Transcript Highlights:

• The Legislature was not happy with that.
• The Legislature put that money back in the budget.
• We call on the Legislature to reject this proposed cut.
• So we think that's an area the Legislature could explore.
• The Legislature could have an opposite interest.

Summary: The Assembly Budget Subcommittee on Health held a May Revision hearing covering several health-related budget proposals and broader concerns about the state’s budget structure. The Chair opened by praising some May Revision changes, such as added health IT funding, county administration support tied to Medi-Cal changes, a delay in Medi-Cal cuts for some lawfully present immigrants, and additional support for Covered California subsidies, while criticizing proposed increases in Medi-Cal premiums, changes to senior eligibility, the lack of a Medi-Cal dental solution, and other reductions affecting counties, mobile crisis units, workforce incentives, and physician shortages. The Legislative Analyst’s Office said the state’s budget condition remains weak despite progress on the structural deficit, and the Department of Finance said the May Revision uses a mix of reductions, reforms, revenue proposals, and fund shifts to cut out-year deficits. The committee first heard Department of State Hospitals proposals, including adjustments to county bed billing authority, contract exemption language for online clinical/pharmacy subscriptions, reversion of unspent funds, a revised Metro Central Utility Plant replacement project, electronic health record implementation, and workforce development funded partly through Behavioral Health Services Act resources. DSH also described savings and realignments in incompetent-to-stand-trial and conditional release programs, including extending the independent placement panel program and shifting funds to support additional bed capacity and a mental health rehab center. Members asked about the use of BHSA funds for workforce programs, and the department said the proposal would replace General Fund support with BHSA reimbursements. The Emergency Medical Services Authority proposed funding for statewide behavioral health crisis response guidance and for enterprise system development, and the Department of Managed Health Care proposed modernization of its complaint system and claims-settlement data system to improve oversight and comply with AB 3275. The largest discussion centered on the administration’s BHSA spending plan under Proposition 1, including state-directed prevention, workforce, and other uses, plus General Fund offsets for existing programs. The LAO questioned whether some proposed offsets fit Proposition 1’s non-supplant and eligible-use requirements, while the administration argued the uses were consistent with the measure and that the state-directed share can be adjusted annually. The Commission for Behavioral Health’s proposals drew the most public and member concern. The administration proposed cutting the commission’s Innovation Partnership Fund from $20 million to $10 million and reducing the Community Advocacy Program by $6.7 million, while redirecting BHSA dollars to other state purposes and direct services. Commissioners, advocates, and several members argued the cuts would weaken community voice, reduce support for underserved populations, and disrupt grants already in process; they also objected to using BHSA funds to backfill General Fund commitments. Public commenters, including youth, disability, behavioral health, LGBTQ, tribal, veteran, immigrant, and community-based organization representatives, overwhelmingly opposed the cuts and urged preservation of prevention, advocacy, mobile crisis, and innovation funding. No votes or final actions were taken during the hearing.

Transcript Highlights:

• So coming to the legislature and passing legislation that would benefit the pear industry as a whole
• I get paid by my members to represent them at that level, and then come to the legislature?
• and jobs outside of the legislature.
• of the legislature, and let's just be good with that.
• Frustrated, because we all bring interest to the legislature.

Summary: The Legislative Ethics Board met to reorganize its agenda, elect officers, approve prior minutes, review employment disclosure forms, consider rule amendments, and discuss a draft annual report. Larry Hoff was nominated and approved as chair, and Lori was nominated and approved as vice chair. The board then approved the December 8 minutes and found no ethics issues with two employment disclosure forms involving Senate and House security employees who are married to each other. Jennifer presented proposed rule changes, described as mostly technical updates, including clarifying that either party may request a continuance for good cause, replacing references to a “complaint” with a “reasonable cause determination,” allowing the board to use an ALJ to hear matters and prepare an initial order, and clarifying discovery authority. The board moved, seconded, and unanimously approved the rule amendments. Members also reviewed a draft annual report and discussed updating biographies and other details. A substantial portion of the meeting focused on a draft advisory opinion about attorney-legislators representing clients in matters against state agencies. Jennifer explained that the draft concluded such representation is not automatically an ethics violation, but cautioned about special privileges, appearances of impropriety, and the need to keep legislative and private legal roles separate. Members debated whether the opinion should be broadened to emphasize that all legislators, regardless of outside employment, must avoid using their office for private advantage. Several members argued the issue is highly fact-specific and that a broad opinion could create unnecessary complexity or special treatment for lawyers. By the end of the discussion, the board appeared to decide not to issue the proposed opinion. The chair also noted a prior advisory opinion on citizen members of the board and reminded members of restrictions on lobbying and related activities. No public testimony was offered, and the board moved toward executive session.

Transcript Highlights:

• Given that the legislature, even if the legislature doesn't direct CDCR to close a prison, it could be
• about updating the legislature and its progress.
• Well, I think that that's certainly the prerogative of the Legislature.
• We're just seeing the... ...would raise any concerns to the Legislature.
• You know, I want what other state agencies have and the Legislature has.

Transcript Highlights:

• So really, the issue before the legislature is: Is this acceptable?
• Conversely, the legislature might... Thank you.
• So really, the issue before the legislature is this acceptable?
• Conversely, the legislature might Thank you. Sized MCO tax.
• And then the legislature could also ask the department to provide.

Summary: The committee first heard May Revision child care and human services items. The Department of Child Support Services described two technical adjustments, which the analyst supported. The Department of Social Services then walked through child care proposals, including a reduction in federal and Proposition 64 funding absorbed through a shift from General Child Care to the Alternative Payment program, a 2.01% child care COLA, disaster-related infrastructure grants, a new administrative support cost structure for Alternative Payment agencies, the removal of prospective pay funding after a federal rule change, a reappropriation for existing infrastructure grants, and estimates of unspent child care funds. The Legislative Analyst’s Office recommended asking for more justification for shifting reductions to CAP, supported the COLA reduction but wanted consistency across programs, recommended removing prospective pay funding, opposed the administrative cost shift, and suggested further review of disaster grant alignment. Members pressed the administration on why more slots would be cut for the same savings, why the COLA was reduced, and whether the administrative percentage would grow over time. The administration said the changes were intended to avoid disrupting currently enrolled families, reflect point-in-time relinquishments and unspent funds, and stabilize contractor operations. Public commenters, including providers, advocates, and county representatives, urged full COLA funding, rejection of child care slot reductions, preservation of prospective pay, and continued investment in child care infrastructure and access. The subcommittee then recessed before moving to health items. In Part B, the Department of State Hospitals presented its May Revision proposals, including a central utility plant replacement project at Metropolitan State Hospital, funding for a continuum electronic health record system, reduced county bed billing authority to reflect phase-in of additional LPS beds, limited contract exemption authority for online clinical subscription services, reversion of prior-year unspent operating funds, and a workforce development proposal to use Behavioral Health Services Act funds instead of General Fund for training programs. The department said the EHR would modernize records and improve continuity of care, and that the contract exemption would prevent delays in essential clinical information services. No votes were taken in the excerpt provided.

Transcript Highlights:

• The work that you guys have done in the legislature here, the laws that we're enacting have helped to
• hopefully stream on an accelerate development across Legislature here, the laws that we're enacting,
• To date, the Legislature knows relatively little about the program's results and impact.
• As your agenda notes, the Legislature began funding this program in 2021-22.
• We just recommend the Legislature refrain from acting on those budget change proposals until the Legislature

Summary: The Assembly Subcommittee on State Administration held a budget hearing focused heavily on housing, homelessness, and related administrative proposals. HCD reported that California housing production has increased, with 2023 completions up 13% from 2022 and entitlement and construction timelines improving, while members and advocates criticized the Governor’s January budget for zeroing out or sharply reducing several housing programs. Public testimony urged funding for affordable housing production, preservation, youth housing, CalHome, LIHTC, HAP, and related programs, and several speakers argued the state should not pull back after recent progress. A major policy item was trailer bill language to allow HCD to access “excess equity” in existing affordable housing projects and recycle those funds into new or preserved housing. HCD and the LAO said the proposal could unlock tens or hundreds of millions of dollars, but members wanted guardrails and clearer statutory direction to ensure the funds stay within the intended housing purposes. The committee also discussed encampment resolution funding; HCD said the proposal would shift expenditure deadlines to the date of award rather than appropriation, while the LAO raised concerns about limited outcome data and urged the Legislature to use upcoming reporting before deciding on future funding. The hearing also covered HCD trailer bills to consolidate default reserve funds into a centralized continuously appropriated account and to clarify reporting requirements for early rounds of the Homeless Housing, Assistance and Prevention program. HCD requested funding to implement chaptered legislation, including a new tribal housing program and reporting-related bills, and also sought extensions for certain reappropriations, including Homekey and REAP 2 deadlines. Public commenters and regional agencies supported flexibility for REAP 2 timing and other housing-related adjustments. Finally, the Business, Consumer Services and Housing Agency presented the Governor’s reorganization proposal to split the current agency into a Housing and Homelessness Agency and a Consumer Protection Agency. The administration said the change would improve focus, efficiency, and coordination, but the LAO and several members questioned whether it would truly save money or improve accountability, especially given the need for new leadership, possible staffing changes, and the fact that the plan had not yet been formally submitted for review. No votes were taken during the hearing.

Transcript Highlights:

• The Legislature was not happy with that.
• The Legislature put that money back in the budget.
• We call on the Legislature to reject this proposed cut.
• So we think that's an area the Legislature could explore.
• The Legislature could have an opposite interest.

Transcript Highlights:

• The committee is then tasked to develop its own recommendations, which are due to the legislature and
• And the legislature and the governor both consider those changes.
• OFM, the legislature, and so it's all, again, consensus-based.
• But the legislature might say, 296 FTEs?
• But the legislature might say 296 FTEs.

Committee: Joint Joint Legislative-Executive Committee on Budget Transparency and Fiscal Sustainability

Summary: The committee held its first meeting, with co-chairs and members introducing themselves and staff outlining the committee’s statutory charge under the 2026 supplemental operating budget. Staff explained that the committee is tasked with studying budget transparency and fiscal sustainability in two phases: first, revenue growth, spending assumptions, statutory cost drivers, and carryforward/maintenance levels; and later, staffing, overhead, performance management, and public reporting tools. The committee also discussed its goals, with members emphasizing a shared factual understanding of Washington’s fiscal situation, the causes of projected structural deficits, and possible paths to a more sustainable operating budget. Staff then gave a detailed operating budget basics presentation. They reviewed the size and composition of the operating budget, explaining that most spending is concentrated in grants and client services, salaries and benefits, and goods and services, with K-12 education, DSHS, the Health Care Authority, DCYF, corrections, and higher education making up most NGFO spending. They also walked through the distinction between constitutional, federal, statutory, and discretionary spending; the role of caseload and per-capita forecasts; how maintenance level and policy level budgets are built; and how the four-year outlook works, including revenue forecasts, reversions, budget stabilization account reserves, and the official outlook adoption process. Members asked several questions about what is or is not included in the outlook, especially future collective bargaining agreements, health care inflation, court-ordered liabilities, and whether the budget could better separate mandatory from discretionary spending over time. Staff said some of those questions would require follow-up and noted the existence of an outlook accuracy report. The committee then heard from Josh Goodman of the Pew Charitable Trusts, who introduced Pew’s state fiscal work and its role as the nonprofit partner supporting the committee. He said Pew would help analyze long-term fiscal sustainability, reserve policies, recession preparedness, and practices from other states, and would draw on its 50-state data and subject-matter experts. No votes were taken and no formal actions were reported at this meeting.

Transcript Highlights:

• In general, JARC may consider three issues: first, whether a rule is within the intent of the legislature
• The legislature created specific roles for the State Board of Education, the Charter School Commission
• By the legislature. The policy's intent may be to prevent disruption for students and families.
• When the legislature is determining whether and how a new authority exists, When the legislature is determining
• So I was not here in the Legislature when the Legislature authorized charter schools.

Summary: The Joint Administrative Rules Review Committee (JARC) met on July 31, 2026 to consider a citizen petition challenging the Washington State Charter School Commission’s April 2026 continuity of operations policy. Staff explained JARC’s authority under the Administrative Procedures Act and framed the issue as whether the Commission was using a policy in place of a rule, and whether that policy was within legislative intent. Staff also reviewed the Charter School Commission’s statutory framework, including limits on charter terms, transfer provisions involving the State Board of Education, and the Commission’s new process for identifying nonprofit operators to assume existing charter contracts when schools close or contracts are surrendered, revoked, or not renewed. The petitioner, Cesar Harrison, argued the Commission had created a new transfer mechanism through policy rather than rulemaking, potentially bypassing statutory procedures and extending charter authority beyond the five-year framework. Commission Executive Director Marcus Hardin responded that the policy was only a procedural framework for evaluating proposals, not a transfer of contracts or creation of new authority, and said the Commission had used similar discretionary processes before. Public testimony from the Washington Education Association supported the petition, emphasizing that the policy should have gone through formal rulemaking for transparency and public input. After discussion, committee members asked staff about the statute’s silence on contract continuation and the relationship between the Commission’s practice and legislative authorization. The committee then voted 7-0, with two members excused, to find that the Charter School Commission is using a policy or interpretive statement in place of a rule and that it is not within the intent of the Legislature as expressed by the statute. Staff explained that the finding will be sent to the agency, which must hold a hearing and then notify JARC of its intended action; JARC may later object to that action or take further steps. The committee then adjourned.

Transcript Highlights:

• And so in an odd-numbered year, the legislature is enacting a brand new budget, like we did last session
• In theory, the legislature could begin working on that, but that'll be a very big job.
• </c><00:02:33.599><c> on</c><00:02:33.760><c> that,</c> legislature could begin working on that, legislature
• </c><00:03:11.440><c> And</c><00:03:11.599><c> now</c> the legislature to consider.
• And now the legislature to consider.

Transcript Highlights:

• What is the role of legislature compared to what is the role of the executive branch.
• what role the legislature is supposed to have in this process.
• So that what is the role of legislature.
• And the the legislature step steps in.
• </c><00:14:37.600><c> has</c> billions of dollars, the legislature has billions of dollars, the legislature

Transcript Highlights:

• I'll repeat, as I have my entire time since I've been back in the Legislature, following the lead of
• I'll repeat, as I have my entire time, since I've been back in the legislature, following the lead of
• The Legislature must continue...
• Offering us half the amount is the Legislature saying our work is only half as valuable.
• We thank the Legislature for rejecting all three proposed cuts to In-Home Supportive Services.

Committee: Senate Budget and Fiscal Review

Transcript Highlights:

• That's kind of what the legislature is kind of proud of, that we're based on a citizen legislature that
• versus a full-time legislature?
• Throughout this study, North Dakota’s part-time legislature, citizen legislature model, has been identified
• You've got a full-time legislature.
• Again, you're a citizen legislature.

Committee: Joint Legislative Procedure and Arrangements Committee

Summary: The Legislative Arrangements and Procedure Committee met with a quorum, approved the prior minutes, and then took up several follow-up items related to legislative security, public records, and the impacts of term limits. The Secretary of State’s office presented draft language to make legislators’ and candidates’ residential addresses confidential in public records, with discussion of who would be covered, how the protection would work, and whether it should expire when a candidate’s term ends. Members raised concerns about unintended consequences, transparency, and whether the public should still be able to see enough information to evaluate residency requirements. Rather than act immediately, the committee set the draft aside for a future meeting and asked for an amendment reflecting the Secretary of State’s suggested changes. The committee also reviewed a security best-practices memo and NCSL materials on capitol security. The memo encouraged legislators to be aware of their surroundings, avoid real-time vacation posting, vary routines, report threats, and follow security alerts. Members discussed a recent incident and the need to improve alert distribution and update contact information so legislators and staff receive notices consistently. The Secretary of State and committee members noted that the alert system may need refinement, including a separate legislative notification channel. The bulk of the meeting was devoted to Garrity Consulting’s final report on how to mitigate the effects of legislative term limits. The consultants summarized interviews, surveys, and focus groups with legislators, the public, and stakeholders, identifying major themes such as loss of institutional knowledge, leadership turnover, staffing pressures, and the need for stronger onboarding and training. Recommendations included considering annual sessions or shifting biennial sessions to even-numbered years, restructuring organizational session, making interim committees more consistent with regular committees, adding office hours, formalizing mentorship and leadership succession planning, expanding staff and professional development resources, creating public-facing educational tools, and improving communication and virtual testimony options. Members generally appreciated the report and its phased implementation roadmap, while also debating the practicality of some recommendations and the tension between making service more demanding and keeping the legislature accessible to new candidates.

Transcript Highlights:

• </c><00:04:15.040><c> with</c> those is to provide the legislature with those is to provide the legislature
• in this legislature int introduced in this legislature crosses<00:17:06.480><c> one</c><00:17:06.640
• </c> counil to members of the legislature counil to members of the legislature that<00:19:46.320><c>
• to</c> legislature for the legislature to legislature for the legislature to consider<00:45:35.160><c
• </c><00:53:21.520><c> to</c> publish on behalf of the legislature to publish on behalf of the legislature

Committee: House State Government Finance and Policy

Transcript Highlights:

• The Legislature must continue...
• I do urge the administration to work with the Legislature and approve these important investments.
• First, I wanted to thank the Legislature for inclusion of the funding for distressed hospitals.
• I want to thank the legislature for inclusion of the funding for distress hospitals.
• We thank the Legislature for rejecting all three proposed cuts to In-Home Supportive Services.

Summary: The Senate Budget and Fiscal Review Committee heard AB 109, the Budget Act of 2026, as the main item. Committee leaders described the legislative budget agreement as a balanced two-year plan with about $355.9 billion in total spending, $253 billion from the General Fund, and $36.5 billion in reserves. The Legislative Analyst and Department of Finance said the package assumes about $5.5 billion in higher revenues than the May Revision and uses those resources for a mix of spending changes, including higher Proposition 98 support, additional child care slots, housing and homelessness funding, delayed Medi-Cal reductions, and added support for counties, public hospitals, and distressed hospitals. The administration said the plan resembles the May Revision’s overall structure but includes new spending and revenue assumptions, and members noted that separate revenue trailer bills would be heard later in the week. Much of the committee discussion focused on Medi-Cal, H.R. 1, and the impact on immigrants, low-income workers, counties, and hospitals. Several senators criticized the budget for locking in savings from delayed or reduced Medi-Cal coverage and for not including a mechanism to restore eligibility, while administration and LAO staff said the package delays some reductions but does not automatically reinstate coverage. Finance staff said roughly 1.5 million to 2 million people with unsatisfactory immigration status would move from managed care to fee-for-service, with coverage largely unchanged except for certain services not federally allowed. Members also discussed county administrative funding, indigent care, public hospital support, and the expected rise in uncompensated care. Other topics included In-Home Supportive Services, child care, homelessness funding, Prop. 36, courthouse construction and new judgeships, transit and cap-and-invest/GGRF funding, local journalism, and workforce or reentry programs. Committee members split along party lines in their comments. Democratic members generally supported the agreement as a difficult but responsible compromise that protects core services, preserves reserves, and makes targeted investments in education, housing, health care, and justice system capacity. Republican members argued the budget relies on unrealistic revenue assumptions, does not sufficiently reduce spending, and includes costly policy choices and tax increases. Public testimony largely came from advocates and stakeholders who supported IHSS, Medi-Cal, child care, domestic violence services, hospitals, transit, and other programs, while some business and health plan representatives raised concerns about tax proposals and the shift from managed care to fee-for-service. The chair then moved the committee to public comment and indicated that the revenue bills would return later in the week; no final vote on AB 109 is reflected in the portion provided.

Transcript Highlights:

• Last year, the legislature, as was noted earlier, Last year, the legislature, as was noted earlier, worked
• It's what the Legislature has also given direction on. And so I have...
• But the Legislature has also given direction on that.
• We just encourage the Legislature and the administration to maintain...
• We just encourage the legislature and the administration to maintain... ...we just encourage the Legislature

Transcript Highlights:

• Certainly, I think that's something the legislature, Secretary Howe said that the legislature would likely
• That's kind of what the legislature is kind of proud of, that we're based on a citizen legislature that
• versus a full-time legislature?
• You've got a full-time legislature.
• Again, you're a citizen legislature.

Summary: The Legislative Procedure and Arrangements Committee met with a quorum, approved the prior minutes, and then took up a draft bill to make legislators’ and candidates’ residential addresses confidential in public records. Legislative Council and the Secretary of State explained the proposal was prompted by security concerns and would protect residential addresses while still allowing election officials to verify residency and keep candidate names and offices public. Members raised concerns about unintended consequences, transparency, and how the change would affect rural districts and residency enforcement. The Secretary of State suggested an amendment to end the confidentiality when a candidate’s term ends, and the committee agreed to hold the bill over for further discussion at the next meeting. The committee also reviewed follow-up materials on legislator security and best practices, including advice on situational awareness, internet hygiene, varying routines, and reporting threats, along with NCSL materials comparing capitol security practices in other states. Members discussed a recent security incident and the need to keep alert contact information current, and staff said they would continue working with the Highway Patrol on legislative-specific notifications. The bulk of the meeting was devoted to Garrity Consulting’s final report on mitigating the effects of legislative term limits. The consultants summarized survey, focus group, and stakeholder input showing concerns about loss of institutional knowledge, leadership turnover, onboarding demands, and workload pressures, while also noting public support for term limits and annual sessions. Recommendations included considering annual sessions or shifting biennial sessions to even-numbered years, restructuring organizational session and interim committee work, creating office hours and more structured orientation and mentorship, expanding ongoing training and staff support, improving public communication and virtual testimony rules, and addressing barriers to service such as employer support and travel costs. Members discussed the tension between making the legislature more effective and preserving a citizen-legislature model, and the report was received as a roadmap for future implementation rather than immediate action.

Transcript Highlights:

• Please stand and be recognized by the Nebraska Legislature.
• Program 180 in the current legislature bill 92, 109th Legislature, including this appropriation interest
• To serve in the 106th Legislature.
• Legislative Bill 1071-107-128, Legislative Bill 10-709th Legislature, 2nd Section 2026, Section 81, Legislature
• Legislature is adjourned. I don't know how much.

Bills: LB764 , LB815A , LB839 , LB888 , LB955 , LB972A , LB1029 , LB1087 , LB1091 , LB1126A , LB1181A , LB1237A , LB1261A , LB304A , LB762 , LB889 , LB929 , LB966 , LB1022 , LB1187 , LR508

Transcript Highlights:

• And again, I just want to say that we intend to be in partnership with the Legislature.
• Are you thinking of a fund that is actually funded by the Legislature?
• And lastly, we are asking the Legislature to fully fund county CCS programs.
• C-Pen strongly urges the Legislature to reject Governor Newsom's proposed budget.
• C-Pen strongly urges the Legislature to reject Governor Newsom's proposed budget.

Summary: The Assembly Budget Committee opened its hearing on the Governor’s 2026-27 budget with remarks emphasizing the start of a months-long process, the need for fiscal responsibility, and concerns about structural deficits, federal funding losses, housing and homelessness, and oversight. The vice chair echoed those concerns, warning against budgets built on short-term fixes and urging accountability. The Department of Finance presented a balanced budget year proposal of about $349 billion in total expenditures, including $248 billion General Fund, while acknowledging a structural imbalance in the out years and proposing a workload budget with limited new spending or cuts. Finance said the budget relies on stronger-than-expected revenues, but also on constitutional obligations such as Proposition 98 and Proposition 2, and on suspending a rainy-day fund true-up deposit to cover a projected $2.9 billion budget-year deficit. The administration highlighted higher education funding, climate and wildfire resilience investments, a new ZEV incentive, added Health and Human Services costs tied to H.R. 1, child care funding, and three tax proposals: third-party delivery tax compliance, a sustainable aviation fuel tax credit, and an extension of the California Competes tax credit. The LAO, by contrast, warned that the budget is “precariously balanced,” cited downside risk from stock market-driven revenues, and urged the Legislature to use reserves, avoid suspending rainy-day deposits, and begin shrinking multi-year deficits sooner rather than later. Member questions focused on wildfire mitigation and insurance, transit and GGRF funding, federal cuts affecting CalFresh and Medi-Cal, the proposed tax credits, homelessness accountability language, and education funding. Several members pressed for earlier partnership on deficit solutions and for more scrutiny of budget choices. The committee also discussed declining enrollment in K-12, community colleges, and CSU, with concerns about whether funding formulas are aligned with actual student demand. No formal votes or final actions were taken in the hearing.

Transcript Highlights:

• Steenhausen, we recommend the Legislature approve this proposal.
• The Legislature would be able to assess the effectiveness of this funding should the Legislature provide
• The legislature might have other priorities, of course, and so it's important for the legislature to
• because there are a lot of changes here for the legislature to consider.
• And, you know, imagine in the future the Legislature stops getting data on certain things that the Legislature

Summary: The committee opened with the State Controller’s Office May Revision requests, including funding for Fiscal book-of-record stabilization, a Broadcom IDMS licensing adjustment, the California State Payroll System, ACFR reporting automation, and $3 million for unclaimed property outreach. Testimony emphasized progress on Fiscal becoming the state’s accounting book of record in July, faster ACFR publication, and the move to electronic unclaimed property claims. Members asked about the size of the unclaimed property fund and how quickly money is transferred to the General Fund; the Controller’s office said about $15 billion is held, with most excess transferred regularly, and the LAO noted the fund is the General Fund’s fourth-largest revenue source. No concerns were raised by Finance or the LAO, and the item was closed after no public comment. The committee then heard the administration’s proposal to tax prewritten digital software and software-as-a-service, with Finance saying it would modernize sales tax treatment and raise an estimated $450 million General Fund and $560 million local revenue in 2026-27. The LAO supported modernizing the tax but suggested broader digital goods coverage and a business-use exemption; industry and taxpayer groups opposed the proposal, warning of higher costs for consumers and businesses. Members also heard CDTFA’s administrative request tied to the proposal, plus a separate CDTFA budget reduction reflecting lower operational needs; that reduction was presented as a savings item and drew positive reactions. Next, the committee considered federal conformity for “Trump accounts,” which would align California tax treatment with federal rules for tax-deferred children’s accounts and avoid tracking burdens for families. The LAO recommended approval, and the item drew no opposition. The committee also heard a proposal to cut the first-year $800 annual business tax to $400 for LLCs, LPs, and LLPs; Finance argued it would lower startup costs and encourage new business formation, while the LAO said the benefit was not well targeted and could subsidize entities that would form anyway. Members discussed the policy tradeoff, and public commenters split between support for small business relief and concern about revenue loss. The final major revenue item was a permanent business tax credit limitation, capping credits at the greater of $5 million per corporation or 50% of pre-credit liability, while excluding the low-income housing tax credit and personal income tax credits. Finance said it would raise significant revenue from large profitable corporations, and the LAO said it was a reasonable option but noted it would mainly affect the R&D credit and could have future implications for programs like California Competes. Public testimony was sharply divided, with business groups opposing the cap and anti-poverty advocates supporting it as a way to recapture revenue. The committee also heard FTB’s CalFile realignment request, which would return most of the direct-file-related resources to the General Fund while retaining a smaller staff to improve CalFile, and the California Arts Council’s request to reauthorize the Keep Arts in Schools voluntary contribution fund, which members and advocates supported despite relatively modest annual donations. The hearing continued with GoBiz proposals on civic media funding, CA RISE reappropriation, and a semiconductor facility reversion, with the LAO supporting the latter two and members raising questions about the civic media program’s scope, outreach, and inclusion of broadcast and ethnic media.

Transcript Highlights:

• I would leave it to the Legislature to identify other revenue sources.
• We urge the Legislature to approve every flexibility available.
• We urge the Legislature to reject these cruel and more severe proposals.
• The Legislature must protect the essential safety net programs and the people they serve.
• The legislature must protect the essential safety net programs and the people they serve.

Summary: The Assembly Budget Subcommittee on Health held a hearing on the impacts of H.R. 1 and related federal actions on Covered California, Medi-Cal, and immigrant access to care. The chair framed the discussion around three main issues: expected losses in marketplace coverage as enhanced federal premium subsidies expire, new federal work and renewal requirements that would add administrative burden to Medi-Cal, and the loss of eligibility for certain lawfully present immigrants. Covered California testified that H.R. 1 and new federal rules, combined with the end of enhanced premium tax credits, are driving higher premiums, lower new enrollment, and more cancellations, especially among middle-income, Latino, and Black enrollees. The agency said California’s $190 million state subsidy program is helping lower-income enrollees but cannot replace the lost federal assistance, and it noted that roughly 120,000 lawfully present immigrants in Covered California will lose federal tax credits in 2027. On Medi-Cal, the Department of Health Care Services said H.R. 1 will require work and community engagement verification, six-month renewals for certain adults, and other changes that the department expects will reduce enrollment substantially. DHCS estimated 233,000 members could lose coverage by June 2027 from the work requirement and 289,000 from six-month renewals, with losses rising much higher by 2028; it also said it is using automation, outreach, clinic navigators, coverage ambassadors, community health workers, and street medicine providers to reduce procedural disenrollments. The department described a two-phase outreach plan and said it is working with counties on implementation, while the Department of Finance said the Governor’s budget maintains $190 million for the state subsidy program and does not propose additional changes at this time. The LAO said its independent forecast is somewhat higher than the administration’s, estimating about 2.1 million fewer Medi-Cal enrollees by June 2028, and urged the Legislature to review county administrative workload and readiness. Public testimony and member comments focused on the human and fiscal consequences of coverage losses. A representative from the Sacramento Native American Health Center warned that reduced reimbursement and coverage losses would destabilize community health centers, increase uncompensated care, and worsen outcomes by pushing patients into emergency care. Members raised concerns about paperwork burdens, county capacity, outreach effectiveness, and whether the state should do more to preserve coverage, including possible modeling of additional H-CARF spending and support for middle-income consumers and immigrant enrollees. The hearing did not take any votes or formal actions, but it ended with public comment and continued discussion of implementation and budget options.