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Gov. Gavin Newsom (D-CA) discusses the revised state budget proposal for 2024-2025.

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Transcript
00:00:00 correct the supercharged budgetary performance in the state of California in 2021 and 2022.
00:00:07 The need to right-size expenditures, the need to right-size in relationship those expenditures to
00:00:15 revenue is self-evident as it relates to some of the projected shortfalls that we announced in
00:00:20 January and we will be updating here today in May. Fundamentally, the approach we will be taking
00:00:27 today is a little bit different than the approach we've taken in the past. We are not looking at the
00:00:32 budget year alone. We're looking at the budget year plus one. We're looking at the next two years
00:00:37 to take operating deficits and to have what I loosely refer to as operating reserves,
00:00:46 operating surpluses over the next two years. We'll lay out today in some detail how we
00:00:54 propose to do that with the humility and understanding always that this is a proposal
00:01:00 and this is a process that will unfold over the course of the next many weeks working with
00:01:04 legislative leaders, working with groups large and small, and being attuned to the mood of the public
00:01:12 and where people are in relationship to some of these proposals. It goes without saying and
00:01:17 you'll ask me I'm sure in the Q&A why this cut. I will undoubtedly say I prefer not to make this cut.
00:01:25 These are programs. These are propositions that I've long advanced, many of them. These are things
00:01:31 that I've supported. These are things we work closely with the legislature to advance. None of
00:01:35 this is kind of work you enjoy doing but you got to do it. We have to be responsible. We have to
00:01:41 be accountable. We have to balance the budget and so we are submitting today a balanced budget but
00:01:46 we're doing so mindful of the world we're living in and I remind you every year as I think previous
00:01:53 governors have the volatility is the tax system and yes you'll ask the same question we get asked
00:01:58 every year. Shall we or should we reform the tax system? The answer is yes. How we do that is a
00:02:05 more difficult and challenging conversation and the volatility is foundational in terms of the
00:02:11 tax system we have, the progressive tax system we have today. It's been our friend. You can see
00:02:16 those spikes going back to 2000 on the left to just a few years ago 2021 on at least the right
00:02:26 of the screen that I'm looking at and just to put it in perspective we talk about this chart as an
00:02:30 EKG chart. It's a revenue chart and relates to capital gains. It's the volatility as capital
00:02:36 gains as a percentage of our income tax receipts and to put it in perspective on the far left there
00:02:43 you'll see in that 2000 peak it was roughly about 10.4 percent of our capital gains that were
00:02:50 realized as percent of revenue that year. It spiked to 11.6 percent in that higher spike on the right
00:02:57 in 2021. That represented 349 billion dollars of capital gains realized. 349 billion dollars of
00:03:05 capital gains realized. Last year 2023 down to 137 billion dollars. 350-ish to 137 and that's
00:03:16 that drop but here's the long-winded story of this chart. You can see it's back to some
00:03:21 normalization. What I mean by normalization again a period of distortions and corrections on the
00:03:27 basis of the supercharged budgetary performance. We're going back now to more historic norms and
00:03:33 I mean historic in this context. The average over the course of the last many decades has been about
00:03:38 5.18 percent capital gains. We're slightly below that in the budget year. We project to be slightly
00:03:45 above or roughly at that in budget year plus one and two and that's the line trailing off to the
00:03:52 right. But here's the January number that you're familiar with. This is the number we put forward
00:03:56 37.9 billion dollar problem statement in January. We were very clear that there was a lot of
00:04:04 volatility, a lot of questions as it relates to tax collections. Those tax collections came in
00:04:10 November numbers came in December, January, February, and March about 5.8 billion dollars
00:04:17 lower than we projected. There was some dust that settled after the tax collections in April and
00:04:21 we'll get to more specific details here in a moment. But I want to remind you a few moments
00:04:28 ago meaning a few weeks back we moved quickly with the legislature to address 17.3 billion dollars of
00:04:36 the problem statement to address the issue of the deficit by moving in concert with an early action.
00:04:44 We want to applaud the budget chairs. I want to applaud legislative leaders for their support and
00:04:49 their recognition the importance of actively managing the budget not waiting to pre-described
00:04:55 or pre-determined dates on the calendar but to actively manage in real time the challenges and
00:05:00 we did that you can see through a series of very familiar solutions. Revenue and borrowing delays,
00:05:06 deferrals, issues around reductions and shifts things we'll be talking a little bit more about
00:05:11 today. As it relates to a bit of that preview I mentioned the 5.8 billion dollars through March.
00:05:17 You extend that and you look across the spectrum of costs and revenue. The problem statement now
00:05:23 has increased by additional 7 billion dollars from the January budget. So today we're submitting a
00:05:30 288.1 billion dollar balanced budget, 201 billion dollar general fund with an additional shortfall
00:05:37 that we'll have to manage of 7 billion dollars. So a reminder 27.6 billion dollar shortfall total now
00:05:46 and I say reminder because we in January announced a 37.9 billion dollar shortfall. We took that
00:05:53 early action of 17.3 billion dollars. We have an increased challenge of 7 billion dollars and it
00:05:59 nets out to what we have to solve for today. 27.6 billion dollar budget challenge. So let's get into
00:06:08 this. How do we address again from a multi-year prism this problem? Not just a short-term strategy
00:06:14 but to get us back to right size to address that remarkable volatility and forgive me you've heard
00:06:21 this on so many occasions. When I say remarkable volatility when I use the word supercharged
00:06:27 those are expressive words but it's expressed by the reality. 177.7 billion dollar two-year
00:06:37 operating surplus simply unprecedented in U.S. history let alone California history at a subnational
00:06:42 level that is at a state level followed by the dust settling and these shortfalls. So here we are
00:06:50 today and we are facing a 27.6 billion dollar challenge. Next year to my point about a multi-year
00:06:59 strategy we project a 28 billion dollar shortfall. It's I think appropriate and prudent for us not
00:07:08 just to solve for this year but to also solve for next year and that's the proposal we're laying out
00:07:14 and we are providing and offering the legislature for consideration. If we move forward with the
00:07:20 recommendations set forth to address this structural issue we would enjoy a count additional
00:07:28 3.4 billion dollars in surplus a 650 million dollar surplus in budget year plus one. So again
00:07:37 moving from two years of deficits to two years of operating surplus is what we're recommending
00:07:44 the legislature seek. Why are we confident we can achieve this? Because it's solvable we've done it
00:07:49 before and this is just a reminder of the totality of challenges in the past again on the basis of
00:07:55 the volatility of our tax structure. The benefits of a progressive tax system during good years the
00:08:00 challenges during years where things are contracting. Markets disproportionately impact
00:08:06 benefit or burden the state of California again capital gains playing an outsized role as we
00:08:11 demonstrated in that first chart but you can see back the previous administration's Schwarzenegger
00:08:16 and Brown administration some of the challenges those administrations faced and they move forward
00:08:22 and state proved its resiliency its capacity for renewal and we worked through those issues and
00:08:29 today we're doing more than ever for more people than we have ever done in terms of providing
00:08:35 supports and I think if there is a theory of the case we're making here today the solutions we're
00:08:40 about to set forth are overwhelmingly supporting existing core programs without cuts and I say
00:08:49 overwhelmingly not exclusively because I'm not naive there are areas where core services are
00:08:55 being impacted but the vast majority are being protected existing services provided to existing
00:09:03 people core services are being provided in this two year are being protected in this two year
00:09:09 blueprint. So let's talk about what that blueprint looks like simple getting back into balance this
00:09:16 is what we believe it would require and this is what we propose to the legislature. We propose
00:09:22 pulling down this year 4.2 billion in reserves I'm going to get to that in a moment three billion
00:09:28 dollars of new efficiencies I say new because they build on the five percent efficiencies that
00:09:32 we announced a year or two or so years ago reductions of 15.2 billion dollars we'll talk
00:09:38 about those reductions in the context of being one time versus ongoing and we're talking about
00:09:42 shifts and pauses not dissimilar to the early action and revenue and borrowing which is primarily
00:09:48 you're asking MCO and net operating loss and then some borrowing that we'll discuss as well.
00:09:56 The 2025-26 solutions previous slide I'll go back for this budget year here's what we're proposing
00:10:04 for budget year plus one draw down an additional 8.9 billion that would be total 13.1 billion over
00:10:11 those two fiscal years 3.6 billion the efficiencies start to annualize at a higher benefit ongoing
00:10:19 reductions as I noted for one time and ongoing considerations expansion pauses again the revenue
00:10:25 borrowing not dissimilar to I just referenced so that's the framework let's get into some
00:10:30 more detail. I mentioned when I brought up the issue of reserves that the 13.1 billion is what
00:10:38 we want to pull down but I want to just caveat you so that 4.2 we want to pull that down over a two
00:10:45 year period we don't want to pull all 13.1 into the budget year we want to do the 13.1 billion
00:10:51 over the two-year budget window so 4.2 billion in the May revision for this budget year and
00:10:59 budget year plus one forgive the vernacular plus one out year we are looking to draw down from the
00:11:05 reserves 8.9 billion so that's that line item on the efficiencies you recall the 3 billion dollars
00:11:10 this is how we propose to do it 7.9% 5% reductions roughly 8% reductions that includes my office and
00:11:18 includes agencies large and small across the state of California we believe that kind of belt
00:11:25 tightening would allow us to enjoy not just 2 billion dollars of budget year savings but ongoing
00:11:31 savings as you can see annualizing about 2.7 billion dollars it means sweeping and this is a
00:11:36 familiar number a numeric some 162.5 million dollars I announced that in January works out
00:11:45 to about 10,000 sweeping plus or minus 10,000 vacant positions those positions are being
00:11:52 determined in real time at every agency and department they're making that determination
00:11:57 we don't have the list of every single vacant position for you today that's a process that
00:12:02 will unfold over the course of a very short period of time it's a process that is unfolding
00:12:07 as well in real time in terms of the work that's being done at the agency department levels so we
00:12:13 want a leaner government leaner government streamlined government we want to do what all
00:12:18 of you are doing in your personal lives all the businesses out there doing in their professional
00:12:23 lives as well and we think we can do that and still achieve outstanding outcomes I'll give you
00:12:28 an example just yesterday with generative AI that's not a job killer in fact that's explicit
00:12:33 in our executive order as it relates to artificial intelligence but some of the
00:12:37 new programming we're doing in partnership with Anthropic and Google and others OpenAI as it
00:12:43 relates to traffic management as it relates to issues around well access to languages and other
00:12:49 services so that's a component part of our leaner government and our more efficient government and
00:12:56 the flexibility providing choice meeting people where they are giving customers meaning giving
00:13:01 taxpayers a voice in terms of their needs and government's services back to the reductions
00:13:10 and we have our two experts here they'll go through these in much more detail because there
00:13:17 are hundreds and hundreds and hundreds of actions that we are taking there's not just one or two
00:13:24 and we can spend and I I'm known to spend a lot of time up here but I don't think you want to spend
00:13:29 that much time with me up here so I'm just going to give you some broad strokes and our experts
00:13:34 here and up on stage can walk through in more detail but but you deserve at least a deep broad
00:13:39 strokes understanding of the one-time versus ongoing which is represented again here in the
00:13:44 budget year in the budget year plus one this is the additional one time and ongoing savings but
00:13:51 let's break this down so you can take a look and understand a little bit more of what these things
00:13:55 may include what they do include in terms of the proposals that we are offering the legislature
00:14:01 you see the one time on the left you'll see the ongoing on the right the one time are familiar
00:14:05 and a lot of those one time we are considering in the context of how they work into other
00:14:13 programs that we provide existing programming and utilization rates always looking at utilization
00:14:19 rates in looking at other forms and other strategies in terms of drawing down more federal
00:14:25 dollars or looking what's happening at the city and county level so you'll see a mixture of very
00:14:31 familiar issues and some deserve more attention than others and I imagine you have questions
00:14:37 everyone will certainly on all of them but notably on a number of them I'll give you an example on
00:14:42 broadband we've been stress testing our broadband strategy in the middle mile on the last mile
00:14:47 and we think we've come up with a plan to actually achieve similar goals at a lower cost so we think
00:14:53 it's appropriate to claw back those dollars without a diminution in terms of programming
00:14:59 and advancing the commitments that we've made as it relates to workforce we have 2.4 billion dollars
00:15:07 new resources that are coming in that we're leveraging from the federal government disproportionate
00:15:12 amount of that leverage from the federal government over the next five years pursuant to prop one we
00:15:16 have facilities grants that we think we can incorporate into strategies for new bonds
00:15:21 in the state we can discuss where we are with the bonds in relationship to the legislature
00:15:25 I imagine that will be a question water storage as it relates to what is being programmed now and
00:15:31 what we anticipate needing into the future relationship to the old prop one the 2.7
00:15:37 billion dollars that was set aside for some of the water storage workforce meaning these sort
00:15:42 of apprenticeship programs learning aligned employment what we're currently doing with
00:15:46 the utilization rate we feel we can make some adjustments children youth and behavior we are
00:15:52 this is a passion project for me as you know we still 4.1 plus billion dollars in this and we're
00:15:59 actually streamlining that program and really targeting in 0 to 26 behavioral health initiative
00:16:05 to the school sites wellness centers and we think we actually could deliver even more bang for
00:16:11 the existing buck as they say on the Cal works there are no cuts to the Cal work and remember
00:16:18 we did 2019 10 percent Cal work increase in fact in 2019 we did an additional 13.1 on top of the 10
00:16:26 we continue the call on Cal works this is just an administrative component part the core service
00:16:33 remains in place and you know sweeping some bonuses under hap I know that may not sit well
00:16:40 with some but we're struggling with seeing the performance I want to see on the streets and
00:16:46 sidewalks and we've been clear about that and you've been many of you been a lot of events
00:16:50 where we've expressed ourselves very clearly on this as relates to just some of the ongoing
00:16:55 I want to talk about the prison issues we've saved and again everything I say
00:17:02 can and will be scrutinized and corrected so I'm mindful that as I sit up here without a note but
00:17:07 3.4 billion dollars from 2021 to 2027 is projected to save 3.4 billion dollars
00:17:15 in terms of the four prisons that we've already closed in the seven yards that we've closed
00:17:19 so you've got 3.4 billion dollars of ongoing we've saved that will project to save from 2021
00:17:27 going back a few years projected through 2027 we are proposing to shut down at 13 prisons
00:17:35 an additional 46 housing units that would reduce the census of beds by just shy of 4600
00:17:44 that would produce ongoing savings on an annual basis that would grow of 80 million dollars
00:17:50 starting in the first year it's enacted in fact we're also moving to pull chukawalla was
00:17:58 projected to close down and by the way that's one of the four that I referenced it was projected
00:18:04 to close down in March of 2025 we're looking to pull that forward as early as November of this
00:18:10 year so we've been scrutinizing that budget we're mindful of the census and population we're mindful
00:18:15 of the direction that we're going as it relates to public safety and we could talk more about that
00:18:20 but prison housing unit deactivations can happen much sooner than prison closures and provide us
00:18:26 more flexibility and this builds on the existing 3.4 billion dollars that we programmed in savings
00:18:32 on the basis of the four prior institutions that have closed in those seven larger yards it does
00:18:37 not mean you ask me later legislative leaders have asked me are you interested are we considering
00:18:44 collectively reducing the larger footprint with prisons in the state the answer is yes
00:18:48 we are but we want to do in a pragmatic and thoughtful way we want to be mindful of labor
00:18:53 concerns community concerns we want to be mindful of trends and we want to be mindful of the unknown
00:19:00 meaning there are proposals to roll back some of our criminal justice reforms that could have a
00:19:06 significant impact on census and population there are lawsuits there are initiatives that could have
00:19:12 impacts on costs all of those need to be factored in but we are moving and we're moving quickly to
00:19:18 focus on addressing that issue the middle class scholarship and that's again the perfect proof
00:19:25 point of something that i enthusiastically supported back when i was lieutenant governor
00:19:31 and i think it was you know john perez and others who work with governor brown to initiate the
00:19:36 program with 117 million dollars in the first year we're basically leveling setting back to
00:19:40 where it was it's about 100 million was 117 but that's the haircut of the enhancements that we've
00:19:46 made the last few years not because we enthusiastically want to do that quite the contrary
00:19:51 so those that express disappointment in that let me add my voice to that maybe i'll provide you a
00:19:56 quote uh in relation to it's again reality it's math being mature about the challenge the problem
00:20:03 statement it's aligning that expectation what are the core services that we can maintain
00:20:08 and continue to enhance versus the things that we'd like to do that are important that's certainly
00:20:14 one of them that right now we feel we're unable to do so that's just a broad strokes on that i
00:20:20 talked about pauses and some of the issues that we're just delaying perfect example this is a
00:20:25 program that's proposed to go in effect in and this is a good example a program that's not in
00:20:31 effect yet so it's not a cut to an existing service that's being provided it's a program
00:20:36 that's proposed great program great program that goes into effect in october of 2025 and we want
00:20:43 to delay it two years if the resources present themselves this would be a top priority to put
00:20:49 back in and we would encourage the legislature to consider that as they consider uh this proposal
00:20:54 itself the child care expansion's more difficult isn't it um i'll take a back seat to no
00:21:00 administration in terms of our advocacy in the space and this was a difficult one the trade-off
00:21:05 here was 724 million that's represented in the two-year contract uh of providing our providers
00:21:11 more support question was do we look to cut that commitment and reduce wages or do we just sort of
00:21:20 hold the line on where we are with the expansion for the time being i thought it was right to
00:21:26 fulfill our commitment to those providers i think they deserve that raise what we're trying to do
00:21:31 is stabilize this workforce professionalize this workforce we've unionized this workforce
00:21:36 first state in the nation to do that and i was proud to promote that not just receive that on
00:21:41 the back end as someone else's proposal i'm working with the women's caucus who's next level
00:21:46 in terms of their support of this expansion so the goal is ultimately 200 000 um you know i'm
00:21:51 mindful of myself by date as governor i'm still committed to getting there but right now we feel
00:21:56 like we again don't want to cut programs just want to hold the line but we still want to provide
00:22:01 more uh line support for our line workers uh so that was just i'm being transparent about
00:22:08 our considerations as we balance the child care space we talk about shifts a lot of movement there's
00:22:14 no material cuts to the climate agenda uh there was a lot of creativity and moving into the cap
00:22:21 and trade program uh the greenhouse gas uh fund and so you'll see some of those shifts in their
00:22:27 transit budget that substantially uh uh is uh is whole i think it's about 150 million dollar
00:22:34 a shift from a four billion dollar base but substantially whole and clean energy programs
00:22:39 that programs accordingly you can see that representing that four billion dollars in the
00:22:43 cap and trade fund and by the way we just promoted uh the anniversary of the cap and trade auctions
00:22:48 not the cap and trade program which established well before the first auction that's been 10 years
00:22:53 uh 28 billion dollars 11 billion dollars has already been invested 76 percent of that in
00:22:58 low-income communities 76 percent of that in low-income communities um and so this cap and
00:23:05 trade program continues to be rightfully envy uh programs uh around the world not just across the
00:23:13 country as it relates to other shifts you'll see some creativity here let me just briefly go through
00:23:18 a few again the team here could go into detail uh for you um prop 56 backfill we want the mco to
00:23:25 address that the issue around arpa there was actual this is the dollars that came from the feds there
00:23:30 was interest attached to that we can sweep that interest and we can shift that off the general
00:23:35 fund uh moving the capital annex and the work that's being done there we can move that to bonds
00:23:40 we were proposing to do that in the beginning we worked with the legislature we were in a position
00:23:45 we didn't have to uh now we're going back to some of the original proposals and the cannabis fund
00:23:49 is looking again to set aside in the cannabis fund child care dollars that would have been
00:23:54 would have been absorbed under the general fund now we're pulling in the cannabis fund
00:23:59 as an example and then there's a pg&e settlement that nerd to the benefit of the state uh and we
00:24:04 are borrowing shifting uh borrowing uh those dollars uh 78 million significant but modest
00:24:10 considering the totality of some of the work we're doing so those are just examples for you
00:24:15 again remember the slide i showed you before hundreds and hundreds of other examples programs
00:24:22 uh that uh that we're proposing to make uh change so the question is well all right there's some
00:24:27 examples of what you're proposing to delay or deny for the moment what are you saving well just
00:24:35 things that were on the well part of the conversation i should say i don't want to say
00:24:40 they were on the chopping block because i don't think they never got there uh but they were
00:24:44 presented uh as proposals ssi well ssp states program is ssp it's relationship with the ssi
00:24:52 i want to maintain that support as i noted the cal works as relates to colas wanted to hold the
00:24:57 line earn income tax credit i think it's one of the great anti-poverty programs in this nation
00:25:02 the state i was an advocate as mayor of san francisco as one of the first cities to do an
00:25:06 income tax credit advocate uh as lieutenant governor governor we went for 400 million on
00:25:11 the earned eitc to over 1.3 billion we added a thousand dollar child tax credits we added a
00:25:17 foster youth tax credit want to hold the line maintain those credits because we think they're
00:25:21 important we also want to maintain our health care expansion across the board regardless ability to
00:25:26 pay uh regardless pre-existing conditions and uh your uh your immigration status and i just think
00:25:34 that's foundational something i believe in it's core of i think who we are as a state and we
00:25:39 should be as a nation a care court um new pathway new strategy moving away from the old binaries
00:25:45 unsupported not substituted care we think is important it relates to the issue of our time
00:25:49 and that's addressing the streets and sidewalks and then on broader nutrition programs uh we're
00:25:53 holding our summary bt programs we're holding all our food bank programs uh we're holding our
00:25:57 programs relates to some of our creative 35 million dollar senior programs where there's a
00:26:02 lot of sort of flexibility and where those dollars can go so i just want folks to know that and i
00:26:06 want to thank senator skinner for making sure uh we were uh sensitive on the nutrition i want to
00:26:11 thank senator eggman and umberg for sensitivity on the care court and i want to thank um you know
00:26:16 leadership remarkable leadership of the latino caucus on the health care expansion i want to
00:26:21 thank marambola and obviously great work mary delana maria elena dorazo has done for decades
00:26:27 as an advocate and now uh as someone who's been delivering on that promotion and promise so just
00:26:32 examples of things we are keeping again back to this notion keeping core services intact for those
00:26:39 that are existing beneficiaries of services vast majority not all cases and is that achieved with
00:26:46 the proposal we're setting forth question we're getting a lot prop 98 what does january look like
00:26:54 or rather what is may look like in relationship to january our per pupil in january we announced
00:26:59 a familiar slide 17 653 here's the may per pupil slightly down about 151 looks like making sure
00:27:10 the numbers slides align with what is my head and then all funds is slightly up which is encouraging
00:27:16 so prop 98 per pupil in may 17 502 and you'll see all funds slightly higher local reasons that's
00:27:27 the case 23 940 begs then the cola question doesn't it colo is at 0.76 in january uh interestingly
00:27:39 because i don't know how to i think it's a word that is appropriate in this case it went up uh to
00:27:46 1.07 only the uh people in that study physics and mathematics and engineering
00:27:55 and possibly explain the prop 98 formula uh to explain exactly why the cola went up uh but it
00:28:02 has we also drove driving down as you recall and that was in the january budget 8.4 billion
00:28:06 uh on that stabilization count within the 98 framework so that remains consistent from the
00:28:12 january proposal two things i'll close with um we want to address this issue of volatility and as i
00:28:20 began homeowner insurance preview because you're not going to ask the question you should have um
00:28:26 because it's a real issue and it's top of mind for all of us and i just wanted to update folks
00:28:30 on our thinking on it and where i think we are as a state but the issue of revenue volatility
00:28:35 this is uh the second to last slide we we are mindful uh on the basis of of our experience with
00:28:45 again the supercharged capital gains 349 billion dollars 2021 the 2022 numbers the volatility
00:28:53 that we know what we know but we don't know what we don't know and when this is why i believe we
00:29:01 need to have a two-year mindset going forward i think the new normal should be budget plus budget
00:29:05 year one that that's a deeper conversation we're starting to socialize that with the legislature
00:29:12 and and how we can advance that i think it's the only way with a progressive tax structure
00:29:16 that you can prudently manage moving forward and i think last few years have really underscored that
00:29:21 as it relates to that volatility we're looking at the constraints under prop two and i've
00:29:25 remembered i reminded you i want to i think you've got to reform the top two legislature
00:29:29 believes that as well the question is what does it look like but the deeper question is will the
00:29:33 public support it i mentioned you in january we've done a lot of outreach on that we've done some
00:29:38 research on that and the public doesn't necessarily see that right now as reform is one of their top
00:29:43 agenda items so that's going to take some work to i don't want to say educate because that's
00:29:48 patronizing we're always getting educated uh and i think that's in limening but to really express
00:29:56 our point of view in a way that sort of saturates in a state larger than 21 state populations
00:30:02 combined in the interim i don't want to wait uh and that's why we want to move forward with this
00:30:09 new strategy uh that our two experts here uh will discuss and that's to address again
00:30:14 this volatility these this incredible uh uh you know the incredible acuity uh that is represented
00:30:23 in this volatility by establishing a new budget account in the state uh that would capture this
00:30:29 excess revenue and allow us on the basis of historic trends to set it aside until it materializes
00:30:38 as opposed to assuming it's coming in on the basis of the lao and the finance and experts saying we
00:30:44 believe it will come in and then we appropriate and attach appropriation to it only discover it
00:30:48 didn't come in a la what occurred in the last two fiscal years so the idea would be able to create
00:30:55 that account yes they're gam gan questions with all we were a lot of a lot of questions and we're
00:31:00 working through those questions but it's something i'm very excited about very grateful uh for erica
00:31:06 and for joe's leadership in this space and i'm very grateful to legislative leaders for their
00:31:11 willingness to engage in this conversation so i don't want not much more i can say on that
00:31:16 except to say we've had some preliminary conversations intellectually people get it
00:31:21 there's some legal questions we have to address but we think it's an interesting uh interim
00:31:25 solution until we address the larger solution as it relates to prop two uh and some of the
00:31:30 questions around the gan uh limit remember gan was created before prop two and we're just stacking
00:31:35 all these things why dubious a lot of these constitutional questions that go on the ballot
00:31:40 locking in this locking out that we have to be very careful about all that and forgive me that's a
00:31:45 rabbit hole we can go down it's one that's being adjudicated across the way at the supreme court
00:31:51 as it relates to this issue of homeowner insurance final slide we did an executive order as you
00:31:58 recall about a year ago and we're trying to reconcile 30 years where there hasn't been much
00:32:02 reform in this space we're mindful of voter approved constraints we're mindful of the
00:32:11 challenge and burdens that have been placed on our fair plan which is our backup plan and we're
00:32:15 deeply mindful of the day-to-day travails of trying to reconcile these screaming headlines
00:32:20 and the reality when you get a notice that your insurer may not want to re-insure or extend that
00:32:26 insurance or you buy a new home and you can't even get that insurance so this is uh this is real
00:32:31 and it's being felt across the united states and uh you know i have a chart if you're interested
00:32:37 you may want to ask me you could take a look at the cost of homeowner insurance nationally and
00:32:43 it's places like florida elsewhere i mean for all our challenges let's just not have theirs
00:32:48 and so we need to get ahead of it and i know our insurance commissioner uh we're in constant
00:32:54 contact his team is working their tails off i know how concerned the legislature is on this
00:33:00 but we're going to do some trailer bill language uh with this budget because the most important
00:33:06 thing we need to do now in addition all the other things that we laid out in the executive order all
00:33:09 the other things that the insurance commissioner has already announced he wants to do but december
00:33:14 i don't think we have that much time we've got to move this and i know 30 years and they're
00:33:21 getting it done in just a matter of relatively speaking months but we just got to do more
00:33:26 and he needs to have all the support and resources to do that but we need to get this rate ruling
00:33:33 process done and that's why we want to expedite it over a 60-day period we need to stabilize this
00:33:39 market we need to send the right signals we need to move we need to move and insurance commissioner
00:33:44 again knows that i know it's broadly shared it's the how it's our business uh we share the same
00:33:51 goal uh but we need to do more and so that's just something i wanted to highlight before we end the
00:33:56 presentation uh and uh move to the final point which i guess i lied there were three slides
00:34:03 um about two because you know i'm proud of this you know back to resiliency you know i think that's
00:34:11 there's a thematic here you know the normalization the alignment um the expectation alignment as well
00:34:17 but but the fact remains that we remain the fifth largest economy in the world seven years running
00:34:23 3.89 trillion dollars um germany 4.4 trillion japan 4.2 watch india uh i want to say we remain
00:34:36 the fifth for as long as i can because india is moving uh but we don't begrudge other people's
00:34:40 success quite the contrary but we maintain our success and our stature as the fifth largest
00:34:44 economy in the world despite all of the macroeconomic swings and challenges and and i
00:34:51 just wanted to highlight that also want to highlight the record uh tourism 150 plus billion
00:34:56 dollars um not every part of the state is enjoying pre-pandemic levels bay area is still
00:35:04 trailing a little bit other parts are enjoying record-breaking tourism that's a very encouraging
00:35:10 sign as well in terms of california's stability but it's record high in terms of the tourism
00:35:15 spend and and population's increasing and i'd say that just it's time to update the memos
00:35:20 to update the talking points uh it's time to update the doom loop um on some of the networks
00:35:25 on that issue um that includes uh one of the platforms uh social truth or uh true whatever
00:35:33 it is uh that uh former president um has started so uh i want to get him to update that talking
00:35:42 point as well just for the purpose of the truth imbued in the platform truth social um so those
00:35:52 are three things i wanted to highlight and that's the resiliency of you know roughly 40 million
00:35:58 americans strong or it's a resiliency of a dream that was promoted and is realized every single day
00:36:03 in the state of california and that's because of the entrepreneurial spirit where people put
00:36:08 everything on the line for riches and new beginnings that's the spirit defines the best of
00:36:12 california uh entrepreneurial energy that innovative energy that continues to be the
00:36:17 envy of the world people visiting here from around the globe saying what is it what is it about this
00:36:23 state where you continue to punch above your weight you continue to invent the future you continue to
00:36:28 outperform expectations um and uh and that's highlighted in ai it's highlighted in immunology
00:36:36 it's highlighted in quantum it's highlighted across the spectrum of biotherapeutics and innovation
00:36:41 medical devices it's it's defined uh by our partnerships with um universities uh the
00:36:48 research and development uh but it's also defined by the fact that we get first round job choices
00:36:54 around the rest of the world people come in from all around the globe because they feel seen and
00:36:59 they feel included and that's the final point i'll make for the q a our values continue uh to allow
00:37:08 us to thrive and those values i believe are foundationally intact despite some tough choices
00:37:15 that we are making and proposing to make in this budget uh and despite uh this short-term uh
00:37:22 adjustment uh but if we move along the blueprint we're putting forward we'll be back uh where we
00:37:28 need to be and that is uh back in the black uh we'll be back um on our feet as it relates to
00:37:35 this budget and we'll continue to do nation leading work across the spectrum and uh and that
00:37:41 requires partnership and so as i always do in this presentation i look forward to working uh with our
00:37:47 speaker look forward to working with the pro tem uh our working relationship has been next level
00:37:53 i'm blessed uh by their partnership the early actions a demonstrable example of that
00:37:58 the relationships are are sound uh these are tough days however and i'm not naive a lot of people have
00:38:05 a lot of opinions different opinions and i welcome that and i want to just repeat what i said in the
00:38:11 outset i look forward to working to adjust to reconsider to recalibrate this is not etched in
00:38:18 stone uh this is not uh you know this is not an archimedes moment where we put the staff in the
00:38:25 sand immovable uh but directionally budget year plus one we have to be mindful not just of the
00:38:34 short-term challenge but we've got to address this ongoing issue and to me that's an important line
00:38:41 that i believe we are aligned on but i want to maintain as we move forward in this budget
00:38:47 negotiation so that's the may revise and we're here to answer any questions
00:38:52 mr governor it's etan wallace from nextar news stations across california thanks for taking the
00:38:58 time uh first question right off the top i'm trying to think about the average californian
00:39:03 out there right off the top i know you are very clear in the january presentation about the
00:39:06 following no new taxes can you look all the cameras in the eye right now and guarantee no
00:39:12 new taxes between now and next year there are no new taxes i have not been one of those promoting
00:39:18 taxes i've been opposing taxes quite publicly the last proposition was on the ballot i invested
00:39:25 millions of dollars uh in ads to try to defeat that tax increase we can achieve all this we can
00:39:29 get our back on our fiscal sound footing without cutting core services without an additional tax
00:39:35 increase and i don't think that now is the time uh particularly with the stacking of stress over
00:39:40 the course of the last few years with uh costs that have risen as a consequence of uh supply chain
00:39:45 disruptions as cost of inflation uh to impose any additional burdens on the taxpayers along those
00:39:51 lines thank you very much and the second question here is uh for our viewers from san diego through
00:39:56 baker's field san francisco and all the way north to y rica everyone between uh got to ask in the
00:40:01 sense of in previous budget presentations i remember you're talking extensively about climate
00:40:06 homelessness fire protection a lot of key issues i know you mentioned they have funding in this but
00:40:10 just in the sense of the average california a lot of numbers here a lot of different things
00:40:14 just to them on homelessness on climate fire crime education what does this budget mean to them we're
00:40:20 holding the line on on unprecedented investments in in crime retail theft you've seen progress in
00:40:27 baker's field uh you saw the chp operations of baker field produced 211 arrests 127 stolen
00:40:33 vehicles that recovered just in the first week of operation with the chp today the chp is graduating
00:40:39 106 cadets a thousand new chp officers were funded a multi-year commitment in the budget
00:40:46 we're maintaining that partnerships in oakland we've seen the reduction in crime in oakland about
00:40:51 33 percent in first quarter of this year you saw the reductions that continue in san francisco
00:40:57 property crime reductions in san francisco 32 percent 14 percent decline in violent crime
00:41:02 partnerships that we want to continue to advance national guard partnerships on the border
00:41:08 addressing fentanyl we want to continue to advance those partnerships on the issues of homelessness
00:41:12 and housing we actually are increasing our low income housing tax credit by 500 million dollars
00:41:20 in this budget i could have had a separate presentation to continue our work in that space
00:41:27 to continue to partner with cities and counties you may have seen our latest
00:41:32 stance as it relates to one community in half moon bay on housing we mean business
00:41:39 we mean business about the housing element we mean business about meeting your state
00:41:45 mandated goals want cities and counties to follow the law will continue in that space prop one on
00:41:51 tuesday this goes to the issue of homelessness we're going to be announcing in detail what we're
00:41:57 doing very differently as it relates to the implementation and the reforms as relates to
00:42:03 mental health and homelessness and i'm really encouraging you to tune in or participate
00:42:10 in that discussion as well we've been working for months now anticipation of a passing weeks
00:42:16 since its passage to fulfill our promises that were made in that campaign so across the spectrum
00:42:22 of those top priorities in the state we preserve our frame of focus no fundamental cuts in terms
00:42:30 of the energy and daring of sorts i say daring because we're daring to do things radically
00:42:36 differently in those space but yes there are programs that are component parts you reference
00:42:41 the bonuses under hap there are other component parts of our housing strategy where we are making
00:42:47 adjustments but the core mission remains firm and our commitment foundational hi lindsey holden
00:42:55 sacramento b um following ethan's question i have to push back a little bit when you say you can do
00:43:00 everything because this this i don't i bought it just for the record i don't recall ever saying i
00:43:05 can do everything well i just want to i want to clarify yeah let me finish my question which is
00:43:10 some of these cuts fall on the poorest californians while budget watchers have suggested changing the
00:43:15 state's corporate tax rate why not consider something like that when some of these cuts
00:43:20 will hurt californians who have the least well i think we protect the vast majority of core
00:43:26 services for existing programs in this state we've done nation-leading work to expand those programs
00:43:32 in the last few years and we're preserving that a perfect proof point of that is a full suite
00:43:36 under the medi-cal system that's been expanded like no other state in u.s history has ever expanded
00:43:43 so we are maintaining that as it relates to the 8.84 corporate tax which is the highest
00:43:48 arguably depending on how you want to analyze it in the country no i'm not prepared to increase
00:43:53 taxes we we have among the highest tax rates in the united states america for high wage earners
00:44:01 we have among the highest tax wage rates as i noted for corporate taxes they were made higher
00:44:06 by donald trump's tax increase under the salt deduction elimination which i hope is eliminated
00:44:12 by the federal government but i feel strongly that we have to live within our means within the
00:44:18 framework being more efficient and more effective and and do what a lot of other families and private
00:44:25 businesses are doing we're up to that task i also wanted to ask you're sponsoring a bill around
00:44:30 changing rena the rena categories to include for cities to include homeless residents in their
00:44:37 calculations and yet your budget continues cuts to housing programs how are cities supposed to
00:44:43 build more housing to help homeless people if there's not more money to do that well they
00:44:48 with respect to you'll hear more i encourage you in particular spend time with us on tuesday
00:44:55 learn more about the details of what was just um advanced and and passed by the voters the state of
00:45:00 california under prop one that provides an additional one billion dollars on an annual
00:45:05 basis to cities and counties specifically for housing to address the most vulnerable as you
00:45:10 categorize them as homeless a billion dollars that was otherwise not eligible under the mental
00:45:15 services act when it was originally conceived that billion dollars uh doesn't go in effect
00:45:19 fast enough there's an implementation phase we'll be updating on that but it also includes
00:45:24 6.38 billion dollars of new housing money unprecedented investments to deal with those
00:45:31 that are struggling fully diagnosed drug or alcohol addictions which also was not eligible
00:45:37 under the previous mental services act so i beg to differ respectfully with that categorization
00:45:43 there's more money in the bond than ever there's more investment in terms of ongoing funding
00:45:50 for housing homeless than ever as a consequence of this reform and we'll be updating you on that
00:45:55 on tuesday i just have to with all due respect to those types of housing that prop one will fund
00:46:01 there's a very limited number of the homeless people in california most of them won't apply
00:46:06 for that kind of housing they just don't have a place to live how what about those folks who
00:46:11 aren't dealing with mental illness addiction etc well i'd point to the 3.75 billion dollars that
00:46:15 we've invested in home key a program that didn't exist before we launched it and initiated it i
00:46:20 refer to your own headline in the sacramento b on the success and efficacy of project room key
00:46:25 a component part of that i would refer to you to the beach hip program 2.2 billion dollars in
00:46:31 behavioral health money that we have advanced i would refer to the prior package of 15.3 billion
00:46:38 dollars on homelessness and housing that we've incorporated again homeless component parts of
00:46:43 housing as proof points to suggest that the totality of that frame needs to be considered
00:46:49 hi governor um i wanted to ask you about this proposal for a new budget account uh that you
00:46:58 mentioned is that something that you're going to be asking the legislature to pass in the coming
00:47:02 weeks and could you talk a little bit more about how exactly that would work i i know you did touch
00:47:07 on some of the details but i wasn't totally clear on all of those some two extraordinary experts
00:47:12 that are eager to discuss further uh the details of that
00:47:16 man it doesn't need to be introduced he's this is the finance chair if you didn't know
00:47:26 joe stephenshaw director of department of finance um so yes it is a proposal that will be part of
00:47:34 our may revision we be will be proposing trailblazing language and um hopefully working
00:47:40 with the legislature over the coming weeks as we finalize the budget uh to include it uh in the
00:47:45 final budget package essentially what we're trying to do here is the governor talked about this um
00:47:51 inherent volatility uh that we have in our revenue system and what we experienced particularly over
00:47:56 the last couple of years when we when we look at our forecast and our and the surpluses that are
00:48:02 part of our forecast cast portions of those sort of surpluses are based on um revenue that's
00:48:09 expecting to come in over the upcoming budget year so the um general idea here would be to come
00:48:15 up with a methodology to um to uh determine growth in the forecast that is above historical levels
00:48:25 of growth a typical level growth is five percent historically so we would figure out uh amounts in
00:48:34 our forecast that are above those historical level of growth and and set aside in our budget plan
00:48:40 a portion of that money and not spend it till it actually comes in uh during that fiscal year
00:48:46 and then we would program it in the in the budget for the for the next fiscal year i guess why is
00:48:52 this needed you know beyond the uh reserve funds that already exist why could you not change those
00:48:59 to just be setting aside more money into into the existing reserve accounts so as the governor uh
00:49:05 stated earlier we are still uh having discussions with the legislature in terms of reforms of prop
00:49:11 two in an amylase to save more money into the budget stabilization account those are changes
00:49:17 that have to go back to the voters uh so this was not will not replace those efforts this is
00:49:22 something that we think we can do uh in the near term that could be in addition just another tool
00:49:28 that we have to manage that volatility okay and then just a question for the governor since he
00:49:34 invited it at the start of this press conference um you know you mentioned that you do think we
00:49:39 should reform the tax system but the how we do so is a more challenging and difficult question
00:49:44 what are the solutions that you personally would support in order to get to a more stable
00:49:49 long-term uh you know revenue system in california so on a probably annual basis i discuss my
00:49:57 long relationship with former senator hertzberg uh who promoted a lot of uh ideas in the space
00:50:05 california forward and uh think long and bergeron institute and others that had offered strategies
00:50:11 and i and that's the broad approximation of the approach uh that uh that i've long thought made
00:50:17 sense um there have been some more detailed uh legislative past that didn't go very far uh in
00:50:23 the past uh senator to his credit uh asserted them these are tough issues and there's certain
00:50:28 things you know that um continue to promote that are difficult to actually achieve and uh including
00:50:34 by the way getting the voters to where they need to be to reform uh proposition two which is an
00:50:40 enormous undertaking and that's why we don't want to wait to achieve that goal without addressing
00:50:45 an interim concern and that's the idea of this account so that's that's where i've long been
00:50:51 long promoted um and uh you know i just think the last few years under underscore that the
00:50:57 volatility again is uh unless we have other um structural reforms it's going to continue to
00:51:05 vex many subsequent administrations and legislators
00:51:08 hi governor blake jones with politico um you know i know that in this budget um kind of unusually
00:51:18 you are addressing uh these two years of deficits which you haven't done before but there are still
00:51:23 several delays being added and you know a couple of pretty massive spending deferrals that you've
00:51:29 kind of already proposed one is this um you know eight billion dollar education funding maneuver
00:51:35 that would have the state basically pay back um you know money through 2028-2029 when you're out
00:51:41 of office also in the early action agreement that you negotiated with the legislature
00:51:47 you know you endorsed a payroll deferral in 2025 that's over a billion dollars so you know i guess
00:51:52 my question is with all of those additional delays and deferrals do you is there still a risk that
00:51:57 you're kicking some of the financial problems uh down the road well i guess there's a risk but look
00:52:02 instead of 13.2 we're taking 4.2 the reserves to sort of hold some prudence um and and and to be a
00:52:09 little bit more rigid and structured we are addressing the out you get two three four years
00:52:15 out yeah i think it's a i think it's i think you start frankly everybody gets misled because you're
00:52:23 you're really speculating it's too speculative to your question it's the right question but doing
00:52:30 what we need to do this year and next year and how we balanced it i think i think it's it's it's
00:52:36 reasonable and again no one's gonna this is a this is a sizable deficit i mean no one's suggesting
00:52:45 nothing's occurred here and there's nothing to see quite the contrary um you're right to reference
00:52:50 there's well over a billion on that payroll um those two examples so you know we'll work through
00:52:56 them on 98 i just you know don i want to see education cuts right now i want to see us preserve
00:53:01 the progress we've made on community schools on preschool uh on after school for all summer school
00:53:07 for all the work we're doing um that's again nation leading and in the education space i
00:53:12 want to maintain that so yeah there are there's uh that's all subject to um kind of debate and
00:53:19 discussions we're going to be having with the legislature but this two-year process i think
00:53:23 is prudent long overdue and um and we stand ready to defend it the language you've used to denounce
00:53:29 tax increases often has been that you don't want broad-based tax increases you talked about not
00:53:33 wanting corporate tax increases but you know there have been things around the edges such as the mco
00:53:38 tax expansion that you uh you know signed last month um are there other tax and fees that could
00:53:44 generate more revenue and uh solve for this that are being considered by the legislature or others
00:53:48 so that you're comfortable with right now this is what i'm comfortable with i just presented
00:53:54 and we've adjudicated and considered many different alternatives the mco is a very
00:53:59 different process as you know with cms and waivers and partnerships and uh and and drawing
00:54:03 down federal funds etc uh but uh no i do not support uh general tax increases period and
00:54:10 you're you're not comfortable with any other revenue generating um you know provisions uh
00:54:15 i think we need to be more efficient i think we need to level set and align our revenues and
00:54:20 expenditures we're going back to our historic uh revenue um the more typical and historic revenue
00:54:28 growth uh and i think it'd be wise to temper uh any enthusiasm uh for the more is always better
00:54:36 frame and that's referring to taxes good morning governor travis gilmore with the epoch times
00:54:43 there's been a lot of uncertainty about the depth of the deficit the lao projected 73 billion
00:54:49 is the actual number we're solving today if we take the 27.6 plus the 17.3 plus the 20 billion
00:54:55 in solutions they said were included in the january proposal are we solving about 65 billion
00:54:59 yeah let's go to the i appreciate this and uh we've got a slide here we can get it up um on
00:55:06 the lao and the dof which department of finance projections uh you can see this is the delta i i
00:55:12 cautioned everyone i failed miserably not to run with that 73 million dollar figure but but billion
00:55:18 but everybody you know i'm just it's sort of repeated as gospel across the country um if you
00:55:23 include the totality of january in the revision um our projected shortfalls at 44.9 um again that's
00:55:32 not the budget problem today but that if you add those two up so there is a delta between their
00:55:37 projections and ours and foundationally in this i could there could be 25 pages um to be fair um
00:55:45 that's where the difference lies um on different projections on revenue different approaches to
00:55:51 prop 98 revenues impact on prop 98 uh how you address 98 and then just work workload which is
00:55:58 another fancy way of saying expenditures uh and sfeu is uh that safety account that that uh that
00:56:05 basically surplus account checking account of sorts so that's the difference um they will have
00:56:11 and they continue to have their point of view we respect them we have great working relationship
00:56:15 with the lao um and we learn a lot from their insights and thoughts and uh and uh and we have
00:56:22 outstanding dialogues and we hope they uh uh learn from finance team which is all assembled here job
00:56:29 well done everybody by the way thank you uh joe in particular and erica uh we appreciate all your
00:56:35 hard work on this so that relationship you know is is outstanding but but this is the difference and
00:56:41 uh we just um we never anticipated that number to uh to be accurate and uh our numbers suggest
00:56:49 something radically differently and then can we explain to californians how we move from 100
00:56:54 billion dollar surplus to such a significant deficit in just a matter of a few years well it's
00:56:59 uh yeah we can explain it 349 billion dollars of unprecedented capital gains 11.6 percent
00:57:06 uh when traditional capital gains is around 5.18 percent on average it's almost double so you have
00:57:14 massive volatility you have requirements under prop 2 the gan you have requirements under prop 98
00:57:21 which require that set aside we use 93 of our surplus which is i want to be careful um either
00:57:32 on the higher end or without precedent for one-time purposes so we anticipated because we didn't want
00:57:40 that surplus to go to ongoing commitments we anticipated that shortfall um what we didn't
00:57:45 anticipate is these rain bombs in december january february and march uh these atmospheric rivers
00:57:54 that led to a federal declaration that led to fema and the irs moving in a direction where we
00:58:05 couldn't collect our taxes until i believe november 16th as opposed to april 15th and so therein
00:58:14 lied this blackout period that beguiled all of us the lao finance economists experts and
00:58:22 interestingly i mean has been at the white house recently had an impact in terms of the irs
00:58:29 collections as well with their estimates because there were other states that had similar delays
00:58:34 in their taxes related to weather events if there was any indication that climate change
00:58:40 has impacts well beyond those that are often promoted i would consider our financial delays
00:58:48 as just another example of why we need to tackle them another reason i'm looking forward to
00:58:53 conversations that we'll be having next week in the space thank you governor thank you
00:58:59 hey governor well i haven't talked in a while angela hart um kff health news
00:59:06 thank you i have a recently the state auditor found um that california wasn't doing a great
00:59:13 job on tracking its homelessness spending and um this isn't a gotcha question um you're doing more
00:59:19 than any other governor in the country really to address this crisis so i have a two-parter for you
00:59:24 um do you acknowledge governor is your administration doing enough
00:59:29 um to determine whether the money that's being plowed into homelessness is being well spent
00:59:35 um and and do you worry i'm curious do you worry that the appetite is souring among the public for
00:59:41 for spending more given the lack of progress that's happening no i appreciate the question
00:59:46 in the frame uh it's it's it's the right question so when i ask myself all the time
00:59:50 as you know from the audit uh one of the vaccine issues that was highlighted in the audit was local
00:59:56 uh appropriations local data collection and it's difficult uh at the state level
01:00:04 um i say it often localism is determinative and uh and each city and county has different strategies
01:00:10 and approaches we've tried to level set that to your subsequent question about doing enough as you
01:00:15 know a few years ago we required accountability plans before we submitted at least one of the
01:00:20 discretionary portions the hap program uh to cities and counties and cscs um i rejected the first
01:00:28 plans because i didn't think there was enough transparency and accountability and ambition
01:00:32 we supported uh the last plans i also acknowledge that we need to do more not just in the homeless
01:00:39 bucket but also the mental health slash homelessness bucket that's why proposition
01:00:43 one had subsequent reforms as it relates to requirement by july of 2026 uh to have one
01:00:50 single plan for all funding sources for mental health uh at the local level with more transparency
01:00:57 auditing and oversight again of the local spend so that audit didn't surprise me in the least
01:01:04 quite the contrary also third and this is really important um angel you know this well but for
01:01:10 others perhaps don't um we also promoted and i couldn't be more proud of uh member ward introducing
01:01:17 just a few days ago um the proposal to take the framework of our housing accountability
01:01:26 unit which by the way has unlocked 23 000 housing units in the state
01:01:29 i'm really proud of their work um and to connect a homeless component uh into that accountability
01:01:40 framework which i think is deeply in the spirit of the zeitgeist of what the uh the audit uh was
01:01:46 at least showcasing and so that's another tool we hope we are able to have if the legislature
01:01:53 embraces it in the next few weeks i'm sorry governor i didn't hear responses to either of
01:01:58 those questions um about whether this is state money ultimately i understand it goes to the
01:02:04 counties but do you acknowledge whether the money that the that the state isn't doing enough to
01:02:09 ensure that the money is being well spent i also didn't hear a response to whether you think that
01:02:14 there's any i mean is the public appetite do you think i'm hearing this like souring towards putting
01:02:19 more money into the credit i didn't hear responses to either of those well and forgive me i'll
01:02:24 if i appear to repeat the first spot so the audit did not surprise me
01:02:31 the state has advanced unprecedented investments you're correct and unprecedented interventions
01:02:41 demanding more accountability with state money at the local level that's why we created a framework
01:02:48 for the state first state plan under the hap money the fact that i rejected it in many ways
01:02:53 is implicit in response to the question i rejected it for a reason around the issue of lack of
01:02:58 accountability in terms of ambition and in in terms of what was presented in that first plan
01:03:05 the fact that we're creating a housing accountability unit equated one and we want to
01:03:09 incorporate homelessness into that also is implicit in response to your question about the need to do
01:03:14 more around state money and the other work we did with proposition one to foundationally reform an
01:03:20 existing stream of funding to provide more transparency and state oversight of the local
01:03:25 spend again as a third i think uh reinforcement of my acknowledgement about the need to see more
01:03:35 accountability and why i agreed as i said with many of the recommendations and was not surprised
01:03:40 as i noted with the audit itself as it relates to the public mood no question more is not always
01:03:47 better people want you know they want to see results i've been very crystal clear about that
01:03:51 i've been focused as you know particularly on the results we want to see on the streets and sidewalks
01:03:56 and tents and the issues around encampments that's why those encampment resolution grants we think
01:04:01 are a national model also been very insistent that we need to move some barriers in terms of
01:04:07 engagement as relates to accountability and results at the local level as it relates to
01:04:12 the grants passed and the amicus brief we filed with the united states supreme court so all those
01:04:17 are demonstrable responses not rhetorical but demonstrable responses to both components of your
01:04:23 question thank you that was that was extremely thorough thank you um my second question um
01:04:28 governor i think it's only been two years not even quite since you passed a historic um funding
01:04:34 increase for california's extremely underfunded public health system um 300 million dollars
01:04:40 ongoing um it looks to me that this is completely being wiped out in your budget proposal
01:04:45 um meanwhile i mean as you well know climate change is upon the the the the the threats the
01:04:53 the public health threats that come with climate change are enormous where there is a really big
01:04:57 concern right now about bird flu um and dairy supply i mean it's really the the i guess my
01:05:03 question for you is what do you say to people to the public who worries that defunding public
01:05:10 health at this critical juncture further further opens up california to and really the globe
01:05:15 some public health and pandemic threats which um you know the pandemic has additional
01:05:21 financial disasters which in some ways put us where we are today yeah look um we have a short
01:05:27 fall we have to be sober about the reality what our priorities are unprecedented expansions in
01:05:34 terms of the medicaid system here in the state of california under medi-cal unprecedented
01:05:39 investments in the health and human service space unprecedented uh we have no peers as it relates to
01:05:45 the investments we've made uh this is a program uh that uh we wish we could continue to absorb
01:05:52 and afford uh obviously we'll have the opportunity to discuss this with the members of the legislature
01:05:57 and make a determination before it lands on my desk whether or not that program or other programs
01:06:03 should be considered in relationship to the need to balance not just this year's budget but next
01:06:07 year's budget as well hi governor kayla moeller with cbs news here in sacramento um how will you
01:06:17 measure success for this model of budget year plus one you mentioned earlier that this could
01:06:24 become the new normal so what does success look like to you that it will indeed become the new
01:06:28 normal well i look i i think it should uh that's the way i i'm i'm promoting a different paradigm
01:06:34 of consideration and thinking we'll see where it lands with the legislature we've had some really
01:06:39 good conversations though with key staff and uh we're encouraged uh by their willingness to
01:06:46 express a willingness to engage in this and i think under the circumstance the last few years
01:06:50 uh there's there's ample evidence as to the why so i'm hopeful we could do that in my previous
01:06:57 roles and executive positions we've adopted similar strategies we've codified that in statute
01:07:03 to the extent uh this is an effective uh relationship in terms of our thinking and
01:07:11 with the legislature and that may be a consideration of the future i'm not promoting that at the moment
01:07:15 but but that's my mindset and uh it's a mindset that i expect uh subject to external uh circumstances
01:07:24 but i would expect to continue to adopt in my remaining three uh sessions that said um you know
01:07:32 it's hard to look beyond uh budget year plus one as i noted earlier because of so much volatility
01:07:39 and uncertainty but i do think it's important that we have a a medium term mindset we have
01:07:46 multi-year budgets as you know with projections which are also important that didn't exist in
01:07:49 the past uh those provide you some understanding of what to anticipate in the future but it's very
01:07:55 difficult on the basis of the macroeconomics and in this revision um programs are being put on pause
01:08:02 so how are you going to ensure that they will indeed resume and that not year after year that
01:08:07 they're getting forgotten about well you can go to i think it's on the eight pages that we provided
01:08:11 you and i'm making this up but if i'm right and there'll be another one of those salads from
01:08:16 january uh that on the bottom of page nine i think there's a headline says triggers and it's the top
01:08:23 of page 10 and there are i think seven specific trigger items um that are bulleted um and and
01:08:33 and and they're triggers as it relates to things we've worked with the legislature formally to
01:08:38 prioritize if and when the money comes we would prioritize these things first and that's a similar
01:08:44 process that will unfold i imagine based on past uh with the legislature as it relates to these
01:08:50 delays what are our top priorities if and when the resources avail themselves and so we'll have that
01:08:57 similar mindset it's been a a proposition that we've advanced in the past it's more difficult
01:09:04 when you're looking at the two-year to assign um the the moment within that budget frame
01:09:11 but that's that's the approach i would take to rebuild uh some of these programs that by definition
01:09:17 we all supported again these are budgets i signed what is out here every question you're asking is
01:09:22 spot on why this well because we have a math problem um is this what i want to do no but the
01:09:28 alternative you know we can we can eliminate our expansion of health care we can eliminate uh wages
01:09:33 we can eliminate we can do furloughs we can do layoffs we can do a lot of things i don't want to
01:09:38 do those things so these are the things that in the absence of those other things that you know
01:09:42 are difficult to do and so triggers provide that pathway and those are examples of triggers in the
01:09:48 past and there'll be more triggers i imagine in the future as relates to this budget as well thank
01:09:53 you thank you hello mckinsey maize with the la times um there is no info about 525 the health
01:10:02 care minimum wage in this budget can you update us where those negotiations are i'm going to get it
01:10:07 done this budget will not be signed without that deal that we committed to being addressed uh and
01:10:13 i believe there's a trigger in january and then we are working to address it in july and dana
01:10:19 williamson is the point person for this my chief of staff who's done an outstanding job on the
01:10:24 budget uh she's under deep duress that i pointed her out and this issue out in relationship to her
01:10:30 responsibility and stewardship and leadership uh to fulfill the core tenets of what was committed to
01:10:36 but that will get done uh before the budget can you give us a hint about what the holdup is like
01:10:41 will worker should workers be expecting to not get that one of the one of the things i've learned
01:10:48 the hard way is talking to publicly about a process that's unfolding in real time and so
01:10:55 i know that that will reveal itself in very short order as we stated it would within this
01:11:00 fiscal year and uh and we maintain that status and and we maintain that expectation how do you
01:11:08 sort of navigate that especially when people are talking about transparency in the capital right
01:11:12 now why is it you know what what does the public um what do you owe the public i guess especially
01:11:18 workers who are concerned that they're not going to get this money well it's the same posture of
01:11:22 expression that i did in january on this when i signed the bill and read my signature related to
01:11:28 the bill and uh and the commitment that i just made to you and reinforced today that it will
01:11:33 get done before the end of the fiscal year you had said you had some concerns about it then can
01:11:40 you explain a little bit more i'm gonna i'm gonna and i'm gonna say with respect and i appreciate
01:11:44 um i appreciate um the work you've done on this and articles and i think it's really important
01:11:52 and um and i thank you for that um we've got a few weeks to land this and i want to land it in a way
01:11:58 that works for everybody and fulfills the commitments we made and and that's just my
01:12:03 responsibility um and i just want to leave it at that at this moment if i okay i'll move on
01:12:08 i appreciate sort of um do you think this wage um industry specific wage hikes are the way to go and
01:12:16 would you support a higher minimum wage for all well we have one of the highest minimum wage
01:12:21 country in the state of california long supported local level not just at the state level and
01:12:26 sectoral bargaining is something obviously we embraced as it relates to one industry that we
01:12:32 think was disproportionately under uh undervalued um and under supported but at this moment i'm not
01:12:40 promoting any additional uh ideas i'm trying to address uh the acuity of the enormity of the task
01:12:46 in front of us uh nothing is on my desk or nothing that's pending in terms of a promotion in that
01:12:52 space uh eminent from this administration okay and just a logistical question uh today's a little
01:12:58 bit different than past may revises usually the budget doc is like hundreds of pages today's is
01:13:03 less than 50 um are we expecting like a may revise part two to come or is this it no you get with all
01:13:09 the i think everybody has all the details lao and everybody and you got hundreds of backups and you
01:13:15 could talk to talk to talk to the experts here talk to the printing press folks yeah okay
01:13:20 hi governor this is adam beam with the associated press um the lao called your proposal to
01:13:30 address the eight billion dollar difference in the proposition 98 minimum guarantee um they
01:13:38 called that bad fiscal policy they said it would be you know kicking the deficit down the road
01:13:44 are you are you still committed to that in this in this budget and why clearly um and it's 8.8 now
01:13:50 well why are you committed to doing it that way because i want to maintain the commitments in
01:13:56 terms of the investments we've made which i think are incredibly important i don't want to see
01:14:00 thousands and thousands of pink slips go up i don't want to see the disruption in the system
01:14:04 um joe and the team could talk more about some of the technical side as i said you need not only phd
01:14:11 but you need a physics degree and engineering degree and everything else related to prop 98 to
01:14:17 unpack its complexities adam and i know you know enough about that over the years uh but we
01:14:23 respectfully disagree with with with that position uh on the slide earlier it mentioned about a 500
01:14:30 million dollar one-time cut for water storage i know that you've been a big proponent of the delta
01:14:37 conveyance and uh sites reservoir that would this cut impact either of those projects nothing
01:14:42 directly related to our number one climate resilience program and that's the delta conveyance
01:14:50 nor uh to the work we're doing to fast track through the first judicial review process related
01:14:55 to our permitting reforms uh sites the first above ground off stream storage facility in the immediate
01:15:01 and that money has been sitting there uh but will not be drawn down for some time so we looked at
01:15:06 the timelines on that so we don't see any direct impact you can argue there's an indirect i'm
01:15:12 mindful of that also as i noted mindful of the old prop 1 and the 2.7 billion and what's been set
01:15:18 aside i'm also mindful of what others may not be mindful of and that's the work we're doing with
01:15:22 the feds in this space and also mindful of other ideas we have in relationship to sites to keep
01:15:29 that project uh moving forward and to get this project done so no i'm very eager to see both
01:15:35 complete uh but it's the right question in relationship to sites more than it is to the
01:15:40 delta conveyance and we have some ideas that we'll be pursuing to address whatever anxiety may be
01:15:47 there but in the short run we don't feel there's any real concerns and finally uh you mentioned
01:15:52 that you feel like this um the budget the revenues declines and everything that we've experienced
01:15:57 you've characterized it as a return to normal like historic norms and that you know what was
01:16:02 happening previously was was not normal you know this crazy amount of budget surplus infusions we
01:16:09 had so if that's the case do you regret decisions made previously spending decisions on that when
01:16:14 we had all this money should we have been more prudent and saving and 93 i mean uh
01:16:19 set aside 93 i remember i had a slide you remember a may revise i said i wanted 99 y'all laughed
01:16:25 and i said well if i can get anywhere near 90 i think historically even brown during those years
01:16:31 fiscal conservative i don't think he broke 89 so no we we knew this was coming at him and that's why
01:16:38 we set aside these one-time programs that we can claw back or extend or promote from a five years
01:16:44 to seven or three years to five or one year to two years so no we we were very sober and if you go
01:16:49 back to those presentations you'll see me very open about uh about that anxiety so no we tapped
01:16:56 out on our reserves we had a gan issue that provided 18.1 billion dollars of tax relief
01:17:02 we had 600 reliefs people earning you know under ssi ssp we uh you know we provide a lot of support
01:17:10 at time people needed the money you had the prop 98 guarantees you're paying down pension
01:17:15 obligations so you look across the panoply and 93 feel like we were doing the best we could
01:17:23 under that circumstance hi governor sofia boleg here from the san francisco chronicle as you're
01:17:29 well aware student protesters across the country including at public universities here in california
01:17:34 are calling for their universities to divest from companies that do business with israel in light of
01:17:40 the war in gaza what's your response to those protesters i don't support divestment what do
01:17:46 you have a reaction to the agreement that the leadership at sac state has made with the protesters
01:17:53 and on that sofia interestingly and this is not to deflect um i actually going to learn more about
01:17:59 that in a few hours because i read one thing on this thing called instagram uh and then i was
01:18:06 told something very different by a member of my staff and those two things need to be squared
01:18:10 so i can answer your question so follow back up with us in a few hours would love to follow up
01:18:14 about that um also wanted to ask you um about uh that i'm on instagram a lot i just someone said
01:18:22 that um also wanted to ask you about energy bills um there's obviously a lot of controversy
01:18:28 um with the the budget that was passed last year and the the flat rate rate hike um there's some
01:18:35 discussions in the legislature of of passing something that uh would change that is there
01:18:40 any bill that lawmakers might send you that you would support to to make changes to that policy
01:18:45 i think what pc broad they did was codified the bill that they did sign and send to me a few years
01:18:51 ago as it relates to the flat rate it just came down a much lower number than i think some had
01:18:56 feared and some had promoted the ious in particular it's a lawn the lines of i think smud in fact the
01:19:04 same exact number roughly we're aligning with what other many other states are doing all across the
01:19:08 united states as well and we're aligning with our values and our promotion around per unit costs
01:19:14 of electricity electricity to promote uh this transition to green energy uh and not to
01:19:20 disincentivize people for moving into heat pumps and getting electric vehicles and moving to
01:19:25 electrification broadly including solar so we think it's was prudent under the circumstance
01:19:31 but it's changed now as it relates to the utility cost more broadly i want to remind everybody if
01:19:36 you have it you will see an adjustment on your bill uh tens of millions of people at least well
01:19:43 maybe i'm overstating tens of millions but millions we'll see an adjustment of the bill of 146 dollars
01:19:48 in april from last month and you'll see another one 146 adjustment in october as it relates to
01:19:55 offsets to utility bill that come from our nation leading cap and trade program cause and effect
01:20:01 we're also working across the spectrum other strategies as it relates to addressing the costs
01:20:09 of utilities and so i'm mindful of that issue i was going to spend more time on that today it was
01:20:17 going to get a little off topic with the may revise but i assure you we'll be talking a lot
01:20:21 more about this issue like we will homeowner insurance as well i'm mindful of of the anxiety
01:20:26 that people are feeling so if if lawmakers were to send you a bill are you saying you you would
01:20:31 or would not be an automatic veto on i don't know you know me i i'm not i'm going to read a bill i
01:20:36 don't want to say i'm going to sign anything i need to see what they're talking about they send
01:20:40 me a bill as relates to um this issue a couple years ago i did sign it and we uh we advanced it
01:20:46 so if they have some new ideas or want to undo the old one uh i uh i'll pay attention as i do
01:20:54 how many bills this year just 2 000 other bills i'm it's not a knock it's not a cheap shot look
01:21:03 forward to reviewing as many bills uh that appear to be progressing as possible just not big tax
01:21:11 increases hi governor ashley zavala with kcra3 uh the california supreme court is set to make a
01:21:19 determination on whether the taxpayer protection act gets on the ballot and amid this discussion of
01:21:24 volatility and taxes and reform just what from the state's perspective is you that you find the
01:21:33 biggest threat with this act should it pass should voters approve it and and and forgive me but i
01:21:39 hope you you really do appreciate it would be if i'm gonna dodge on a hypothetical about a bill
01:21:47 that i haven't seen in print or a bill that may be in print that i haven't reviewed in relationship to
01:21:53 the issue of utilities i want i want to be careful about actually discussing something that's in
01:21:59 front of the supreme court as we speak um and and and be careful about uh uh expressing anything
01:22:07 more than what was expressed by not only myself but former governor brown and others as it relates
01:22:13 to the filing which details my concern about that initiative i will just for broad strokes purposes
01:22:22 remind you of something that is not often in print and that's the retroactivity that's a separate and
01:22:28 above from the legal question but the retroactivity of 100 plus already approved local measures the
01:22:40 impact that would have would be felt and outsized and make a lot of the conversation we're having
01:22:46 today significantly materially different so i just i caution that as a part of the sort of
01:22:54 punditry on this i hope people really look through uh what that could mean again separate and above
01:23:00 from the legal questions in front of the california supreme court okay separate separate from that um
01:23:05 and i know i know this question exhausts you but i ask because i know this is the start of a give
01:23:10 and take with the legislature and and i don't think any of us would be surprised if one or two
01:23:17 or a group of democratic lawmakers came to you and said we'd like to raise taxes on xyz so is it is
01:23:23 it fair to say that it is an absolute non-starter for you yeah look look again i'm not ideological
01:23:30 i'm open argument i'm interested in evidence but i don't see there's real evidence and need right
01:23:36 now to increase general taxes in the state and put more burden on working folks um and and and and
01:23:43 our competitive posture so no uh i would have laid that out if i believe that and i did not uh i do
01:23:50 not believe we need that this year or next year and um and so i will not be promoting um and will
01:23:56 not be supporting subject to some random act of god and having experienced a disproportionate number
01:24:04 of those in five years uh i add that as an asterisk okay so you will not be convinced well
01:24:11 no the answer is no okay yeah i don't know how many times i can say no to that tax question
01:24:19 but everyone thinks you know anytime you do anything you add a fee then it's a tag get it
01:24:23 so everyone's just you know i've been doing this too long anyway hi governor andrew oxford
01:24:28 from bloomberg you mentioned wanting a trailer bill on homeowner insurance can you talk a little
01:24:34 bit more about what you want to see in there and why you want that before the insurance commissioner
01:24:40 is complete it's complete i just i want to see here's the spirit of what i want to see we got
01:24:44 to move this process along here's my humble submission point of view uh we can't wait
01:24:51 till december can't that said i'm deeply mindful intimately deeply mindful of how hard the staff is
01:25:00 working over there uh how difficult this task is and i'm very grateful to the insurance commissioner
01:25:07 for his willingness to engage in this process and his deliberativeness in terms of the reforms he's
01:25:14 promoting but it has to come sooner so we're promoting a 60-day process of review it should
01:25:21 not take this long for emergency regs i am almost of the temptation to do an additional executive
01:25:28 order but under the circumstance i think working with the legislature on a trailer bill is more
01:25:35 appropriate but we've got to move this process along 60-day process of review for for the reg
01:25:42 for the rates review for the rates uh and then also don't have the full details in front of me
01:25:49 so can you talk about the air resources board are you expecting that they will be funded to
01:25:55 implement sb253 uh on the time frame that's outlined in the law we'll get into that a little
01:26:01 bit more they should have the resources but let me let me get back to you on the specifics related
01:26:06 to carbs relationship to that bill in terms of staffing i think there was a big staffing request
01:26:12 we think they can refine those resources to achieve the same goal without the magnitude of
01:26:16 that request being fulfilled or at least the numeric but i'll get some more detail and
01:26:21 and but not at the level they originally wanted we're gonna have a separate conversation it's
01:26:29 funded in the it's funded in the budget i just don't want you to come back and say it wasn't
01:26:32 their original they had maybe i know this is what happens when you do this for a living there was
01:26:37 an original proposal where i'm like guys you know this is this was too much of an ass they got the
01:26:42 the ultimate compromise and they got the they got the budget is the answer thanks there you
01:26:47 not to lay the air resources board out sorry that was uh that was the chair randolph and looking at
01:26:54 the camera hi governor jamie kennedy from spectrum news you talked about pausing child care expansion
01:27:01 slots you also said everyone's doing it leaner at the moment so the state government has to but
01:27:07 if everyone who's already at the vulnerable stage has to do it leaner um and they were expecting
01:27:13 a child care slot what do you say to the families that were hoping to get into something like this
01:27:18 well then we have more work to do and we've been doing more than i imagine we could do three years
01:27:24 ago i mean if the idea that we had a 200 000 i remember we called it a stretch goal a couple
01:27:29 years ago then it was 100 000 and then i said we'll do 150 and then we went back maybe we can
01:27:34 achieve this 200 000 so i would tell them our resolve remains firm but reality check we don't
01:27:40 want to take away an existing slot 119 000 we're going to protect that and we chose and again
01:27:46 legislature may have different point of view they may say well we don't we want to sacrifice the
01:27:50 wage i don't believe that's the right thing to do but they may say we want to sacrifice the wage
01:27:54 increase because slots become more important i think that would be a mistake but but we may be
01:28:00 able to fund some other common common strategy um because i maintain firm in my desire to see that
01:28:07 goal is what i would tell those those families and with cal works um with the reductions you said i
01:28:12 believe on the administrative side of things with more people needing more um from cal works because
01:28:20 more people are doing it tough if you're putting any more strain on that weren't that also not much
01:28:24 strain that's an administrative function at the county level that's not a direct impact the cola
01:28:29 remains firm in the budget and i'll remind you since i've been here 10 in 2019 in january we did
01:28:36 a 13.1 on top of that later you saw other incremental increases including the cola
01:28:42 that we're holding today so cal works is not being cut in that respect this is an administrative
01:28:47 function at the county level all right thank you and then just lastly state of the state when can
01:28:52 we expect that why is it taking so long like we've just finished it today uh uh as we're going off
01:28:57 topics uh looking forward to it's just defining the time and the space with the legislature and
01:29:01 we've met with legislative leaders on two occasions and uh we were running around with
01:29:06 certain dates i'm glad you care you're the first person
01:29:10 which was so good last year god bless yeah thanks hi governor becca hobbiger with abc 10 news i want
01:29:18 to circle back to the added urgency to the already urgent homeowners insurance affordability and
01:29:22 availability crisis i'm wondering whether you and commissioner laura have been speaking with
01:29:27 insurance companies to get reassurances that if a then b if the state expedites the rate
01:29:32 request approval process if that forward-looking modeling actually gets on board sooner rather
01:29:37 than later then these companies will come back and write once again yes and yes and yes that's why
01:29:42 i'm moving forward this trailer bill let's go so you're hearing for them we've been meeting with
01:29:47 everybody on this strong opinions about time to uh this process i mean time to decision making on
01:29:55 on resolving these open-ended questions around reinsurance around uh guaranteeing insurance
01:30:00 within the wui guaranteeing that people come back in the market the rulemaking but all the above all
01:30:05 the things that were laid out in the executive order all the things that the church commissioner
01:30:08 himself has very publicly pronounced in advanced all the things that a lot of the insurers
01:30:13 themselves have been promoting with again deep mindfulness of prop 103 deep mindfulness of those
01:30:21 that have consumer concerns and maintaining that price balance but availability price that finding
01:30:28 that that uh that that balance but time is important in terms of the rate decision making
01:30:34 and that's what we're promoting uh as a short-term step and continue to promote the larger package
01:30:40 uh in partnership uh with the insurance commissioner and undoubtedly december as you
01:30:44 mentioned is already an expedited process but what would you say to the average homeowner who
01:30:48 all over california i'm thinking of folks i've talked to in the foothills who say look i'm
01:30:51 retired i'm on a fixed income i simply can't possibly live in california for much longer
01:30:56 i'm with them that's why we're doing the trailer bill i'm with them that's why i did the executive
01:30:59 order um i i could not um i can't impress upon them more the the urgency uh that we share together
01:31:09 to move this process along i'm also deeply mindful of the burdens have been placed and the stress on
01:31:14 the fair plan and um and just full disclosure uh participant in the fair plan in the foothills so
01:31:20 uh to those specific individuals uh we share uh similar uh experiences as well
01:31:26 final question um i'm taking a page out of a ton's uh book over there uh as you are well aware i'm
01:31:33 sure yesterday rumors were swirling that this may revise could include furloughs obviously that is
01:31:37 not the case but to the 240,000 state workers uh can you state explicitly that your proposal does
01:31:42 not include furloughs there are no furloughs there are no layoffs we're not asking for
01:31:46 wage cuts or concessions we are asking for 7.9 efficiencies in this budget that will impact
01:31:53 our administration uh and uh and we are looking to sweep those vacant positions vacant
01:32:00 positions going forward which total roughly 10 000 thank you thank you
01:32:04 thank you
01:32:05 hi it's laurel rosenhall from this from the la times um i just was wondering if you could address
01:32:14 the question of bonds obviously there's proposals floating around in the legislature and how did
01:32:19 your own experience with prop one shape your you know risk receptiveness to any bonds that might um
01:32:28 happen this year do you want any yeah um so um
01:32:33 there are three parallel conversations that are taking shape you can argue four or five but three
01:32:41 uh that are core conversations around three different topics climate issues related to housing
01:32:52 and schools there are proposals and there's desire from members of the legislature promote
01:32:58 one two or all three those conversations continue i met with many of the caucuses over the course
01:33:06 last few weeks to have more granular conversations and continuing to meet with leadership our teams
01:33:11 are meeting at staff level with leadership about where we are as you know on the school bond in
01:33:17 particular there's a component part as relates to housing uh and general fund impacts that must be
01:33:22 considered the questions there as you know also remain around should higher education be included
01:33:28 or should they not as it relates to climate we were able to substantially protect the climate
01:33:33 budget as was promoted in january plus we've received and this is an update from january
01:33:38 now 15.9 billion dollars from the federal government uh that is substantially higher
01:33:45 than we even projected in january of additional funds that have come uh to enhance our larger
01:33:52 our largest sub-national climate uh budget uh on the issue of housing ongoing discussions
01:34:00 key legislative leaders uh that care deeply about that space so we we we're maintaining a posture
01:34:06 of engagement we'll make a determination we'll look at the bond thresholds overall we'll look
01:34:11 at the long-term costs of those bonds as relates to absorbing more of the general fund and as it
01:34:16 relates to the issue of march in the experience we had i'm mindful that march experience is very
01:34:22 different than a november experience uh but yes even that experience of march sobered uh i think
01:34:29 a lot of the conversation up here about uh where people are and it goes to i think one of the
01:34:35 questions was asked earlier about public's appetite um and the public wants to see results
01:34:40 they're not interested in inputs they're not interested to talk about how much money we're
01:34:44 spending they want to see results and they deserve results and they demand results and so
01:34:50 when we're out there uh promoting these bonds we need to be mindful of that and that's
01:34:54 deeply to your question part of the conversation we're having with legislation so how many of
01:34:58 those three do you want to see on the november ballot i'm working with the legislature in a
01:35:01 process to see where the where they are and make a determination and um and uh we'll let you know
01:35:07 but um we're we're right now uh working in partnership with the legislature to see where
01:35:13 we land on these things and nothing more to say at this moment so also related to the november
01:35:18 ballot um but not on bonds i mean this next six weeks is kind of the season when a lot of deals
01:35:23 get made in sacramento to get things taken off the ballot um are there measures that you are
01:35:29 actively working to get taken off the ballot apparently dana williamson gave that up by
01:35:35 smiling uh right there that's all i can't tell you how many hours of the day were consumed uh
01:35:41 we're you it's a very good question a very thoughtful question uh it's very accurate uh
01:35:48 that this is the season uh and we are uh engaged in a number of advanced conversations uh around
01:35:56 around these initiatives and uh stay tuned any priority ones you really want to get off the
01:36:02 ballot at peril once again of making the mistakes i used to make i'm going to make new mistakes but
01:36:09 i don't want to make the same mistakes that i used to make of saying anything more would be
01:36:13 imprudent this moment okay thank you thanks and that is our last question well with that
01:36:21 i want to say that concludes the state of the state but uh uh now that there's interest i may
01:36:28 i may defer uh but let me thank you all again for um uh the opportunity and and and let me just once
01:36:35 again reinforce this isn't without uh yeah these are difficult decisions and i'm very mindful
01:36:42 there's things we haven't discussed that will hit people hard these deferrals mean a lot to a lot of
01:36:47 people there were expectations that were set over the course of the last few years and unfortunately
01:36:52 we're not able to advance that on the basis of this new reality and so i'm i'm sensitive to that
01:36:58 i'm sensitive to those concerns and it's a way of reinforcing that we look forward to engaging the
01:37:05 legislature constructively to address these gaps to address the concerns to reappropriate to
01:37:12 reconsider to reprioritize again the vast majority of what i promoted here are things that in the
01:37:18 past promoted as cuts or things in the past i've promoted as investments and so by definition the
01:37:25 posture is one of engagement with the legislature in terms of addressing their particular concerns
01:37:33 co-equal branch government deep gratitude to the legislature for their patience throughout
01:37:39 this process and we're looking forward to the next number of weeks thank you all very much
01:37:44 and with that the real budget presentation is about to happen
01:38:02 good afternoon again uh first would like to start by acknowledging all the hard work that our
01:38:13 department has done to get us to this point i can't express enough how much work it takes to
01:38:19 present the governor's budget and the governor's may revision to the legislature particularly at
01:38:28 the may revision when we have to incorporate april tax receipts we have from the end of april until
01:38:37 this press conference to deliver the may revision and the hard working folks at the department of
01:38:44 finance work non-stop day and night to make that happen i just can't express how much i appreciate
01:38:50 that um to erica lee the chief uh uh deputy for budgets for the department uh and the rest of the
01:38:59 executive team all the pbms are here uh just want to acknowledge their work and thank them also would
01:39:04 like to acknowledge and thank all the work in partnership with the governor's office staff
01:39:09 and the cabinet secretaries agencies and departments this is obviously from the governor's
01:39:14 presentation has not been an easy budget and it's been a real team effort within the administration
01:39:22 to get to this point i'd like to start by adding a little bit of additional context to the governor's
01:39:32 presentation he did a fantastic job of outlining the proposal uh why we're taking the approach that
01:39:38 we're taking but i just want to highlight that at this time last year there was significant
01:39:43 uncertainty built into our revenue forecast as the governor mentioned and the approach we took
01:39:48 at may revision and ultimately when we um came to a deal on the 2023 budget act with the legislature
01:39:55 we held on to all our reserves we um didn't take real drastic steps in either way uh understanding
01:40:04 that uh there was that significant uncertainty built in because of the irs tax delay and we
01:40:11 wanted to wait and see and we said at the time um how things shook out for the governor's budget
01:40:17 we didn't know at that time that the irs would delay the tax filing for 99 of the taxpayers in
01:40:23 the state uh further through november but now here we are at the may revision and we have
01:40:29 a a better understanding of what happened in terms of our taxes for tax year 2022 and now 2023
01:40:37 and we can see um that we as we had at the governor's budget we've had a little bit of um
01:40:45 softening our revenue since the governor's budget but not a huge swing and we can see we still have
01:40:51 these huge uh shortfalls in the out years and um giving all of that know that uh this is the time
01:40:59 that we need to address those shortfalls in order to ensure that the state is able to protect the
01:41:06 programs and services that uh the residents of california rely upon and i think it goes to some
01:41:12 of the questions on um as the governor mentioned this cut or that cut obviously these are all tough
01:41:17 decisions we would don't want to be in this position to be here proposing cuts um as the
01:41:24 government mentioned we tried to focus on protecting the core programs and services that
01:41:29 people rely upon but even in doing that tough decisions had to be had to be made um and this
01:41:36 puts us in a place where when we are building when the department of finance starts working
01:41:42 on the budget for next year in just a matter of months we are not facing another shortfall
01:41:48 this is to intention here to right size our budget so that we can then um in future budgets
01:41:54 work on advancing and building back up all of the efforts uh and and um and programs that
01:42:03 programs and efforts that are underway and i'll just highlight uh that that point um
01:42:10 more finally at the governor's budget the budget year plus one uh negative special fund for
01:42:17 economic uncertainty our our basically our operating reserve was uh negative 33.1 billion
01:42:24 dollars and so that meant and we are required to have a positive balance there um when we are
01:42:30 presenting and acting a budget and so uh that meant if uh if we had a similar uh budget year
01:42:37 plus one at this time that in a matter of months when we were heading into building next year's
01:42:42 budget we would be back at the drawing boards in terms of um looking for solutions and it would
01:42:48 be tougher at that time because a lot of solutions that we are utilizing now including cuts that are
01:42:53 hard uh would no longer be available at that point and that is why it was important to really
01:42:58 get back uh into balance not only in the budget year but in budget year plus plus one and as the
01:43:04 governor mentioned that is exactly what this budget does and so uh in addition to having a 3.4
01:43:10 billion uh dollar um special fund for economic uncertainty balance in 2425 which is a similar
01:43:18 uh balance that uh that we had at the the budget act we are we have flipped that 33 that negative
01:43:25 33.1 billion dollar balance in 2526 to now be a positive 650 million dollar balance i also note
01:43:34 kind of in the approach i know there's a question about delays deferrals that um that uh yes there
01:43:41 were some that were included in the governor's budget but at the approach that we're taking at
01:43:46 the may revision uh really minimizes additional delays and deferrals and um really focus on um
01:43:53 aligning expenditures with revenues and bringing that budget back into balance as far as the um
01:44:00 the uh the eight pages the document overview of the budget uh that uh folks received today and i
01:44:06 know the question about the size versus previous uh versions that the document today really reflects
01:44:12 the the approach that we're taking in the budget where um uh we are you know the the this budget is
01:44:20 about uh uh solutions uh to uh not only solve for for the budget year but the the um the
01:44:28 subsequent budget year and uh the eight pages highlight the major solutions uh that get us there
01:44:35 and um within a matter of an hour or so we will also be providing a detailed list of all of the
01:44:42 solutions that are part of the may revision proposal as the governor mentioned there are a
01:44:48 few hundred of them uh the major ones are in the eight pages uh but there are many minor uh
01:44:55 solutions many of those uh reductions that um we will post that list on our on our website
01:45:02 um the eight pages historically is a document that is an overview of the high level uh um
01:45:09 significant issues in the budget and is never comprehensive of everything in the budget and
01:45:14 we are providing that document today so um so it's available to the public on all of the uh all of
01:45:20 the solutions that are contained um uh in the budget in one place in in one document um
01:45:27 so when we the the when we uh have the press conferences here and uh the information that
01:45:47 we present is is we are presenting the information that we normally present um with the may revise
01:45:54 there are um uh backup documents that are provided to the legislature uh and those will be uh uh
01:46:02 provided by the may revise deadline which is uh uh tuesday so there will be some subsequent backup
01:46:10 documentation that um goes to the legislature that information is stuff that we typically provide
01:46:19 and sometimes that rolls out over a number of days so there's not a change in terms of the
01:46:26 amount of information that's being provided or the process and it will all be provided
01:46:31 by the may revision date of uh tuesday
01:46:40 no no
01:46:41 okay um uh lastly just wanted to clear up one thing the governor talked about the uh prison closures
01:46:57 that the he was dead on on the mount uh the savings weren't but four prisons closed uh
01:47:03 in eight facilities uh uh in the last few years um the behavioral health continuum infrastructure
01:47:13 program he mentioned the uh the amount that was provided for the program which is accurate but
01:47:17 with the the solutions that uh um we have proposed uh the total amount of funding for that program
01:47:24 is now 1.75 billion uh dollars and uh with that i will open it up to questions
01:47:32 hey excuse me thank you for taking our questions again it's angela again from kff health news um
01:47:41 i had a question about joe the last budget it was approved but because it's a federal medicaid
01:47:47 waiver some of the funding streams it hasn't actually gone through yet i don't think the
01:47:52 transitional rent waiver through cal aim are you familiar yes so there was a transitional rent waiver
01:47:59 that went through the budget last year although it's not in place yet it was supposed to be done
01:48:03 by the budget by this uh the beginning of this upcoming fiscal year um so do you know has the
01:48:10 state received approval final approval from from cms to do the transitional rent waiver and if so
01:48:18 when does that start um all i can say is there's no changes to the assumptions in our budget and i
01:48:24 think we're still on track but um uh our program budget manager over our health programs can follow
01:48:33 up with you great great can i okay great can i chat with you hi sorry just a quick question um
01:48:39 i'm annabelle sosa from the la times i just didn't hear uh what you had previously said about prison
01:48:46 and you said 1.5 billion i just didn't catch the last few sentences you said if you can i think the
01:48:51 the governor mentioned an amount of savings from prison closures and facilities um uh over the last
01:48:59 few years going out through 2027 and that amount was 3.4 billion and which he was correct on the
01:49:05 amount however the the number of closures was four prisons with eight uh eight facility closures
01:49:14 um
01:49:16 hi uh rachel bluth politico um can you explain what's going on with the mco tax here um it seems
01:49:25 like so so this 6.7 billion over multiple years that was is that from the the like the provider
01:49:32 payment fund for the out years um and does that mean that some providers are not going to be
01:49:38 getting those planned rate increases will that be backfilled later can you kind of get into that a
01:49:44 little bit so um there are i think there are two um probably major mco proposals ones on the
01:49:53 spending side and that is uh correct for the uh rate increases that have not gone into effect yet
01:50:01 uh the budget uh assumes that those will not move forward uh for uh and then on the the for the rate
01:50:10 increases that did go in fact uh in in this year those are maintained for um on the revenue side
01:50:17 we're also uh assuming increased revenues by adding uh medicare revenue to the calculation
01:50:27 something that we can do within the existing structure it doesn't change impact on the
01:50:32 commercial health plans and it's just something that we have to work with cms to get approval for
01:50:37 gotcha so obgyn um specialty mental health and primary care are still getting their
01:50:44 planned increases that went into effect first but the out years which was supposed to be
01:50:49 um you know emergency care um ambulances like a bunch of all those others there
01:50:56 none of them are happening they are not moving forward in uh in the may revision budget proposal
01:51:04 correct okay great thank you hi adam beam with the associated press um governor mentioned
01:51:12 something about arpa interest being swept up can you explain what that is um it's not not being
01:51:19 swept up it's just the the the arpa funds that the state had interest accrued and we're uh we're
01:51:26 using uh that interest to offset some uh general fund expenditures you know about how much that was
01:51:33 it's around 260 million dollars okay and the the net operating loss proposal i know in january
01:51:41 he wanted to limit it to what 80 i think and yes that was the so now the proposal is let's go ahead
01:51:47 and just suspend all of it is that yeah so the the proposal in january is limited to 80 going forward
01:51:53 the um proposal at the may revision is uh similar to the uh the um proposal from 2020 that had the
01:52:02 three year pause however um a couple uh modifications number one it wouldn't begin until
01:52:11 the 2025 tax year so it's it wouldn't begin immediately uh and uh really we look at it as
01:52:17 beginning in the 25 26 budget so there's a one year delay on when uh it would actually start
01:52:24 and we also are including a trigger that would trigger it off if our revenues um performed at a
01:52:31 level that allowed us to do so okay but is the 80 percent thing still take so this would replace
01:52:37 the the um the january proposal okay because i noticed it said in the document that there was
01:52:43 900 million dollars in revenue for the 24 25 yes but if it didn't take effect on 25 26 i was
01:52:50 wondering how that because it would uh be for the 25 tax year so half of that year begins and i got
01:52:59 you okay thank you hi uh we talked about state workforce i just want to be very clear there are
01:53:06 no furloughs there are no pay cuts will state bargaining units still get their con uh agreed
01:53:13 to cost of living adjustments in out years yes the the current bargain agreements will still see
01:53:21 their cost of living adjustments uh and there are no furloughs okay so only impacts to state
01:53:26 workforce are the 10 000 position roughly sweet okay thank you hi um can you talk about like the
01:53:36 total solutions the governor's proposing because in the summary here it kind of seems to divide
01:53:43 them into like two different charts it has the ones from january and then the additions in this
01:53:50 revision but i just want the total numbers of all like the reductions revenue delays etc and i don't
01:53:56 see a chart that has it was confusing because it said in like the fact sheet had one number then he
01:54:02 presented like 15 billion in his presentation and i don't i don't understand where those numbers are
01:54:08 coming from yeah so there are um this it's not simple to just tie because we're going back to
01:54:18 building upon solutions from the governor's budget uh and uh and then we also are talking about
01:54:24 solutions for the following fiscal year so it's a little bit easier following fiscal year there's
01:54:29 28.4 billion of solutions for 25 26 i think those are broken down in that sheet i think i see it now
01:54:37 yeah yeah and then for but for the um the current fiscal year i think there's um there are there's
01:54:45 a breakdown of solutions by category of what's left because we have to net out the early action
01:54:51 and i do have those here somewhere yeah i just want to know okay i'm looking at this again this
01:54:59 is just for 25 26 yeah honestly i can't even think about i just want to look at just this fiscal year
01:55:05 like what he wants to do for this fiscal year with solutions and i don't see one that totals all of the
01:55:11 reductions etc yeah so the so what's left um uh do you just add those two together like the
01:55:18 chart on page six and the chart on page seven well no and i think that that chart there's trying
01:55:24 to just show kind of there's the incremental may revise uh changes but what what is um when we look
01:55:30 at the bigger picture uh for the budget window through 24 25 and we take into account what was
01:55:37 proposed at january uh the um early action package and then what's being proposed now
01:55:44 what's left after that um and so and there are a number of ways to slice this but if you look
01:55:50 at it from that perspective there are um uh 2.5 a billion in uh pauses delays
01:55:58 about 3.2 billion in fund shifts 14.7 million in reductions
01:56:05 and then 2.3 million in revenue borrowing is that is that anywhere in here can i like is
01:56:13 there a visual of that somewhere i it's i don't believe it's in the introduction there but it's
01:56:18 something that we could provide follow-up and provide yeah okay um and then the cdcr reductions
01:56:24 around present so that that's new correct like because i know the governor has announced plans
01:56:29 to close yards prisons etc this is a new proposal in terms of like the housing changes yes that's
01:56:35 okay the new proposal at the mayor vision okay gotcha hi it's still blake with politico um yeah
01:56:44 i wondered uh if there was anything that you all learned from the pandemic about the net operating
01:56:48 law suspension and um you know whether you saw any kind of deterrent to business growth or business
01:56:55 retention in the state i mean one thing that we heard in terms of feedback and we we tried to
01:57:01 take into account here was the fact that starting it in the budget year means it's impacting
01:57:08 taxpayers for the current tax year and decisions had already been made and so we learned a lesson
01:57:17 from that and that's one of the reasons why we we decided to put it off a year based on that feedback
01:57:24 gotcha makes sense all right that's all i am the last question um can you explain what the health
01:57:32 care workforce reductions are does that mean people are going to lose their jobs or is that like
01:57:37 when we talk about those initiatives is that something else it should not impact jobs it is
01:57:43 really impacting initiatives from in the huge investments that were have been made in um
01:57:52 workforce in the last uh last couple years as we've had those surpluses but i think as the
01:57:59 governor alluded to as we were making those reductions we also are seeing a huge influx of
01:58:03 of federal funds and other funding sources for for uh for workforce needs uh and so those
01:58:11 reductions should be mitigated somewhat somewhat by by other funds okay thanks

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