI-DECADE EFFORT REALLY
AIMS TO DO THREE THINGS
MODERNIZE FTB'S AGING IT
SYSTEMS, IMPLEMENT BUSINESS
OPPORTUNITIES, AND OBJECTIVES
THROUGH A BETTER USE OF DATA,
AND ALSO TO IMPROVE TAXPAYER
SERVICES, EFFECTIVE COMPLIANCE
AND OPERATIONAL EXCELLENCE. IT'S
THE FIRST OF THE THREE PROJECTS
ENTERPRISE DATA TO REVENUE. ONE
EDR ONE WAS SUCCESSFULLY
COMPLETED IN 2015. EDR ONE
BROUGHT A NEW TAX RETURN
PROCESSING SYSTEM THAT AUTOMATED
A LOT OF MANUAL WORK AND
IMPROVED DATA CAPTURE AND
VALIDATION FOR PERSONAL INCOME
TAX. BECAUSE OF THAT, IT MADE
PROCESSING OF PERSONAL INCOME
TAX AND BUSINESS ENTITIES
RETURNS MORE EFFICIENT AND
FASTER. THE PLANNING FOR THE
SECOND PHASE, EDR TWO, BEGAN IN
2016, AND IMPLEMENTATION WORK
BEGAN IN JULY OF 2021. SO THAT
MEANS THE FISCAL YEAR 24 TO 25
WILL SEE FTB ENTER INTO THE
FOURTH YEAR OF THIS PROJECT. THE
PROJECT CONTINUES TO BUILD ON
THE FOUNDATION SET BY EDR ONE BY
EXPANDING ENTERPRISE CASE
MANAGEMENT AND MODELING SERVICES
FOR AUDIT, FILING, ENFORCEMENT
AND ACCOUNTS RECEIVABLE
FUNCTIONS. IT WILL ALSO EXPAND
SERVICE TOOLS FOR OUR TAXPAYERS
THROUGH THE TAXPAYER FOLDER,
WHICH IS EXTERNALLY KNOWN AS MY
FTB. FOLLOWING THE STATEWIDE
PROCESS ESTABLISHED TO SUPPORT
FUNDING FOR LARGER IT PROJECTS
AND ANNUAL BCP IS REQUIRED FOR
NEW COSTS RELATED TO THAT YEAR.
SO THIS YEAR'S PROPOSAL IS
REQUESTING AN AUGMENTATION OF
127.1 MILLION AND INCLUDES
FUNDING FOR 28 PERMANENT AND TEN
LIMITED TÂM POSITIONS. THE
REQUEST INCLUDES 112.5 MILLION
FOR PAYMENT TO OUR SOLUTION
PARTNERS. PLEASE NOTE THAT FTB
IS USING A JUST IN TIME APPROACH
TO REQUESTING RESOURCES. AS YOU
CAN SEE WITHIN OUR PROPOSAL, WE
ARE ASKING FOR RESOURCES ACROSS
THE SAME FUNCTIONS FOR DIFFERENT
FISCAL YEARS, BUT ONLY AS NEEDED
AND FOR LIMITED TERMS. FTB HAS
NOTED THESE ONGOING LIMITED
TERMS AND ONE TIME COSTS WITHIN
THE BODY OF THE BCP AND ALSO
WORKLOAD MEASUREMENT DOCUMENT
THAT'S INCLUDED IN THE PROPOSAL
ITSELF. FOR THE FOURTH YEAR OF
THE PROJECT, OUR WORK WILL FOCUS
ON DATA ANALYTICS TOOLS AND
MODELS, AND HENCE DATA CAPTURE,
DATA MANAGEMENT AS WELL AS
OVERSIGHT FUNCTIONS SUCH AS
INDEPENDENT VERIFICATION AND
VALIDATION, QUALITY ASSURANCE
AND AN INDEPENDENT SECURITY
ASSESSMENT FOR FULL TRANSPARENCY
. I WOULD ALSO NOTE THAT THERE
ARE TWO PROVISIONAL LANGUAGES IN
OUR BUDGET THAT SUPPORT THE EDR
TWO PROJECT. THE FIRST
PROVISIONAL LANGUAGE ALLOWS FOR
THE CARRYOVER OF VENDOR
COMPENSATION OF THE FUNDS
APPROPRIATED FOR VENDOR
COMPENSATION. ANY UNUSED AMOUNT
IS ALLOWED AS A ONE TIME
CARRYOVER TO THE NEXT FISCAL
YEAR. TO SUPPORT VENDOR PAYMENTS
FOR SERVICES PERFORMED. THE
SECOND PROVISIONAL LANGUAGE
SUPPORTS THE FUNDING AND USE OF
UNPLANNED WORK FUNDING, WHICH IS
NOT TO EXCEED 5% OF THE CONTRACT
AMOUNT, TO COVER COSTS
ASSOCIATED WITH UNPLANNED WORK,
WHICH DOES ALIGN WITH THE
EXISTING SCOPE OF THE PROJECT,
AND IT'S NECESSARY FOR THE
SUCCESSFUL COMPLETION OF THE EDR
TWO PROJECT. LASTLY, STATEWIDE
POLICY REQUIRES A SPECIAL
PROJECT REPORT ON SPR TO BE
SUBMITTED WHEN THERE IS A 10% OR
MORE INCREASE IN EITHER THE
SCHEDULE OR COST, OR WHEN
THERE'S A SCOPE CHANGE TO THE
PROJECT. HOWEVER DUE TO THE SIZE
AND COMPLEXITY OF THE EDR TWO
PROJECT, THE PROJECT HAS A
SPECIAL CONDITION WHERE IT IS
SUBJECT TO AN SPR. IF COSTS
INCREASE BY 5 MILLION OR MORE IN
THE SUMMER OF LAST YEAR, THE EDR
TWO PROJECT SUBMITTED AND
RECEIVED APPROVAL FOR ITS FIRST
SPR. WHILE THE PROJECT SCHEDULE
AND END DATE REMAIN THE SAME,
THE TOTAL PROJECT COST INCREASED
BY 13.9 MILLION, OR 1.8. THESE
ADDITIONAL COSTS ARE THE RESULT
OF WORKING THROUGH THE DETAILED
REQUIREMENTS AND FUNCTIONALITIES
OF THE PROJECT. WHILE THE SCOPE
OF EDR TWO REMAINS UNCHANGED AS
WE PARTNER WITH THE VENDOR TO
DIVE INTO HOW SOME OF THIS WORK
IS CARRIED OUT, WE DID DISCOVER
ADDITIONAL UNFUNDED WORK THAT IS
NEEDED TO SUPPORT CURRENT
BUSINESS OPERATIONS AND TO
ENSURE PROJECT SUCCESS AS WE
MOVE TOWARDS THE SUCCESSFUL
COMPLETION OF THE PROJECT. THE
COLLABORATION BETWEEN FTB AND
OUR SOLUTION PARTNERS REMAINS
STRONG AND WE ARE WORKING WELL
TOGETHER AS ISSUES PRESENT. WE
ARE CURRENTLY AT THE PEAK OF THE
PROJECT AND WHILE THE SCHEDULE
IS TIGHT AND THERE ARE MANY
MOVING PIECES, WE ARE WITHIN
SCOPE, SCHEDULE AND REVISED
COSTS. AS STATED WITHIN THE SPR
ONE. THANK YOU SO MUCH FOR YOUR
TIME AND SUPPORT AND HAPPY TO
TAKE ANY QUESTIONS YOU HAVE.
THANK YOU ANY COMMENTS FROM DOV
OR LAO, I ALSO HAVE NO QUESTIONS
. WE APPRECIATE YOUR
PRESENTATION. AND DO WE HAVE
ANYBODY FROM THE PUBLIC THAT
WOULD LIKE TO SPEAK ON THIS ITEM
SEEING NONE. THANK YOU SO MUCH
FOR COMING AND JOINING US. AND
WE WILL BE MOVING TO THE NET
OPERATING LOSS. ITEM NUMBER SIX.
THANK YOU FOR JOINING US. IF YOU
WANT TO INTRODUCE YOURSELF AS
YOU MAKE YOUR COMMENTS. THANK
YOU. GOOD AFTERNOON, MADAM
CHAIR, NICK THOMAS, DEPARTMENT
OF FINANCE, SO AS PART OF
ADDRESSING THE PROJECTED DEFICIT
IN THE 2425 BUDGET, THE
ADMINISTRATION IS PROPOSING TO
LIMIT THE USE OF NET OPERATING
LOSSES TO 80% OF A BUSINESS'S
TAXABLE INCOME FOR TAX YEARS
BEGINNING ON OR AFTER JANUARY
1ST, 2024, THE LIMITATION WOULD
APPLY TO ALL EXISTING AND NEW
NOLS. AND THE RATIONALE IS THAT
IT WOULD RESULT IN MORE
PROFITABLE BUSINESSES, PAYING AT
LEAST SOME STATE INCOME TAXES,
BUSINESSES THAT BECOME
PROFITABLE WOULD STILL BE ABLE
TO FULLY UTILIZE THEIR NOL
STOCKS, JUST OVER A LONGER TIME
HORIZON, AND THIS ALSO DOES NOT
IMPACT, CREDIT USAGE, THE
PROPOSAL IS ESTIMATED TO
INCREASE REVENUES BY $300
MILLION IN 2425, DUE TO THE ONE
AND A HALF YEAR IMPACT, AND BY
$200 MILLION ANNUALLY THEREAFTER
, I WOULD ALSO NOTE THAT THESE
ESTIMATES WILL BE REVISED IN THE
MAY REVISION, AND WITH THAT, I'M
HAPPY TO ANSWER ANY QUESTIONS. I
KNOW YOU HAVE SOME COMMENTS HERE
. WELCOME, SO BRIAN UHLER WITH
THE WITH THE LAO, OUR OFFICE IS
RECOMMENDING, REJECTING THIS
PROPOSAL ON LIMITING NET
OPERATING LOSS DEDUCTIONS IN.
THE PRIMARY FACTOR IS THAT THE
PROPOSAL WOULD LEAD TO LESS LESS
EQUITABLE TAX TREATMENT OF
BUSINESSES. AND LET ME BRIEFLY,
BRIEFLY KIND OF EXPLAIN WHY. SO
NET OPERATING LOSS DEDUCTIONS IN
GENERAL ALLOW BUSINESSES TO KIND
OF SMOOTH THEIR PROFITS AND
LOSSES OVER TIME IN A WAY THAT
ALLOWS FOR BUSINESSES WITH
SIMILAR PROFITS OVER TIME TO PAY
SIMILAR AMOUNTS OF TAXES,
WITHOUT A NET OPERATING LOSS,
NET OPERATING LOSS DEDUCTIONS,
BUSINESSES THAT HAVE LARGER
SWINGS IN REVENUE FROM YEAR TO
YEAR, WOULD END UP PAYING MORE
TAX THAN BUSINESSES WITH A
SIMILAR INCOME, BUT THAT'S MORE
STABLE OVER TIME, AND SOME
BUSINESSES ARE JUST MORE PRONE
TO, TO THOSE KINDS OF LARGE
SWINGS IN PROFITS JUST BECAUSE
OF THE SECTOR THAT THEY WORK IN.
THEY MIGHT BE IN A MORE RISKY OR
INNOVATIVE SECTOR, OR THEY MIGHT
BE IN A SECTOR THAT'S MORE
DOMINATED BY STARTUP ACTIVITY,
AND SOME EXAMPLES OF THOSE KINDS
OF SECTORS ARE ONES THAT ARE
KIND OF, SECTORS THAT ARE
GENERALLY CONSIDERED CENTRAL TO
THE STATE'S ECONOMY, INCLUDING
TECH, THE MOTION PICTURE
INDUSTRY AND TRANSPORTATION. AND
SO NULL DEDUCTIONS ALLOW FOR
MORE EQUITABLE TREATMENT OF, OF
BUSINESSES WITH THESE LARGER
SWINGS IN REVENUE. AS SUCH,
LIMITING THE NET OPERATING LOSS
DEDUCTION AS PROPOSED, WOULD
LEAD TO LESS EQUITABLE TREATMENT
OF THOSE BUSINESSES THAT
EXPERIENCED THOSE LARGER SWINGS,
AND BECAUSE OF THAT, WE
RECOMMEND, REJECTING THIS
PROPOSAL. ALL RIGHT. I DO HAVE A
QUESTION. THÀNH. DODD. WHY DOES
THE ADMINISTRATION'S PROPOSAL GO
BEYOND FEDERAL CONFORMITY? YEAH.
SO THE PROPOSAL THAT WE PUT
FORTH IN THE GOVERNOR'S BUDGET,
IT DIFFERS FROM FEDERAL LAW IN
TWO MAIN WAYS, SO THE FIRST IS
THAT IT DOESN'T ALLOW OLDER
ANIMALS TO BE USED UP TO 100% OF
TAXABLE INCOME, WHICH IS
SOMETHING THAT THE FEDERAL DOES
BECAUSE IT WAS ENACTED IN ABOUT
SIX YEARS AGO, THERE'S BASICALLY
TWO CLASSES OF KNOLLS, ONE THAT
ARE ONES THAT ARE ALLOWED TO BE
USED UP TO 100, AND THEN A
SEPARATE ONE THAT IS LIMITED TO
80, FROM OUR PERSPECTIVE AT THIS
POINT, GIVEN THE FACT THAT WE
ARE SIX YEARS LATER, CREATING A
CUT OFF DATE IN 2018 IS A LITTLE
ARBITRARY, IGNORING THE FACT
THAT THAT WAS WHEN TCJA WAS
PASSED. AND SO, WE VIEW IT AS
PREFERABLE TO ONLY CREATE ONE
CLASS OF NOBLES AND ALSO THE
OTHER FACTOR IS THAT IN CREATING
A CLASS OF NOBLES THAT WOULD BE
ABLE TO BE USED UP TO 100, THAT
WOULD LIMIT THE POTENTIAL
REVENUE GAIN OF THE SOLUTION, IN
THE BUDGET WINDOW, AND THEN ALSO
IN THE MULTI YEAR, THE OTHER
THING I WOULD NOTE IS THAT. SO
ONE OTHER DIFFERENCE IS THAT,
IS, THE PROPOSAL THAT THE, IN
THE GOVERNOR'S BUDGET, IT
DOESN'T ALLOW UNLIMITED
CARRYFORWARDS. THAT IS ONE THING
THAT, FEDERAL LAW DOES, THE
STATE ALLOWS A FAIRLY LONG CARRY
FORWARD PERIOD OF 20 YEARS. AND
THE REAL DIFFERENCE BETWEEN
THOSE 220 YEARS VERSUS UNLIMITED
IS, IS RELATIVELY MINOR. THE
VAST MAJORITY OF GNOLLS THAT ARE
GOING TO BE USED AT SOME POINT
WOULD BE USED WITHIN 20 YEARS.
AND THEN I THINK ONE OTHER POINT
I WOULD BRING UP WITH, WITH
REGARD TO CONFORMITY IS IT
DOESN'T NECESSARILY CHANGE THE
FILING PROCESS, SO KNOLLS AT THE
FEDERAL LEVEL AND AT THE STATE
LEVEL, THEY HAVE TO BE TRACKED
AND CALCULATED SEPARATELY.
BECAUSE OF DIFFERENCES IN
FEDERAL INCOME VERSUS STATE
INCOME. AND SO THIS DOESN'T
NECESSARILY CREATE ANY FURTHER
ADMINISTRATIVE HURDLE FOR EITHER
THE TAXPAYER OR FOR, FOR FTB.
THANK YOU. LEO, DO YOU HAVE ANY
RESPONSE TO THAT? I THINK MAYBE
JUST ONE THING THAT I WOULD ADD
ON ABOUT, YOU KNOW, I GUESS THE
DIFFERENCE ON WHETHER OR NOT
THIS PROPOSAL APPLIES TO, TO
NULL DEDUCTIONS THAT WERE
CREATED IN 2017 OR PRIOR, AS
WITH THE FEDERAL LAW, DEPARTMENT
OF FINANCE MENTIONED THAT KIND
OF MIRRORING THE FEDERAL LAW
MIGHT BE SORT OF ARBITRARY,
GIVEN THAT WE'RE SO FAR OFF FROM
WHEN THAT, FEDERAL POLICY WAS
PUT IN PLACE, YOU KNOW, THAT'S
THAT'S REASONABLE TO A DEGREE.
BUT ALSO, I THINK I WOULD I
GUESS I WOULD SUGGEST THAT IT'S
NOT ENTIRELY ARBITRARY, GIVEN
THAT IT WOULD BE ALIGNING US
WITH THE FEDERAL RULES THAT MANY
OF THESE BUSINESSES ARE ALREADY,
KIND OF ORIENTING THEIR BOOKS TO
COMPLY WITH. AND SO THERE COULD
BE SOME ADVANTAGES OF ALIGNING
OUR ADMINISTRATION WITH, THE WAY
THAT THE FEDERAL RULES WORK.
THANK YOU. APPRECIATE THAT, WITH
THAT, DO WE HAVE ANYBODY FROM
THE PUBLIC THAT WOULD LIKE TO
SPEAK ON THIS? SEEING NONE,
WHICH IS A TINY BIT OF A
SURPRISE, THEN WE ANY LAST
COMMENTS HERE, THEN THANK YOU SO
MUCH FOR YOUR COMMENTS. AND WE
WILL MOVE TO OUR NEXT ITEM,
PLEASE JOIN US HERE. AND THAT IS
ON CHARITABLE CONSERVATION
EASEMENTS. WELCOME GOOD
AFTERNOON. ROBIN FINNESTAD WITH
THE DEPARTMENT OF FINANCE. A
LITTLE LOUDER, PLEASE. OF
COURSE. UNDER CURRENT, FEDERAL
AND STATE LAW, PROPERTY OWNERS
WHO ELECT TO GIVE UP RIGHTS TO
DEVELOP CERTAIN LAND ARE ALLOWED
TO A CHARITABLE DEDUCTION EQUAL
TO THE PROPERTY'S FOREGONE LAND
USE VALUE FROM THE LAND VALUE
FROM THE USE RESTRICTION.
HOWEVER, THE DEDUCTION HAS
PROVEN EASY TO ABUSE, AS
INFLATED PROPERTY APPRAISALS
HAVE ALLOWED INVESTORS THROUGH
SYNDICATED PARTNERSHIPS
PARTNERSHIPS TO GET IMPROPERLY
LARGE TAX DEDUCTIONS. THE
FEDERAL CONSOLIDATED
APPROPRIATIONS ACT, THE CAA OF
2023, ADDRESSED THESE ABUSES BY
DOING THE FOLLOWING. LIMITING
THE DEDUCTION FOR OWNERS OF PASS
THROUGH ENTITIES TO TWO AND A
HALF TIMES THE VALUE OF A
TAXPAYER'S INVESTMENT, AND
DISALLOWED THE DEDUCTIONS FOR
PARTICIPANTS WHO HAD PREVIOUSLY
ENGAGED IN FRAUD. FOR EXAMPLE, A
PARTIAL OWNER WHO INVESTED $100
WOULD NOW BE LIMITED TO CLAIMING
A DEDUCTION OF UP TO $250.
CALIFORNIA LAW CONFORMS WITH
FEDERAL LAW IN ALLOWING
DEDUCTIONS FOR CHARITABLE
CONSERVATION EASEMENTS. HOWEVER,
THE STATE HAS NOT CONFORMED TO
THOSE 2023 CHANGES. THIS
PROPOSAL WOULD CONFORM
CALIFORNIA'S TREATMENT OF THE
CHARITABLE CONSERVATION
EASEMENTS DEDUCTION WITH WITH
FEDERAL LAW. BY ADOPTING THESE
CHANGES MADE IN THE
CONSOLIDATION APPROPRIATIONS
ACT, BEGINNING IN TAX YEAR 2024,
CONFORMING CALIFORNIA LAW TO
FEDERAL LAW IN LIMITING THE SIZE
OF CHARITABLE CONSERVATION,
EASEMENT DEDUCTIONS WILL
INCREASE ADMINISTRATIVE
EFFICIENCY AND ENSURE THAT THE
STATE IS ALIGNED WITH FEDERAL
GOVERNMENT IN LIMITING
IMPROPERLY LARGE TAX DEDUCTIONS
FROM ABUSIVE TRANSACTIONS. THIS
PROPOSAL IS ESTIMATED TO
INCREASE REVENUES BY 55,000,000
IN 20 2425, 55,000,000 IN 2526,
AND 25,000,000 IN 2627 AND
ONGOING. THIS ESTIMATE WILL BE
REVISED AS PART OF THE MAY
REVISION. AND WITH THAT, I CAN
ANSWER ANY QUESTIONS FOR YOU.
THANK YOU, THANK YOU. APPRECIATE
THAT. AND ON THIS ONE, WE
RECOMMEND APPROVING THE
GOVERNOR'S PROPOSAL, WE AGREE
THAT CONFORMING TO FEDERAL LAW
WOULD HELP TO CURB A POTENTIAL
MISUSES OF THIS DEDUCTION AND
COULD STREAMLINE STATE TAX
ADMINISTRATION. THANK YOU. AND
WE WILL WELCOME OUR, COLLEAGUE
HERE, ASSEMBLY MEMBER CHRIS WARD
. WE ARE ON CHARITABLE,
CHARITABLE, CAN WE TAKE ROLL
HERE, ASSEMBLY MEMBER
QUIRK-SILVA HERE. ASSEMBLY
MEMBER. PATTERSON. ASSEMBLY
MEMBER WARD HERE. OKAY, AND
AGAIN, I APPRECIATE THIS MEASURE
AS WELL. WE CERTAINLY, WANT TO
MAKE SURE THAT WHEN PEOPLE CAN,
WRITE SOMETHING OFF THAT IT'S
JUSTIFIED BUT NOT MISUSED. ANY
COMMENTS ON THIS CONSERVATION?
ALL RIGHT, ANYBODY FROM THE
PUBLIC THAT WOULD LIKE TO SPEAK
ON THIS ITEM. ALL RIGHT, WE'RE
JUST GOING TO ROLL ALONG. HERE
WE ARE ON ISSUE NUMBER EIGHT,
ELIMINATE OIL AND GAS, DIRECT
TAX SUBSIDIES, PLEASE JOIN US.
THANKS, MADAM CHAIR. JT CREEDON,
DEPARTMENT OF FINANCE, THE
GOVERNOR'S BUDGET PROPOSES
ELIMINATING DIRECT TAX SUBSIDIES
THAT ARE SPECIFIC AND GIVE
PREFERENCE TO THE OIL AND GAS
INDUSTRY, BUT ARE NOT AVAILABLE
TO ALL OTHER SMALL AND LARGE
BUSINESSES IN OTHER INDUSTRIES
ACROSS THE STATE. THESE INCLUDE
REPEALING THE IMMEDIATE
EXPENSING FOR INTANGIBLE
DRILLING COST DEDUCTION, THE
INCREASED PERCENTAGE MINERAL
DEPLETION ALLOWANCE, AND THE
ENHANCED OIL RECOVERY COSTS
CREDIT COMBINED. ELIMINATING
THESE SUBSIDIES WOULD SAVE $22
MILLION IN BUDGET YEAR AND
ROUGHLY 72 MILLION CUMULATIVELY
THROUGH 20 2728. THESE ESTIMATES
WILL BE UPDATED AT MAY REVISION.
THESE DIRECT TAX SUBSIDIES WERE
CREATED MANY DECADES AGO TO
INCENTIVIZE DOMESTIC OIL
PRODUCTION, AND ARE NO LONGER
NECESSARY OR CONSISTENT WITH THE
STATE'S CLIMATE AND ENERGY
GOALS. WHILE THESE SPECIAL TAX
SUBSIDIES ARE PROPOSED TO BE
ELIMINATED, OIL AND GAS
INDUSTRIES CAN CONTINUE TO
BENEFIT FROM ALL THE OTHER
GENERAL BUSINESS TAX INCENTIVES
THAT ARE AVAILABLE TO OTHER
BUSINESSES IN THE STATE. I'M
HAPPY TO TAKE QUESTIONS. WE
RECOMMEND APPROVING THESE
PROPOSALS AS WELL, THE PROPOSALS
WOULD LEAD TO MORE CONSISTENT
TREATMENT OF BOTH BUSINESSES
WITHIN IN THE OIL AND GAS
INDUSTRY AND ALSO ACROSS,
SECTORS AS WELL. IN ADDITION,
THERE ISN'T A CLEAR THERE DOES
NOT APPEAR TO BE A CLEAR POLICY
RATIONALE FOR CONTINUING, THESE,
PROVISIONS OF TAX LAW GIVEN THE
STATE'S TRANSITION THÀNH TOWARDS
POLICIES AIMED, OF TRANSITIONING
AWAY FROM FOSSIL FUELS. THANK
YOU. ANY QUESTIONS? I WAS JUST I
WANT TO THANK THE GOVERNOR'S
OFFICE FOR HIGHLIGHTING THIS AS
PART OF THE DRAFT, I THINK THAT
I WOULD AGREE WITH FOR ALL THE
REASONS YOU STATED, I THINK IT'S
TIME THAT THIS BE FULLY
REVISITED, IN ORDER TO BE ABLE
TO BE IN ALIGNMENT WITH WHERE
WE'RE HEADING WITH OUR CLIMATE
GOALS, IS NECESSARY, ADDITION AS
WELL. SO THANK YOU FOR THAT.
THANK YOU. AND ANY LAST COMMENTS
. ALL RIGHT. THANK YOU. ANYBODY
FROM THE PUBLIC? MICHAEL. JARED,
ON BEHALF OF THERE YOU GO. THANK
YOU. MICHAEL. JARED, ON BEHALF
OF CLIMATE RESOLVE, WE SUPPORT
THIS, ITEM AND THANK THE
ADMINISTRATION FOR BRINGING IT
FORWARD. BUT BELIEVE WE COULD DO
EVEN MORE, TO FIND ADDITIONAL
SUBSIDIES TO ELIMINATE DURING
THESE TOUGH BUDGET TIMES. THANK
YOU. THANK YOU FOR THOSE
COMMENTS AND APPRECIATE YOU,
MAKING COMMENTS ON THAT. WE'LL
MOVE TO ISSUE NUMBER NINE, WE
HAVE.
OTHER TRAILER. BILL PROPOSALS.
YOU ARE JUST OTHER WELCOME. WE
APPRECIATE YOU BEING HERE. AND
PLEASE INTRODUCE YOURSELF. THANK
YOU. GOOD AFTERNOON, MADAM
CHAIR, AND ESTEEMED COMMITTEE
MEMBERS. MY NAME IS DENNIS
ARMSTRONG, THE LEGISLATIVE
DIRECTOR FOR THE FRANCHISE TAX
BOARD. AND I WILL FIRST BE
SPEAKING TOWARDS THE MIDDLE
CLASS TAX REFUND, TECHNICAL
CLARIFICATION. UNDER CURRENT
STATUTE, ALL UNEXPENDED OR
UNCLAIMED MIDDLE CLASS TAX
REFUND PAYMENTS ARE SET TO
EXPIRE ON APRIL 30TH, 2026.
CURRENT STATUTE ALSO REQUIRES
THE UNUSED BALANCE OF THESE
PAYMENTS TO BE RETURNED TO THE
STATE BY MAY 31ST OF 2026. THIS
PROPOSAL CLARIFIES THAT THESE
UNUSED FUNDS WILL BE RETURNED TO
THE FRANCHISE TAX BOARD, WHICH
WILL THEN HAVE THE MONIES
DEPOSITED INTO THE GENERAL FUND.
THIS TECHNICAL CHANGE LOOKS TO
AVOID CONFUSION AS THESE UNUSED
BALANCES ARE RETURNED TO THE
GENERAL FUND. I'D BE HAPPY TO
TAKE ANY COMMENTS OR QUESTIONS
AT THIS TIME. THANK YOU, THANK
YOU. ANY COMMENTS FROM DOV OR
LAO, I HAVE NO QUESTIONS. NO
QUESTIONS, DO WE HAVE ANYBODY
FROM THE PUBLIC? ALL RIGHT. IT
LOOKS LIKE, YOU ARE VERY SPEEDY,
AND WE APPRECIATE THAT. THANK
YOU SO MUCH FOR YOUR COMMENTS.
WHAT WE HAVE ALSO THREE OTHER
ITEMS ON THIS. WE HAVE,
TERMINATE, SORRY, TERMINATE
TRANSFERS TO DELINQUENT TAX
COLLECTION FUND. THANK YOU,
TAYLOR WONG FROM OXFORD, THIS
TERRIBLE LANGUAGE IS JUST TO
CLEAN UP THE STATUTE AND TO STOP
THE TRANSFER OF THE 404,000
THAT'S DONE ANNUALLY FROM THE
GENERAL FUND TO FTB'S DELINQUENT
TAX FUND. ESSENTIALLY THIS FUND
WAS PREVIOUSLY USED TO COVER
COSTS FOR INTERAGENCY COLLECTION
ACTIVITIES WITH THIRD PARTY
IN-STATE AND OUT-OF-STATE
COLLECTIONS, AND WITH THE FULL
IMPLEMENTATION OF THE EDR
PROJECT, WE ARE NO LONGER
OUTSOURCING THESE COLLECTION
EFFORTS. SO, THAT'S BEEN
ACTUALLY SUSPENDED FOR SOME
TIME. SO THESE FUNDS ARE NO
LONGER NEEDED. THANK YOU. SAY
THAT AGAIN. THESE FUNDS ARE NO
LONGER NEEDED, MA'AM. SAY THAT
ANOTHER WAY. REALLY LOUD A THIRD
TIME FOR THOSE IN THE BACK.
THESE FUNDS ARE NO LONGER
NEEDED. WELL, YOU NEVER HEAR
THAT IN GOVERNMENT. CAN WE USE
THOSE FUNDS FOR HOUSING? ALL
RIGHT. THANK YOU SO MUCH. ANY
COMMENTS OF OVER HERE, THEN
LET'S GO TO REPEALING THE
EXPIRATION DATE FOR ELECTRONIC
NOTIFICATIONS TO TAXPAYERS.
TRAILER BILL LANGUAGE. THANK
YOU, MADAM CHAIR. DENNIS
ARMSTRONG FRANCHISE TAX BOARD
UNDER CURRENT STATUTORY
AUTHORITY, TAXPAYERS CAN CHOOSE
TO RECEIVE NOTIFICATIONS FROM
THE FRANCHISE TAX BOARD AND SEND
NOTIFICATIONS ELECTRONICALLY.
THIS AUTHORITY WILL BE REPEALED
ON JANUARY 1ST, 2025. THIS
PROPOSAL ELIMINATES THE REPEAL
DATE INDEFINITELY, ALLOWING A
TAXPAYER OR THEIR REPRESENTATIVE
THE OPTION TO CHOOSE AN
ELECTRONIC METHOD TO RECEIVE AND
FILE CERTAIN NOTIFICATIONS WITH
THE FRANCHISE TAX BOARD. THERE
ARE NO ADMINISTRATIVE COSTS FOR
THIS PROPOSAL NOR IMPACTS TO THE
GENERAL FUND. THIS PROPOSAL WILL
BENEFIT TAXPAYERS WHO HAVE
ELECTED TO SEND AND RECEIVE
ELECTRONIC NOTIFICATIONS BY NOT
HAVING THEIR PREFERRED METHOD OF
NOTIFICATION INTERRUPTED. THANK
YOU AGAIN AND I'D BE HAPPY TO
ANSWER ANY QUESTIONS, ANY
COMMENTS. AND MR. WARD, DID YOU
HEAR? HE SAID NO GENERAL FUND.
YOU GUYS COULD STAY HERE ALL DAY
LONG. ALL RIGHT, THEN WE WILL GO
TO OUR LAST ITEM. EXTEND
EXEMPTION FROM IRS, 280 FOR
CANNABIS. CANNABIS BUSINESSES,
THANK YOU, MADAM CHAIR. COLBY
WHITE DEPARTMENT OF FINANCE. SO
CURRENT FEDERAL LAW, IN SECTION
280 OF THE INTERNAL REVENUE CODE
DISALLOWS BUSINESSES THAT ARE
INVOLVED IN THE ILLEGAL SALE OF
CONTROLLED SUBSTANCES FROM
TAKING TAX DEDUCTIONS OR USING
TAX CREDITS FOR THE COST OF
DOING BUSINESS OUTSIDE OF COST
OF GOODS SOLD. SINCE CANNABIS
REMAINS AN UNLAWFUL CONTROLLED
SUBSTANCE UNDER FEDERAL LAW, THE
STATE'S LICENSED CANNABIS
OPERATORS ARE UNABLE TO TAKE
TYPICAL FEDERAL DEDUCTIONS AND
CREDITS THAT ARE AVAILABLE TO
OTHER BUSINESSES. CURRENT STATE
LAW. HOWEVER, UNTIL JANUARY 1ST,
2025, DID DECOUPLES FROM FEDERAL
LAW AND SECTION 280 Â AND
ALLOWS LICENSED CANNABIS
OPERATORS TO FULLY UTILIZE STATE
TAX DEDUCTIONS AND CREDITS. SO
THIS PROPOSAL HERE WOULD EXTEND
THE EXEMPTION FROM 280 FOR
LICENSED CANNABIS OPERATORS FROM
JANUARY 1ST, 2025 TO JANUARY
1ST, 2030. THERE IS NO FISCAL
IMPACT BECAUSE THE CURRENT
REVENUE FORECAST AND THE BUDGET
DO NOT ASSUMES THAT LICENSED
CANNABIS BUSINESSES WILL BE ABLE
TO CONTINUE TO USE THE STATE TAX
DEDUCTIONS AND CREDITS BEYOND
THE SUNSET DATE. THIS IS GOOD
POLICY TO ENSURE THAT PROPERLY
LICENSED CANNABIS BUSINESSES IN
THE STATE OF CALIFORNIA CAN
CONTINUE TO UTILIZE THE STATE'S
TAX DEDUCTIONS AND CREDITS. AND
WITH THAT, I'M HAPPY TO ANSWER
ANY QUESTIONS. THANK YOU. ANY
COMMENTS, ASSEMBLY MEMBER WARD
AND I HAVE NO QUESTIONS EITHER.
WE APPRECIATE YOU BEING HERE.
ANY COMMENTS FROM THE PUBLIC ON
ANY OF THOSE ITEMS? SEEING NONE.
THANK YOU SO MUCH. WE APPRECIATE
YOU BEING HERE. NEXT WE HAVE GO
BIZ AND ECONOMIC DEVELOPMENT.
AGAIN WITH ISSUE NUMBER TEN.
CALIFORNIA SMALL AGRICULTURE
BUSINESS DROUGHT AND FLOOD
RELIEF GRANT PROGRAM. OKAY.
WELCOME THANK YOU. PLEASE
INTRODUCE YOURSELF AS YOU MAKE
YOUR COMMENTS. THANK YOU, THANK
YOU, MY NAME IS PHILIP CHEN. I'M
THE BUDGET OFFICER FROM THE
GOVERNOR'S OFFICE OF BUSINESS
AND ECONOMIC DEVELOPMENT, ALSO,
GO-BIZ, AND, I CAN'T HELP YOU
WITH THE WHEELS ON THE BUS, BUT
MAYBE I CAN DO RUDOLPH IN THE
RED NOSED REINDEER, SO A COUPLE
OF HIGHLIGHTS FROM OUR
GOVERNOR'S BUDGET, THE
GOVERNOR'S BUDGET FOR 20, 24 AND
25 REFLECTS A YEAR OVER YEAR
DECREASE OF 333.8 MILLION, OR
ABOUT 56% OF OUR 20 2324 BUDGET.
OUR GENERAL FUND, IS SHRINKING
FROM 473.8 MILLION TO JUST UNDER
$181 MILLION, GENERAL FUND. SO
THAT'S A 62% REDUCTION, WE'RE
ARE, THESE TWO MODEST PROPOSALS,
INCLUDE THE $50 MILLION GENERAL
FUND FOR OUR RECAPITALIZATION OF
THE INFRASTRUCTURE STATE
REVOLVING FUND, FOR I BANK AND
ANOTHER $60 MILLION, FOR THE CAL
COMPETES GRANT PROGRAM. AND WE,
OFFSET THESE WITH, $100 MILLION
DELAY OF GENERAL FUND, FOR THE
CITY OF FRESNO'S, INFRASTRUCTURE
FUNDING. SO WE'RE TRYING TO DO A
VERY MODEST PROPOSAL HERE, TO MY
LEFT IS THE ESTEEMED, CHRIS
MISTER CHRIS EARL, DEPUTY
DIRECTOR FOR OUR OFFICE OF SMALL
BUSINESS ADVOCATE, AND HE'LL
ADDRESS SOME OF THE QUESTIONS
YOU HAD WITH THE AGRICULTURAL
BUSINESS AND DROUGHT AND FLOOD
PROGRAM. ALL RIGHT. WELCOME.
THANK YOU. THANK YOU. MADAM
CHAIR AND COMMITTEE MEMBERS, AND
THANK YOU FOR THE OPPORTUNITY TO
PRESENT ON BEHALF OF THE
CALIFORNIA OFFICE OF THE SMALL
BUSINESS ADVOCATE, WE ARE A
DIVISION WITHIN THE GOVERNOR'S
OFFICE OF BUSINESS AND ECONOMIC
DEVELOPMENT, MY NAME IS
CHRISTOPHER EARL, AS PHILIP
MENTIONED. AND I'M THE ASSISTANT
DEPUTY DIRECTOR FOR INNOVATION
AND ENTREPRENEURSHIP, AS WELL AS
THE SOUTHERN CALIFORNIA REGIONAL
ADVISOR FOR THE OFFICE, AS NOTED
IN THE COMMITTEE AGENDA, OUR
OFFICE WAS TASKED WITH CREATING
THE NEW GRANT PROGRAM CALLED THE
SMALL CALIFORNIA SMALL
AGRICULTURAL DROUGHT AND FLOOD
RELIEF PROGRAM, AND ULTIMATELY,
WE RECEIVED $95 MILLION TO FUND
DROUGHT, WHICH WAS ALLOCATED 75
OF THAT 95. AND THEN FLOOD WAS
ALLOCATED SEPARATE 20 MILLION,
WHICH MADE UP THE TOTAL 95
MILLION FOR THAT PROGRAM, AND SO
THIS WAS USED TO COVER THE COST
INCURRED BY THE BUSINESSES THAT
WERE AFFECTED BY DROUGHT, PRIOR
TO 2022, AND SO WE USED A
COMPARISON OF 2019 TAX RETURNS
AGAINST 22 TAX, 2022 TAX RETURNS
FOR THE DROUGHT PROGRAM, AS WELL
AS COVERING THE ISSUES FROM
BUSINESSES THAT WERE AFFECTED BY
FLOOD IN 2023. SO WE HAVE TWO
ESSENTIALLY PROGRAMS COMBINED
INTO ONE FOR THIS PROGRAM. SO
JUST REALLY WANTED TO HIGHLIGHT
THAT, ALSO THIS BEING THAT THIS
PROGRAM WAS DEVELOPED IN SUCH A
WAY, WE ASKED OR WE WENT AND GOT
A FISCAL THIRD PARTY FISCAL
AGENT TO ESSENTIALLY BE TASKED
WITH DISPERSING THE FUNDS FOR
THIS PROGRAM, IN ADDITION TO
THAT, THE THIRD PARTY PROVIDER
WAS TASKED WITH PROVIDING
DEVELOPING, OUTREACH, PLANNING,
AS WELL AS COMMUNICATION AND
MARKETING TO THE PUBLIC TO
ENSURE THAT THERE WAS ADEQUATE
AND EQUITABLE AWARENESS OF THE
PROGRAM SO THAT ALL ELIGIBLE
ENTITIES WOULD HAVE THE ABILITY
TO TAKE ADVANTAGE OF THE
PROGRAM. WE LAUNCHED THE
PROGRAMS, THE VARIOUS DROUGHT
AND THE DROUGHT AND FLOOD
GROUPS. IN AUGUST OF 2023, AND
SUBSEQUENT THESE DROUGHT PROGRAM
ONE AND TWO, AS WELL AS THE
FLOOD PROGRAM, GROUPS CLOSED ON
FEBRUARY THE 15TH. AND SO AT
THAT TIME, WE WERE ABLE TO FUND
AT 100% OF THE FUNDS AVAILABLE
FOR THE FLOOD PROGRAM, AND I'M
REALLY TRYING TO BE SEGMENT THIS
OUT FOR YOU ALL, AND THEN FOR
THE DROUGHT GROUP ONE, WE WERE
ABLE TO FUND OUT 93% OF THE
AVAILABLE FUNDS. AND IN YOUR
PACKAGE YOU HAVE THE EXACT
DOLLAR AMOUNTS FOR THOSE FOR
THOSE FUNDS. ALSO FOR THE
DROUGHT GROUP TWO, WE WERE ABLE
TO FUND APPROXIMATELY 78% OF THE
AVAILABLE FUNDS FOR BETWEEN
THOSE BOTH PROGRAMS. SO WE WERE
ABLE TO EXPAND ALL OF THE FLOOD
FUNDS, AND WE WERE ROUGHLY TOTAL
NORTH OF 70 ISH PERCENT TOTAL
FOR THE DROUGHT GROUPS COMBINED,
SO JUST WANTED TO HIGHLIGHT
THAT. AND ALSO IN YOUR PACKETS,
THERE IS A LIST OF PARTNERS THAT
INDUSTRY ALSO WORKED WITH IN
TERMS OF STAKEHOLDERS, REGIONAL
PARTNERS, AS WELL AS OTHER
STAKEHOLDERS WITHIN THE
AGRICULTURAL INDUSTRY. IN
ADDITION TO THAT, CAL, SBA AND
OUR THIRD PARTY FISCAL AGENT
INDUSTRY HELD MULTIPLE MEETINGS
THROUGHOUT THE PROCESS TO ENSURE
THAT WE COULD TROUBLESHOOT ANY
ISSUES, MAKE SURE THAT WE COULD
REMEDY ANY TYPE OF PROGRAMMATIC
ISSUES THAT MAY ARISE DURING
THAT TIMELINE. ALSO, CAL SBA
ADVERTISED AND COMMUNICATED WITH
VARIOUS SOURCES OF MEDIA,
INCLUDING OUR OWN SOCIAL MEDIA.
ALSO THROUGH OUR CONTRACTED
PARTNERS, TO ENSURE THAT THEY
HAD OUTREACH TO THEIR
CONSTITUENT GROUPS AS WELL. AS
OF APRIL THE 5TH, WE DID PUBLISH
OUR, AS STATUTORILY REQUIRED,
OUR 30 DAY REPORTING OF THE
SENATE AND ASSEMBLY DATA FOR
THIS PROGRAM. SO THAT IS LIVE ON
THE ON OUR WEBSITE TODAY, BUT IN
YOUR PACKETS, I DO HAVE THAT
INFORMATION AND, FOR YOU ALL AS
WELL, AND SO JUST TO GIVE YOU
GUYS JUST A QUICK INFORMATION
HERE. SO FOR IN ADDITION SO
TOTAL WE HAD 631 DROUGHT AWARDS
TOTALING 49,120,000, FOR THE
DROUGHT GROUPS ONE AND TWO.
MOVING ON TO FLOOD, WE WERE AS I
MENTIONED, THAT WAS 20 MILLION
ALLOCATED IN ALL AVAILABLE FUNDS
WERE SPENT OUT FROM THAT, SO
SUBSEQUENTLY WE HAVE A DROUGHT
ROUND THREE, SOON TO COME
AVAILABLE HERE IN MID TO LATE
MAY. AND SO THAT PROGRAM IS
ALLOCATED FOR 6.75 MILLION,
WHICH IS SET ASIDE FOR LATE
FILERS. AND SO THIS WOULD BE THE
LAST ROUND OF THIS DROUGHT AND
FLOOD AGRICULTURAL PROGRAM.
SUBSEQUENTLY, WE WILL BE ISSUING
A 45 DAY, STATUTORY REPORT,
WHICH WILL DETAIL THE AWARDEES
FROM ALL OF OUR GROUPS OF
FUNDING. AND, SORRY. AND SO WE
ARE EXPECTING TO, WITH THE FLOOD
SIDE OF IT. JUST WANTED TO MAKE
ONE LAST NOTE ON THE FLOOD
PROGRAM SIDE, WE WERE SEVERELY
OVERSUBSCRIBED. WE RECEIVED A
TOTAL OF 659 APPLICATIONS, ONCE
THOSE FUNDS WERE EXHAUSTED, WE
STILL HAD FUNDABLE APPLICATIONS
IN THE QUEUE OF ABOUT ROUGHLY
$16 MILLION IN ELIGIBLE
BUSINESSES FROM THE FLOOD SIDE,
AND FOR THIS REASON, THE FINAL
AWARDS WERE DETERMINED BY THE
APPLICATION DATE AS WELL AS THE
ELIGIBILITY OF THOSE APPLICANTS.
AND SO THANK YOU FOR THE
OPPORTUNITY TO PRESENT TODAY AND
HAPPY TO TAKE ANY QUESTIONS.
THANK YOU. ANY COMMENTS HERE. GO
AHEAD. I WAS JUST GOING TO SAY
CHARLES SAU DEPARTMENT OF
FINANCE. NO COMMENTS. ALL RIGHT,
I DO HAVE A QUESTION ON, ON THE
CURRENT STATUS STATUS OF
FUNDING. HOW MUCH HAS LNDUSTRY
BEEN PAID IN ADMINISTRATIVE
FEES, THIS IS PHILIP CHEN AGAIN,
BUDGET OFFICER, OF THE
APPROXIMATELY $4.7 BILLION IN
OVERALL GRANT PROGRAM FUNDS
ACROSS, I THINK IT WAS WE HAD
LIKE 14, 13 OR 14 CONTRACTS, AND
I THINK THERE WAS A 6 OR 7
DIFFERENT PROGRAMS, IT WAS JUST
UNDER 5% OF THE TOTAL WAS
UTILIZED FOR THE ADMINISTRATIVE
COSTS, ABOUT 4.3, TOTALING A
$201.7 MILLION. THANK YOU. AND
THEN, YOU MENTIONED IN YOUR
COMMENTS THAT YOU WENT TO THE
THIRD PARTY, WHICH IS LINDA
STREET, FOR THE APPLICATION OR
TO SELECT THE APPLICATIONS. IS
THAT TYPICAL ON OUR STATE
FUNDING THAT WE USE A THIRD
PARTY TO, TO SELECT GRANT
AWARDEES, OR IT JUST DEPENDS ON
THE I'M SORRY, CHRIS EARLE,
CARLOS VÀ, IT JUST DEPENDS ON
THE NATURE OF THE PROGRAM. AND
AND IF, IF THAT PROGRAM CALLS
FOR IT OR IN SOME CASES, THERE
MAY BE A NEED OF EXPEDIENCY IN
GETTING THE AWARDS OUT TO THE
INTENDED INDIVIDUALS. AND SO,
WHEN IT COMES TO EXPEDIENCY,
THOSE THIRD PARTIES CAN MOVE A
LITTLE BIT QUICKER IN TERMS OF
CUTTING CHECKS AND DISPERSING
FUNDS. BUT WE DO HAVE THE
LATITUDE TO DO THAT INTERNALLY
IF, IF THE SITUATION CALLS FOR
IT. OKAY. THANK YOU. ANY OTHER
QUESTIONS, SEEING NO OTHER
QUESTIONS FROM HERE. DO WE HAVE
ANY COMMENTS FROM THE PUBLIC?
HERE WE HAVE SOMEBODY COMING UP
QUICKLY. SO HI. HELLO. GOOD
AFTERNOON, JAMIE FANOUS, ON
BEHALF OF THE COMMUNITY ALLIANCE
WITH FAMILY FARMERS OR CARF, WE
REPRESENT 8000 SMALL AND
UNDERSERVED FARMERS ACROSS THE
STATE OF CALIFORNIA AND HAVE
WORKED FOR 46 YEARS TO PRESERVE
FAMILY SCALE FARMING. WE'RE
EXTREMELY GRATEFUL TO THE
COMMITTEE FOR ASKING QUESTIONS
AND BRINGING UP THIS ISSUE ITEM,
UNFORTUNATELY, THIS PROGRAM
COMPLETELY FAILED TO SERVE OUR
FARMERS, WITH MEANINGFUL RELIEF.
WE WERE DISAPPOINTED WITH THE
PROGRAM DUE TO IMPOSSIBLY
CHALLENGING APPLICATIONS,
PAPERWORK, TECHNICAL ISSUES. IN
FACT, WE WERE ONE OF THE
TECHNICAL ASSISTANCE PROVIDERS
AND DECIDED TO NO LONGER
CONTINUE TO CONTRACT WITH
INDUSTRY DUE TO THE CHALLENGES
WITH THE ADMINISTRATOR. WE
RECOMMEND THAT ANY REMAINING
FUNDS GO TO THE CDFA CUSP
PROGRAM. THE CALIFORNIA
UNDERSERVED IN SMALL PRODUCER
PROGRAM, WHICH HAS HAD A LONG
TRACK RECORD OF ACTUALLY
SUPPORTING SMALL AND UNDERSERVED
FARMERS WITH RELIEF FROM COVID
TO DROUGHTS TO FLOODS AND HOPE
CLIMATE CHANGE IS NOT STOPPING.
WE WILL CONTINUE TO HAVE THESE
EMERGENCIES AND WE'LL NEED TO
CONTINUE TO SUPPORT SMALL
BUSINESSES. SO THANK YOU VERY
MUCH. THANK YOU, ANY LAST
COMMENTS? SEEING NONE. THANK
YOU. WE APPRECIATE YOU COMING.
OKAY. OR ISSUE NUMBER 11
CALIFORNIA COMPETES TAX GRANT
PROGRAM.
OKAY WELCOME. GOOD AFTERNOON.
CHAIR MEMBERS. MY NAME IS SCOTT
DOSIK. I AM THE DEPUTY DIRECTOR
OF THE CALIFORNIA COMPETES
PROGRAMS AT THE GOVERNOR'S
OFFICE OF BUSINESS AND ECONOMIC
DEVELOPMENT. THANK YOU FOR
HAVING US HERE TODAY, I THINK
THIS PROGRAM IS NOT NEW TO THE
COMMITTEE OR TO THE MEMBERS.
IT'S BEEN AROUND FOR A FEW
YEARS. I'LL TRY AND KEEP MY
COMMENTS BRIEF, THE PROPOSAL IS
TO CONTINUE FUNDING FOR THE
CALIFORNIA COMPETES GRANT
PROGRAM FOR AN ADDITIONAL YEAR
AT A $60 MILLION LEVEL. THE
CALIFORNIA COMPETES GRANT BUILDS
ON THE SUCCESS OF THE CALIFORNIA
COMPETES TAX CREDIT PROGRAM,
WHICH HAS BEEN RECOGNIZED BY
INDEPENDENT RESEARCHERS AT UC
IRVINE AS FEATURED IN A PC
REPORT. AS GENERATING
DOCUMENTED, QUANTIFIABLE
BENEFITS OF JOB INCREASES,
LOOKING AT DIFFERENT CENSUS
TRACKS AS A DIRECT RESULT OF THE
PROGRAM, THE THING THAT MAKES
THE GRANT PROGRAM UNIQUE IS
TWOFOLD. ONE, THERE ARE
COMPANIES THAT CANNOT TAKE
ADVANTAGE OF THE TAX CREDIT
BECAUSE IT IS A NONREFUNDABLE
STATE INCOME TAX CREDIT, MEANING
IF THAT COMPANY DOES NOT HAVE
INCOME TAX LIABILITY BECAUSE
IT'S STILL IN, SAY, STARTUP
PHASE OR EXPERIENCING NET
OPERATING LOSSES, R&D CREDITS,
OTHER THINGS OF THAT NATURE,
THEY'LL NEVER BE ABLE TO TAKE
ADVANTAGE OF THE TAX CREDIT. AND
THE KEY REASON BOTH OF THESE
PROGRAMS WERE CREATED WAS TO
ENSURE THAT CALIFORNIA HAS A
TOOL IN ITS ARSENAL TO KEEP
COMPANIES IN CALIFORNIA TO KEEP
THE JOBS HERE AND TO INCENTIVIZE
THAT FULL TIME, QUALITY JOB
CREATION IN THE STATE,
ATTRACTING AND KEEPING
BUSINESSES AND THEIR JOBS. HERE
IN CALIFORNIA, THERE ARE MANY
COMPANIES THAT CANNOT TAKE
ADVANTAGE OF THE NONREFUNDABLE
CREDIT, AND THAT'S THOSE ARE THE
ONES FOR WHOM THE GRANT WAS
SPECIFICALLY TARGETED. SO
SIMULTANEOUS WITH THAT, OVER THE
LAST FEW YEARS, WE SAW THE
ADVENT OF THE CHIPS ACT AND THE
OPPORTUNITY TO LEVERAGE CAL
COMPETES TO BRING IN BILLIONS OF
DOLLARS, POTENTIALLY, OF FEDERAL
FUNDING RELATED TO SEMICONDUCTOR
RESEARCH AND DEVELOPMENT AND
MANUFACTURING HERE IN THE STATE.
SO FOR THESE REASONS, WE ARE
REQUESTING ONE YEAR ADDITIONAL
FUNDING FOR THE CAL COMPETES
GRANT PROGRAM, IN THE PAST, IT
WAS AT 120 MILLION. WE'RE
REQUESTING 60 MILLION THIS YEAR.
AVAILABLE TO ANSWER ANY
QUESTIONS. THANK YOU, THANK YOU.
WELL IN LIGHT OF THE BUDGET
PROBLEMS FACED BY THE STATE, WE
THINK IT'S PRUDENT TO LIMIT ANY
AUGMENTATIONS IN THE BUDGET, TO,
SUPPORTING PROVEN MEANS OF
CARRYING OUT THE STATE'S CORE
RESPONSIBILITIES OR MEETING
CRITICAL HEALTH AND SAFETY
NEEDS. AND, NOTWITHSTANDING THE
POTENTIAL MERITS OF THIS
PROPOSAL, IT'S OUR ASSESSMENT
THAT IT DOESN'T KIND OF RISE TO
THE LEVEL OF THAT CRITERIA TO
SUPPORT, ADDITIONAL FUNDING IN
THE CURRENT BUDGET ENVIRONMENT.
BUT, WE DO RECOGNIZE THAT THERE
HAS BEEN SOME, FAIRLY GOOD
RESEARCH ON THE TRADITIONAL CAL
COMPETES TAX CREDIT PROGRAM THAT
DOES SUPPORT, APPEAR TO SUPPORT
ITS, ITS EFFICACY, BUT WE WOULD
NOTE THAT THIS, THE CAL GRANT
PROGRAM IS A MORE KIND OF RECENT
EXPANSION OF THE TRADITIONAL TAX
CREDIT PROGRAM, AND IT DIFFERS
FROM IT IN KEY WAYS THAT WE
THINK, MEANS THAT YOU CAN'T
NECESSARILY, APPLY THAT PAST
RESEARCH ON THE TAX CREDIT
PROGRAM TO THE GRANT PROGRAM AND
ASSUME IT WILL ACHIEVE THE SAME
RESULTS. WE DON'T YET HAVE ANY,
OUTCOME DATA ON THE FIRST THREE
ROUNDS OF THE GRANTS. AND SO
WHILE OVER THE PAST FEW YEARS,
GIVEN THE PRIOR BUDGET
ENVIRONMENT, IT MAY HAVE MADE
SENSE TO ALLOCATE FUNDING TO
TEST OUT THAT EXPANSION, WE
THINK GIVEN THE CHANGE IN
ENVIRONMENT, IT'S NO LONGER
PRUDENT TO ALLOCATE ADDITIONAL
FUNDING IN THIS AREA FOR. THAT
BEING SAID, WE DO RECOGNIZE THAT
THERE COULD BE CONCERN THAT
WITHOUT THE GRANT FUNDS, THAT
THE STATE MAY POTENTIALLY MISS
OUT ON CHIPS, X CHIP, X CHIPS
ACT PROJECTS, YOU KNOW, WE WOULD
POINT OUT THAT THERE ARE
POTENTIALLY OTHER AVENUES THAT
THE STATE, CAN AND WE KNOW THE
ADMINISTRATION IS EXPLORING TO
DRAW THOSE, THOSE PROJECTS IN
COULD THAT COULD BE THE
TRADITIONAL CAL COMPETES TAX
CREDIT PROGRAM OR POTENTIALLY
R&D CREDITS, OR THE NEW
EMPLOYMENT TAX CREDIT, AMONG
OTHER OPTIONS, THERE ARE SOME
POTENTIAL THAT THAT PERHAPS
THOSE WON'T, YOU KNOW, THERE MAY
BE A PROJECT THAT COULD
POTENTIALLY SLIP THROUGH THE
CRACKS IF WE CAN'T PUT TOGETHER
ENOUGH INCENTIVES THROUGH THOSE
EXISTING TOOLS, ONE OPTION, THE
LEGISLATURE COULD CONSIDER IF
IT'S CONCERNED ABOUT THAT
POTENTIAL, WOULD ESSENTIALLY TO
BE PROVIDE BASICALLY A MECHANISM
, POTENTIALLY THROUGH BUDGET
BILL LANGUAGE FOR THE
ADMINISTRATION TO COME BACK AND,
AND REQUEST FUNDING FOR CHIPS
ACT PROJECT FOR CAL COMPETES
GRANTS, IF THEY CAN DEMONSTRATE
TO THE JLBC THAT THEY HAVE
EXHAUSTED ALL OTHER POTENTIAL
EXISTING OPPORTUNITIES TO
PROVIDE INCENTIVES TO A PROJECT,
AND THEY REALLY NEED THE GRANTS
FOR THAT, THAT, THAT MEANS, ANY
OTHER COMMENTS? ASSEMBLYMEMBER'S
BOARD. NO. THANK YOU FOR
BRINGING THIS ITEM FORWARD. AND
I GUESS BASED ON SOME OF THE
LEO'S OBSERVATIONS, I WOULD
SHARE THOSE CONCERNS AS WELL,
MAYBE TO A POINT OF QUESTION
THREE, ACTUALLY. ONE, WHAT ARE
SOME RESOURCES YOU MENTIONED,
INDEPENDENT RESEARCH. IS THERE
OTHER DATA THAT WE COULD
RESEARCH INTO TO SORT OF
UNDERSTAND THE EFFECTIVENESS OF
THE CAL COMPETES PROGRAMS? SURE
AGAIN, SCOTT DISICK WITH CAL
COMPETES AT GÓMEZ, ASSEMBLY
MEMBER WOULD BE HAPPY TO SEND
YOU THE LINKS. WE COULD SEND
THOSE OVER TO YOU TODAY. THERE
WAS A PC REPORT THAT CAME OUT
JUST IN THE LAST COUPLE OF
MONTHS, AND IT BUILDS OFF OF A
REPORT THAT WAS DONE BY THE èC.
èC IRVINE, WHICH PUBLISHED A
REPORT A MULTI YEAR STUDY THAT
THEY PERFORMED, LOOKING AT THE
DIRECT IMPACTS OF CAL COMPETES
ON JOB CREATION. OKAY, OKAY.
THAT WOULD BE GOOD TO SEE. AND
THEN THERE WAS A $10 MILLION IN
SAVINGS FROM LAST YEAR. I'M
READING THAT AS WAS NOT SPENT.
SO PHÐ Y, BUT WE WANT TO ENHANCE
THIS WITH ANOTHER 50 MILLION ON
TOP OF THAT. SO WHAT IS HOW CAN
WE BE ASSURED IF, WE'RE PUTTING
BUDGET OUT THERE, THAT IT WOULD
BE EFFECTIVELY USED? SURE. THANK
YOU SO MUCH FOR THAT QUESTION
AGAIN, SCOTT. THE LAST THREE
YEARS, WE HAD $120 MILLION
APPROPRIATION FOR THE GRANTS
PROGRAM. IN EACH OF THOSE YEARS,
WE RECEIVED BILLIONS OF DOLLARS
B WITH BILLIONS WITH A B OF
DOLLARS IN GRANT APPLICATIONS.
WE HAVE A VERY RIGOROUS
APPLICATION REVIEW PROCESS WHERE
WE ENSURE ONLY THE MOST
COMPETITIVE APPLICANTS ARE THE
ONES THAT MOVE FORWARD
THROUGHOUT THE PROCESS AND
EVENTUALLY ARE RECOMMENDED FOR
AN AWARD AT THE LAST MINUTE.
DURING THE LAST ROUND, WE HAD
ONE COMPANY WITH A RECOMMENDED
$10 MILLION AWARD WITHDRAW ITS
APPLICATION FOR CONSIDERATION
THÀNH, AND AS A RESULT, THAT $10
MILLION WAS OUT THERE. INSTEAD
OF HAVING AN INEFFECTIVE
APPLICATION PROCESS FOR I KNOW
IT SOUNDS WEIRD TO SAY ONLY $10
MILLION, BUT FOR ONLY 10 MILLION
WE HELD IT BACK. AND SO INSTEAD
OF REQUESTING A $60 MILLION
APPROPRIATION, IT'S THE 50
MILLION PLUS THE TEN THAT WAS
NOT AWARDED. GOT IT. SO THAT WAS
A KIND OF AN ODD CIRCUMSTANCE.
CORRECT? I'LL LOOK FORWARD TO
THOSE LINKS COMING OVER. BUT ON
THE ON THE FLY HERE, CAN YOU
SORT OF ARTICULATE SOME OF THE
METRICS THAT YOU'RE USING TO
DEFINE SUCCESS? SURE, WHEN SO
THE BOTH THE GRANT AND THE TAX
CREDIT HAVE ROUGHLY THE SAME
EVALUATION CRITERIA. THERE ARE
ADDITIONAL CRITERIA FOR THE
GRANT PROGRAM. LOOKING
SPECIFICALLY AT THE COMPANY'S
INABILITY TO BE ABLE TO USE THE
NON REFUNDABLE TAX CREDIT, IF
THEY CAN USE THE TAX CREDIT, WE
DIRECT THEM TO APPLY IN THAT THE
METRICS FOR SUCCESS REALLY BUILD
ON THE EVALUATION CRITERIA
FIRST. AND WHILE WE HAVE A LOT
OF CRITERIA LOOKING AT THE
NUMBER OF FULL TIME JOBS BEING
CREATED, THE WAGES ARE GOING TO
PAY THEIR FULL TIME EMPLOYEES.
YOU KNOW, THE RELEVANCE OF THOSE
WAGES TO THE REGION IN WHERE
THEY'RE PROPOSING THE JOB
GROWTH, THE CAPITAL INVESTMENTS,
THE ECONOMIC BENEFIT, THE
INCENTIVES BEING OFFERED BOTH IN
CALIFORNIA AND FROM OUTSIDE
COMPETITOR STATES, TRYING TO
STEAL OUR BUSINESSES AWAY. THE
ULTIMATE SUCCESS IS MEASURED IN
THAT EACH OF THESE COMPANIES
SIGNS A FIVE YEAR CONTRACT THAT
LAYS OUT THEIR MILESTONES OVER A
FIVE YEAR PERIOD, AND THE AMOUNT
OF EITHER TAX CREDIT OR GRANT
THAT THEY WILL RECEIVE EACH YEAR
IF THEY ACHIEVE THOSE
CONTRACTUAL MILESTONES, WHICH
ARE THE NUMBER OF FULL TIME JOBS
CREATED, THE WAGES THAT THEY
COMMITTED TO IN THE APPLICATION,
AND THE CAPITAL INVESTMENTS. IF
THEY DO NOT ACHIEVE THOSE
MILESTONES, THEY DO NOT GET THE
CREDIT OR THE CORRELATED AMOUNT
OF CREDIT. EXCUSE ME, CREDIT OR
GRANTS ASSOCIATED WITH THOSE
MILESTONES. WE ALSO HAVE THE
FRANCHISE TAX BOARD, WHICH IS IN
CHARGE OF THE ENFORCEMENT OF
THIS PROGRAM, WHICH FOR BOTH
PROGRAMS CONDUCTS A RIGOROUS WE
DON'T CALL IT AN AUDIT. IT'S A
BOOKS AND RECORDS REVIEW, A VERY
RIGOROUS BOOKS AND RECORDS
REVIEW WHERE THEY VALIDATE THE
INFORMATION PROVIDED BY THE
APPLICANT, BOTH DURING THE
APPLICATION AND DURING
SUBSEQUENT EACH OF THE FIVE
YEARS OF REPORTING DURING THE
CONTRACTUAL PERIOD. BUT IT
REALLY COMES DOWN TO IF YOU
DON'T CREATE THE JOBS, YOU DON'T
GET IT. OKAY. THANK YOU. THANK
YOU SIR, I DID ASK FOR SOME MORE
INFORMATION. WE'LL MAKE SURE YOU
GET THIS ASSEMBLYMEMBER'S AWARD
OF WHERE THESE GRANTS WERE
AWARDED. SO AS YOU AWARD THESE
GRANTS, DO YOU HAVE A CRITERIA
OR, METRICS THAT SHOW REGIONALLY
WHERE THEY'RE GOING, WHETHER
IT'S NORTHERN CALIFORNIA,
SOUTHERN CALIFORNIA, OR IS IT IS
THAT A CONSIDERATION AT ALL? SO
ONE OF OUR PRIMARY, ONE OF THE
MANY PRIMARY THINGS THAT WE LOOK
AT DURING THE APPLICATION, YOU
KNOW, FIRST AND FOREMOST, ARE
THESE JOBS AT RISK FOR NOT BEING
CREATED IN CALIFORNIA? AND DID
THE COMPANY ACTUALLY DOCUMENT
YOU KNOW, DEMONSTRATE THAT THESE
JOBS ARE TRULY AT RISK FOR
LEAVING THE STATE? WE ALSO ARE
LOOKING AT THE EXTENT OF
UNEMPLOYMENT AND POVERTY IN THE
REGION WHERE THE JOBS ARE BEING
CREATED, AND IF THOSE JOBS ARE
BEING CREATED IN AN AREA WHERE
THE UNEMPLOYMENT OR POVERTY RATE
IS 150% OR MORE THAN THE
STATEWIDE AVERAGE, THEY RECEIVE
A PRIORITY IN THE REVIEW
PROCESS. THANK YOU. BECAUSE JUST
WHEN I'M LOOKING AT THIS, IT
DOESN'T NECESSARILY, WHEN YOU
SAY POVERTY, I'M NOT SEEING SOME
OF THE COMMUNITIES ON THERE THAT
I WOULD THINK THAT WOULD SHOW
THAT. BUT AGAIN, THERE'S
PROBABLY MORE INFORMATION THAT I
DON'T HAVE IN FRONT OF ME. SO
AND THE CHALLENGE, OF COURSE,
THAT WE HAVE IS WHILE WE WOULD
LOVE TO GET MANY BUSINESSES
MOVING TO AREAS OF THE STATE
THAT COULD BENEFIT MOST, THERE
ARE CERTAIN TYPES OF BUSINESSES
THAT HAVE ALREADY DECIDED THE
GENERAL GEOGRAPHY OF WHERE
THEY'RE GOING TO BE, EITHER IN
CALIFORNIA OR OUTSIDE OF
CALIFORNIA, BUT PART OF THE
CONVERSATION THAT WE HAVE WITH
THEM THROUGHOUT THE PROCESS IS
IF A COMPANY, SAY, IN A MORE
EXPENSIVE PART OF CALIFORNIA,
THE COASTAL AREAS SAYS WE'RE
THINKING ABOUT LEAVING BECAUSE
IT'S CHEAPER TO OPERATE IN
ARIZONA, NEVADA, OR, GOD FORBID,
TEXAS. THE CONVERSATION WE'LL
HAVE WITH THEM IS YOU DON'T HAVE
TO LEAVE CALIFORNIA TO SAVE ON
OPERATIONAL COSTS. YOU MOVE A
LITTLE FURTHER EAST, LOOK AT THE
CENTRAL VALLEY, LOOK AT THE
INLAND EMPIRE, LOOK AT IMPERIAL.
YOU CAN SAVE SIGNIFICANTLY ON
LABOR AND REAL ESTATE. AND WE
HAVE THE CALIFORNIA COMPETES
PROGRAMS TO HELP LEVEL THAT
PLAYING FIELD AS WELL. ALL
RIGHT. THANK YOU. ANY OTHER
COMMENTS, ANY COMMENTS FROM THE
PUBLIC? MADAM CHAIR MEMBERS,
SARAH PHLOX FROM THE CALIFORNIA
LABOR FEDERATION, AND I JUST
WANTED TO MAKE CLEAR THAT WE'RE
NOT COMMENTING ON THE BUDGET
ALLOCATION OR APPROPRIATION OF
LEAVING THAT UP FOR THE
LEGISLATURE, BUT WE DID HAVE
COMMENTS ABOUT THE CALIFORNIA
COMPETES, BOTH TAX CREDIT AND
GRANT PROGRAM. WE WERE INVOLVED
IN THE CREATION OF THIS PROGRAM
OUT OF THE ENERGY ENTERPRISE
ZONE PROGRAM TEN YEARS AGO, AND
DO THINK THAT IT IS TIME FOR AN
UPDATE, WE DO KNOW THAT THERE IS
GUARDRAILS FOR NET NEW JOB
CREATION, AND THERE IS
TRANSPARENCY INTO WAGES. I THINK
MAYBE NOW IS THE TIME THAT WE
LOOK AT MAKING SURE THAT THESE
ARE THE HIGHEST QUALITY JOBS AND
HAD MORE TRANSPARENCY THAT'S
AVAILABLE TO THE PUBLIC ON THE
METRICS THAT ARE USED, THERE IS
INFORMATION THAT THE PUBLIC CAN
GET BEFORE THE BOARD MEETINGS,
WE WOULD LIKE TO GET THAT
INFORMATION MORE IN ADVANCE. SO
WE HAVE SOME TIME TO STUDY IT TO
GET SOME MORE GRANULAR
INFORMATION ON WHAT WAGES ARE
ACTUALLY PAID, AND ALSO AN
EXPLANATION OF ACCORDING TO THE
CRITERIA THAT IS IN LAW AND
REGULATIONS. HOW ARE DECISIONS
MADE TO MAKE AWARDS OF THE TAX
CREDITS AND GRANTS ACCORDING TO
THAT CRITERIA? I THINK THOSE
UPDATES WOULD GIVE MORE
TRANSPARENCY, MORE PUBLIC
PARTICIPATION, IN BOTH SIDES OF
THE PROGRAM. THANK YOU. THANK
YOU. APPRECIATE THOSE COMMENTS.
THANK YOU FOR SPEAKING TO US
TODAY. APPRECIATE IT. AND WE'RE
GOING TO OUR NEXT ITEM, WHICH.
WHICH IS ITEM NUMBER 12, THE
INFRASTRUCTURE STATE REVOLVING
FUND. THANK YOU. AND WELCOME.
GOOD AFTERNOON. I'M CLINT KELLUM
. I'M THE CHIEF DEPUTY EXECUTIVE
DIRECTOR OF THE CALIFORNIA
INFRASTRUCTURE AND ECONOMIC
DEVELOPMENT BANK, OR IBANK.
IBANK IS PART OF THE GOVERNOR'S
BUSINESS OF ECONOMIC DEVELOPMENT
AGENCY, AND WE SERVE AS THE
STATE'S ONLY GENERAL PURPOSE
FINANCING AUTHORITY. OUR MISSION
IS TO PROVIDE FINANCIAL
ASSISTANCE AND SUPPORT
INFRASTRUCTURE AND ECONOMIC
DEVELOPMENT IN CALIFORNIA. WE DO
THIS IN ALIGNMENT WITH OUR THREE
TOP PRIORITIES CREATING JOBS,
ENSURING INCLUSIVITY INTO OUR
PROGRAMS, AND ADDRESSING CLIMATE
CHANGE. STAFF DID A NICE JOB
SUMMARIZING A PROPOSAL ON THE
AGENDA, AND I'D LIKE TO OFFER A
FEW SUPPLEMENTS TO THAT
INFORMATION. ONE OF THE BANK'S
FLAGSHIP FINANCING PROGRAMS IS
OUR MUNICIPAL LENDING PROGRAM,
THE INFRASTRUCTURE STATE
REVOLVING FUND, WHICH WAS
ESTABLISHED 25 YEARS AGO AND
RECEIVED INITIAL STATE FUNDING
OF $162 MILLION FROM THE GENERAL
FUND. THIS HAS BEEN THE STATE'S
ONLY INVESTMENT IN THE PROGRAM
TO DATE. THE IMPORTANCE OF
FINANCING INFRASTRUCTURE IS
UNDENIABLE, AND I BANK'S
INFRASTRUCTURE LOAN PROGRAM
PLAYS AN IMPORTANT ROLE IN
HELPING MUNICIPALITIES IN A
RANGE OF CRITICAL INFRASTRUCTURE
PROJECTS, INCLUDING WATER,
SEWER, TRANSPORTATION AND ENERGY
. SINCE THE PROGRAM'S INCEPTION,
IBANK HAS ISSUED 146
INFRASTRUCTURE LOANS ACROSS THE
STATE, PRIMARILY TO CALIFORNIA'S
SMALL AND MEDIUM SIZED CITIES,
COUNTIES, AND SPECIAL DISTRICTS
TO FINANCE PROJECTS RANGING FROM
ROADS AND MUNICIPAL UTILITIES TO
THE IMPROVEMENT OF PORT
FACILITIES AND AIRPORTS. THE
AVERAGE LOAN SIZE IS AROUND $7
MILLION, WITH OUR SMALLEST LOAN
AT ABOUT 500,000 AND OUR LARGEST
SET AT 40 MILLION IN THE LAST 25
YEARS, IBANK HAS LEVERAGED THE
INITIAL 162 MILLION FROM THE
STATE SIX TIMES TO FINANCE MORE
THAN 1 BILLION IN MUNICIPAL
INFRASTRUCTURE PROJECTS. IT'S
NOW 25 YEARS LATER. SUCCESS HAS
LED US TO THE POINT WHERE THE
PROGRAM IS APPROACHING THE
LIMITS OF AVAILABLE LEVERAGE
FROM THE ORIGINAL GENERAL FUND
ALLOCATION. CONSEQUENTLY IBANK
IS REQUESTING A $50 MILLION, ONE
TIME GENERAL FUND APPROPRIATION
IN 2425 TO CONTINUE FUNDING
THESE PROJECTS AT AFFORDABLE
INTEREST RATES FOR THOSE
MUNICIPALITIES THAT ARE UNABLE
TO SELF-FUND THEIR PROJECTS AND
UNABLE TO ACCESS THE BOND
MARKETS THEMSELVES. THANK YOU
FOR YOUR TIME AND I LOOK FORWARD
TO ANSWERING ANY QUESTIONS YOU
HAVE. THANK YOU. BRIAN EULALIO
OUR COMMENTS ON THIS ITEM ARE
PRETTY SIMILAR TO THE LAST ITEM.
NOTWITHSTANDING SOME OF THE
POTENTIAL MERITS OF THE
PROPOSAL, WE THINK GIVEN THE
CURRENT BUDGET ENVIRONMENT, IT
THE AUGMENTATION CAN'T BE
JUSTIFIED, OUR UNDERSTANDING IS,
THE ADDITIONAL, 50, $50 MILLION
WOULD ALLOW THE PROGRAM TO
CONTINUE RUNNING COMPLETELY
SMOOTHLY. BUT, WITHOUT THE 50
MILLION, WE UNDERSTAND THEY
COULD, THAT IBANK WOULD BE ABLE
TO CONTINUE RUNNING THE PROGRAM,
ALBEIT SOMEWHAT SUBOPTIMALLY,
MAYBE, YOU KNOW, SOMEWHAT LESS
FAVORABLE RATES, FOR THE LOCAL,
PARTICIPANTS, AND IN OUR VIEW,
THAT DOESN'T KIND OF QUITE RISE
TO THE LEVEL OF JUSTIFYING THE
AUGMENTATION. AGAIN IN THIS
TIGHT BUDGET ENVIRONMENT. OKAY.
THANK YOU. CHARLES LÀ SAU
DEPARTMENT OF FINANCE. I'LL JUST
REITERATE THAT THIS INVESTMENT
WILL ALLOW THE ISSF TO CONTINUE
OPERATIONS AT THE EXISTING
CURRENT SERVICE LEVEL. THIS
AUGMENTATION WILL PROVIDE
SUFFICIENT RESOURCES FOR IBANK
TO CONTINUE PROVIDING LOANS TO
LOCAL MUNICIPALITIES FOR
CRITICAL INFRASTRUCTURE PROJECTS
THAT MAY OTHERWISE NOT HAVE
ACCESS TO CAPITAL, AS WELL AS
PROVIDING THESE AT PREFERRED
INTEREST RATES. THANK YOU FOR
THAT. ARE THERE ANY MEMBERS OF
THE PUBLIC ON THIS ITEM? SEEING
NONE, I WONDERED IF THERE WAS
ANY MORE DIRECT RESPONSE, I
GUESS, WHY THE NEED FOR
ADDITIONAL FUNDING IF YOU'RE
ONLY TRYING TO MAINTAIN EXISTING
SERVICE LEVELS? SO THE POINT HAS
BEEN THAT THE STATE HASN'T
INVESTED IN THE PROGRAM IN ABOUT
25 YEARS BEYOND THAT 162
MILLION. AND WE'VE TAKEN THAT
AND LEVERAGED IT TO A POINT AT
WHICH NOW WE'VE REACHED, WHERE
WE THINK WE COULD HARM THE SORT
OF, ECONOMY OF SCALE OF THE
PROGRAM AND THE BENEFICIAL RATES
WE CAN OFFER WITHOUT AN
ADDITIONAL EQUITY INVESTMENT IN
THE PROGRAM. AND SO WE'RE HERE
TODAY. IT'S SOMETHING WE'VE BEEN
MONITORING OVER THE YEARS, BUT
WE ONLY WANTED TO COME BEFORE
THE LEGISLATURE AND REQUEST
ADDITIONAL FUNDS WHEN WE TRULY
HAD A NEED. THE UNFORTUNATE PART
IS THE TIMING IS NOT IDEAL. AND
SO THAT'S, YOU KNOW, CONSISTENT
WITH THE DEPARTMENT OF FINANCE'S
COMMENTS HERE. YOU KNOW, WE'RE
REQUESTING THESE FUNDS TO
MAINTAIN THE SERVICE LEVEL THAT
ALLOWS US TO HAVE A TRIPLE A
BOND AND HAVE THAT PORTFOLIO
THAT HAS YOU KNOW, SOME BIGGER
HIGH CREDIT COUNTIES THAT HELP
THE SMALLER MUNICIPALITIES THAT
COULDN'T ACCESS THE BOND MARKET
OR MAYBE AT UNFAVORABLE RATES.
OKAY. THANK YOU FOR THAT. WE'LL
TAKE THAT UNDER CONSIDERATION,
APPRECIATE THIS ITEM TODAY.
THANK YOU. WE'LL MOVE ON TO
ISSUE NUMBER 13. THIS IS THE
DEPARTMENT OF FINANCIAL
PROTECTION AND INNOVATION. LET
EVERYBODY RESET.
GOOD AFTERNOON. WHAT'S UP?
EVERYBODY GETS SETTLED. GOOD
AFTERNOON. ARE YOU READY TO
BEGIN? ALL RIGHT. THANK YOU.
GOOD AFTERNOON, CHAIR MEMBERS.
MY NAME IS SOPHIA SMITH, AND I
AM THE DEPUTY COMMISSIONER OF
ADMINISTRATION AT THE DEPARTMENT
OF FINANCIAL PROTECTION AND
INNOVATION, WHERE WE ARE FOCUSED
ON PROTECTING CONSUMERS AND
FOSTERING RESPONSIBLE INNOVATION
IN THE FINANCIAL MARKETPLACE.
WITH ME TODAY ARE KHALIL
MOHSENI, CHIEF DEPUTY
COMMISSIONER, AVI MALEK, OUR
GENERAL COUNSEL NICOLE HISATOMI,
OUR DEPUTY COMMISSIONER OF
LEGISLATION, SUZANNE MARTINDALE,
SENIOR DEPUTY COMMISSIONER OF
CONSUMER FINANCIAL PROTECTION,
MELINDA LEE, DEPUTY COMMISSIONER
OF DEBT COLLECTORS. AND MICHAEL
NELSON, OUR ACTING DEPUTY
COMMISSIONER OF BROKER DEALER
INVESTMENT ADVISORS. HE'S
SITTING RIGHT HERE NEXT TO ME,
THE DFP IS RESPONSIBLE FOR
SAFEGUARDING CONSUMER RIGHTS AND
ENSURING FINANCIAL STABILITY. WE
OVERSEE A VARIETY OF FINANCIAL
SERVICES, PRODUCTS AND
PROFESSIONALS. THE DEPARTMENT
REGULATES STATE LICENSED
FINANCIAL INSTITUTIONS SUCH AS
BANKS, CREDIT UNIONS, MONEY
TRANSMITTERS AND PREMIUM FINANCE
COMPANIES BY CLOSELY MONITORING
THEIR OPERATIONS, THE DFP
PROMOTES COMPLIANCE WITH STRICT
STANDARDS, THEREBY BUILDING
TRUST AND CONFIDENCE AMONG
CONSUMERS. ADDITIONALLY, THE DFP
EXTENDS ITS EXTENDS ITS
REGULATORY REACH TO INCLUDE
VARIOUS FINANCIAL BUSINESSES
LIKE SECURITIES BROKERS AND
DEALERS, INVESTMENT ADVISERS AND
PROVIDERS OF DEFERRED DEPOSIT
SERVICES, COMMONLY KNOWN AS
PAYDAY LOANS. THROUGH LICENSING
AND REGULATION, THE DEPARTMENT
UPHOLDS INDUSTRY STANDARDS,
PROMOTES ETHICAL CONDUCT, AND
PROTECTS VULNERABLE CONSUMERS
AGAINST PREDATORY PRACTICES. THE
DFP ALSO PLAYS A CRUCIAL ROLE IN
REGULATING THE OFFER AND SALE OF
SECURITIES. FRANCHISES AND OFF
EXCHANGE COMMODITIES BY
ENFORCING REGULATIONS IN THESE
AREAS, THE DEPARTMENT ENSURES
INVESTOR PROTECTION, THÀNH,
PROMOTES MARKET INTEGRITY AND
CREATES A LEVEL PLAYING FIELD
FOR ALL PARTICIPANTS. LASTLY,
THE CALIFORNIA CONSUMER
FINANCIAL PROTECTION LAW
REPRESENTS A LANDMARK EXPANSION
OF THE DFP OVERSIGHT
CAPABILITIES, AIMING TO BOLSTER
CONSUMER PROTECTION, THÀNH
FOSTER RESPONSIBLE FINANCIAL
INNOVATION AND STIMULATE JOB
GROWTH. THIS LEGISLATION MARKS A
SIGNIFICANT MILESTONE IN THE
HISTORY OF THE DFP, GRANTING IT
UNPRECEDENTED AUTHORITY TO
REGULATE PREVIOUSLY UNREGULATED
SECTORS BY ALLOWING REGULATION
BY ACTIVITY. INSTEAD OF A
LICENSED CATEGORY. EXAMPLES OF
THESE INDUSTRIES INCLUDE DEBT
COLLECTION, DEBT RELIEF
SERVICES, CREDIT REPORTING
AGENCIES, AND CREDIT REPAIR
COMPANIES. AS WE NAVIGATE THE
COMPLEXITIES OF OUR FINANCIAL
LANDSCAPE, THE DFP SERVES AS A
BEACON OF ACCOUNTABILITY,
TRANSPARENCY, AND CONSUMER
EMPOWERMENT BY UPHOLDING THE
HIGHEST STANDARDS OF REGULATORY
OVERSIGHT. THE DEPARTMENT NOT
ONLY PROTECTS CONSUMERS
INTERESTS, BUT ALSO FOSTERS A
ROBUST AND RESILIENT FINANCIAL
MARKETPLACE FOR THE BENEFIT OF
ALL STAKEHOLDERS. WE HAVE, THREE
BC IN THE GOVERNOR'S PROPOSED
BUDGET, BUT I'LL MOVE TO ITEM
NUMBER 13, WHICH IS THE BROKER
DEALER INVESTMENT ADVISOR
WORKLOAD UNDER THE CORPORATE
SECURITIES LAW OF 1968, THE
BROKER DEALER INVESTMENT ADVISOR
PROGRAM IS RESPONSIBLE FOR
LICENSING AND REGULATING BROKER
DEALERS, BROKER DEALER AGENTS,
INVESTMENT ADVISORS AND
INVESTMENT ADVISOR
REPRESENTATIVES. DFP HAS A
DRIVER OF A NEW WORKLOAD IN THIS
PROGRAM. IMPLEMENTATION AND
MONITORING OF NEW ANNUAL
INVESTMENT ADVISOR
REPRESENTATIVE. CONTINUING
EDUCATION REQUIREMENTS. WITH
$456,000 IN FISCAL YEAR 24, 25
AND 432,000. IN FISCAL YEAR
2526, AND TWO POSITIONS, THE
DEPARTMENT WILL ENSURE
INVESTMENT ADVISOR
REPRESENTATIVES MAINTAIN THEIR
LEVEL OF KNOWLEDGE AND
COMPETENCE AND COMPLY WITH THE
CONTINUING EDUCATION
REQUIREMENTS AND THE PROGRAM
AIMS TO PROTECT CONSUMERS BY
ENSURING THAT INVESTMENT ADVISOR
REPRESENTATIVES ADHERE TO THE
HIGHEST STANDARDS OF KNOWLEDGE
AND COMPETENCE, REDUCING THE
RISK OF MISCONDUCT OR INADEQUATE
FINANCIAL ADVICE. THANK YOU,
MEMBERS OF THE COMMITTEE, FOR
YOUR TIME AND PATIENCE. PLEASE
LET US KNOW IF YOU HAVE ANY
QUESTIONS. THANK YOU VERY MUCH.
ANY COMMENTS FROM LIU JARED
SIPPEL WITH THE LÀ? NO COMMENTS.
THANKS GREAT. THANK YOU VERY
MUCH. AMY ASENSIO DEPARTMENT OF
FINANCE NO COMMENT. THANK YOU
VERY MUCH. ANY MEMBERS OF THE
PUBLIC WISHING TO COMMENT ON
THIS ITEM? OKAY. SEEING NONE
VERY STRAIGHT FORWARD. HAVE NO
QUESTIONS. THANK YOU. YOU NEXT
YOU ALSO HAVE ISSUE NUMBER 14.
YES THANK YOU. JOINING TO MY
RIGHT IS SENIOR DEPUTY
COMMISSIONER SUZANNE MARTINDALE.
CONTINUATION OF CALIFORNIA
CONSUMER FINANCIAL PROTECTION,
ASSEMBLYWOMAN LEMONS ASSEMBLY
BILL 1864 PASSED IN 2020, WHICH
HAS SIGNIFICANTLY BROADENED THE
STATE'S CAPABILITY TO SAFEGUARD
CALIFORNIANS AGAINST ABUSIVE AND
PREDATORY FINANCIAL PRODUCTS AND
SERVICES. WITH $14 MILLION IN
EXPENDITURE AUTHORITY FOR 55
POSITIONS, THE DEPARTMENT WILL
CONTINUE TO STRENGTHEN THE
STATE'S ABILITY TO OVERSEE AND
REGULATE FINANCIAL PRODUCTS AND
SERVICES TO ENSURE COMPLIANCE
WITH THE CALIFORNIA CONSUMER
FINANCIAL PROTECTION LAW, WE
WILL SAFEGUARD CALIFORNIA FROM
ABUSIVE AND PREDATORY PRACTICES
WITHIN THE FINANCIAL INDUSTRY
AND PROMOTE CONSUMER PROTECTION
AND FINANCIAL WELL-BEING. WE
WILL CONTINUE ROBUST EDUCATION
AND OUTREACH PROGRAMS AIMED AT
INCREASING CONSUMER AWARENESS
AND FINANCIAL LITERACY,
EMPOWERING INDIVIDUALS TO MAKE
INFORMED DECISIONS AND RESIST
PREDATORY PRACTICES BY EQUIPPING
CALIFORNIANS WITH THE KNOWLEDGE
AND TOOLS THEY NEED TO NAVIGATE
THE FINANCIAL LANDSCAPE
EFFECTIVELY, WE CAN STRENGTHEN
THEIR ABILITY TO PROTECT
THEMSELVES FROM EXPLOIT ATION.
THANK YOU, MEMBERS OF THE
COMMITTEE, FOR YOUR TIME AND
PATIENCE. PLEASE LET US KNOW IF
YOU HAVE ANY QUESTIONS. THANK
YOU. NO COMMENTS. ANY COMMENTS
FROM MEMBERS OF THE PUBLIC ON
THIS ITEM? OKAY. SEEING NONE,
JUST A COUPLE OF QUESTIONS. ON
BEHALF OF OUR CHAIR, LET'S START
WITH AN UPDATE ON THE FEE STUDY.
DO YOU HAVE ANY, KNOWLEDGE OF
THAT TODAY? THANK YOU. ASSEMBLY
MEMBER I CAN TAKE THAT QUESTION
VERY BRIEFLY. WE ARE IN THE
MIDDLE OF CONDUCTING A 360 FEE
STUDY TO ENSURE THAT PROGRAMS
ACROSS THE DEPARTMENT ARE
SUPPORTING THEMSELVES, AND THAT
WORK IS ONGOING. WE'RE HAPPY TO
PROVIDE AN UPDATE WHEN THAT
STUDY IS DONE. OKAY. AND THEN
WE'RE REQUESTING FOR A NUMBER OF
55 ADDITIONAL POSITIONS AND THE
FUNDS THAT IT WOULD TAKE TO GET
THERE. WHEN WOULD YOU ANTICIPATE
THAT KFPL WOULD BE
SELF-SUFFICIENT? WELL, I DO WANT
TO CLARIFY FOR THE ROOM THAT WE
ARE ASKING FOR A CONTINUATION OF
THE 55 POSITIONS THAT WE ALREADY
HAVE, NOT AN INCREASE. NOT AN
INCREASE. THIS IS FLAT
HEADCOUNT, JUST A LITTLE BY WAY
OF BRIEF LEGISLATIVE HISTORY,
BACK IN 2020, THE LEGISLATURE
AND THE GOVERNOR AGREED ON THE
KFPL PACKAGE. IT WAS NOT JUST
THE SUBSTANTIVE LEGISLATION FROM
MONNING LIMÓN, BUT ALSO INCLUDED
DOZENS OF POSITIONS THAT WERE
APPROVED IN 2020 AND WERE PHASED
IN OVER A THREE YEAR PERIOD. SO
THE FUNDING WAS TEMPORARY. WE
ARE COMING BACK TO ASK FOR TWO
MORE YEARS OF FUNDING TO RETAIN
THE SAME FLAT HEADCOUNT FOR OUR
ONGOING IMPLEMENTATION OF THE
KFPL. DO YOU FEEL THAT WITHIN
THOSE TWO YEARS YOU'LL BECOME
YOU'LL MEET YOUR GOALS? WE ARE
WELL ON OUR WAY. WE HAVE ONE OF
THE WAYS THAT WE GET REVENUE IS
THROUGH REGISTRAR, ONE OF THESE
NEWER INDUSTRIES THAT ARE NOW
SUBJECT TO THIS LAW. WE HAVE TO
WRITE A REGULATION FIRST. SO
THAT'S IN THE STATUTE. BUT ONCE
WE WRITE A REGULATION, WE CAN
THEN MANDATE THAT CERTAIN
INDUSTRIES COME AND REGISTER
WITH US. WE CURRENTLY HAVE A
PACKAGE THAT IS PENDING FINAL
APPROVAL WITH THE OFFICE OF
ADMINISTRATIVE LAW, WE SHOULD BE
HEARING BACK IN A NUMBER OF
DAYS, AND THEN THAT WILL BECOME
OUR FIRST TRANCHE OF
REGISTRANTS, AND WE WILL
CONTINUE TO ADD MORE IN THE
COMING YEARS WITH THAT
REGISTRATION AUTHORITY THAT'S IN
THE CCPL. OKAY THANK YOU. WE'LL
BE MONITORING THAT CLOSELY.
THANK YOU. SURE I GUESS THAT'S
ALL FOR THIS ITEM. AND LAST
ISSUE ON THE DOCKET TODAY IS
ALSO IN YOUR WHEELHOUSE G 15.
WE'RE GOING TO HAVE YOU STAY UP
WITH US. OH OKAY. THANKS THANK
YOU. ALL RIGHT. THANK YOU FOR
JOINING ME. TO MY RIGHT IS
DEPUTY COMMISSIONER MELINDA LEE
OVER THE DEBT COLLECTOR PROGRAM.
WE ARE ASKING FOR CONTINUATION
OF DEBT COLLECTOR LICENSING AND
REGULATION. THE DEBT COLLECTOR
LICENSING ACT, SB 908 BILL
PASSED IN 2020, WHICH ALLOWS THE
DEPARTMENT TO LICENSE, REGULATE
AND EXAMINE DEBT COLLECTORS WITH
$11.75 MILLION IN EXPENDITURE
AUTHORITY FOR 51 POSITIONS. THE
DEPARTMENT WILL CONTINUE TO
IMPLEMENT AND ENFORCE
REGULATIONS TO ENSURE THAT DEBT
COLLECTORS OPERATE IN ACCORDANCE
WITH THE LAW, PROTECTING
CONSUMERS FROM UNFAIR OR
DECEPTIVE PRACTICES. THIS
INCLUDES STRICT MONITORING OF
COLLECTION TACTICS AND ADHERENCE
TO GUIDELINES OUTLINED IN THE
CONSUMER PROTECTION LAWS. WE
WILL REGULARLY ASSESS THE
FINANCIAL HEALTH AND PRACTICES
OF DEBT COLLECTOR COLLECTION
AGENCIES TO PROTECT CONSUMERS BY
CLOSELY MONITORING THEIR
ACTIVITIES, WE CAN PROACTIVELY
IDENTIFY POTENTIAL RISKS TO
PROTECT CONSUMERS FROM HARMFUL
PRACTICES THAT MAY ARISE WITHIN
THEIR OPERATIONS, AND WE ENFORCE
COMPLIANCE WITH LICENSING
REQUIREMENTS AND TAKE
APPROPRIATE ACTIONS AGAINST DEBT
COLLECTORS FOUND IN VIOLATION,
SUCH AS IMPOSING FINES OR TAKING
ENFORCEMENT ACTIONS TO HOLD
ACCOUNTABLE ANY DEBT COLLECTORS
WHO FAIL TO MEET THE NECESSARY
STANDARDS, AND ENSURING THAT
CONSUMERS ARE SHIELDED FROM
PREDATORY BEHAVIOR. THANK YOU,
MEMBERS OF THE COMMITTEE, FOR
YOUR TIME AND PATIENCE, AND
PLEASE LET US KNOW IF YOU HAVE
ANY QUESTIONS. THANK YOU VERY
MUCH. NO OTHER COMMENTS. ANY
MEMBERS OF THE PUBLIC WISHING TO
COMMENT ON THIS ITEM? SEEING
NONE, THANK YOU FOR THE
PRESENTATION TODAY. I HAVE NO
IT'S VERY STRAIGHTFORWARD. I
HAVE NO QUESTIONS OR COMMENTS OF
MY OWN. SO THANK YOU FOR YOUR
TIME. THANK YOU. HAVE A
WONDERFUL EVENING. THANK YOU. I
GUESS I'LL GIVE ONE LAST CALL.
ARE THERE ANY MEMBERS OF THE
PUBLIC WISHING TO COMMENT ON ANY
ITEM ON TODAY'S AGENDA? YES,
I'LL KEEP IT VERY BRIEF. MY NAME
IS DANIELLE OR DANNY KENDALL
KAISER. I REPRESENT THE
CALIFORNIA LOW INCOME CONSUMER
COALITION, WHICH IS ONE OF, THE
MANY GROUPS THAT ARE INVOLVED IN
THE DFP ADVOCACY COALITION. WE
MEET WEEKLY TO DISCUSS
LEGISLATION AND MATTERS RELATED
TO THE DFP. WE ARE ALL A PART OF
THE GROUP THAT, FIRST WORKED TO
ESTABLISH THE DFP. SO WE URGE
YOUR CONTINUED SUPPORT OF THIS,
THE CRITICALLY IMPORTANT WORK
MANY OF OUR MEMBERS DEAL WITH,
WITH LEGISLATIVE AND LEGAL
ISSUES THAT THE DFP HAS HELPED
US WITH REGULATION, AS YOU JUST
HEARD, YOU KNOW, DEBT
COLLECTION, DEBT SETTLEMENT, WE
THINK THE WORK IS CRITICALLY
IMPORTANT. WE URGE YOUR
CONTINUED SUPPORT. THANK YOU.
THANK YOU VERY MUCH. AND WITH
THAT, I THINK WE HAVE REACHED
THE END OF OUR AGENDA AND OUR
SUBCOMMITTEE WILL BE ADJOURNED