Transcript Highlights:

• </c> credit. Not all of them are refundable. credit. Not all of them are refundable.
• credit.
• So, there's going to be a lot more credit taken by employers providing this child care credit.
• credit.
• </c> as where we would audit as where we would audit um,<01:00:18.600><c> purchases.

Summary: The committee heard testimony on House File 5055, the governor’s supplemental tax budget. Commissioner of Revenue Paul Marquart outlined the proposal as a balanced budget package that would leave a positive bottom line in the current biennium and beyond. He emphasized family-focused tax relief, especially a new refundable young child credit for children ages 0 to 4, which would provide up to $3,000 for one child or $6,000 for two or more, benefit about 104,000 families, and phase out at higher incomes. He also described federal conformity changes, including updates to business interest deductions, dependent care credits, and Section 179 expensing, along with omitted federal items such as research expensing and opportunity zones due to cost and policy concerns. Marquart also defended broader tax modernization proposals, including expanding the sales tax to selected consumer services such as accounting, banking, brokerage, and legal services while lowering the statewide sales tax rate, and creating a social media tax on consumer data collection that would fund an AI readiness special revenue fund rather than the general fund. He said these changes would make the sales tax less regressive and better aligned with the modern economy. Additional provisions mentioned included a gun-related gross receipts tax on firearms and ammunition, cannabis tax technical changes, historic structure rehabilitation conformity, and added auditors for tax compliance. Testimony from outside groups was mixed. Nan Madden of the Minnesota Budget Project supported the governor’s approach as a response to federal tax and spending changes, praised the decision not to conform to opportunity zones or federal no-tax-on-tips/overtime provisions, and urged even stronger revenue measures. Brian Lake of the Minnesota State Bar Association strongly opposed the proposed sales tax on consumer legal services, arguing it would burden low- and middle-income people in sensitive cases and create unfairness when individuals litigate against the state. Tanner Fritsinger of the Minnesota Association of Professional Employees supported the sales tax base expansion and the social media tax as ways to broaden revenue without raising the base rate. The committee chair thanked the commissioner and then began hearing public testimony, with additional testifiers queued up.

Transcript Highlights:

• That's the headline, I think, of the entire audit.
• Again, that's where the audit comes in.
• of higher education included in the audit.
• This audit affirms that the ADT is the best pathway for students in terms of reducing excess credit accumulation
• Versace and his team who oversaw the audit, and obviously the institutions who were subject to the audit

Summary: The Joint Legislative Audit Committee held an oversight hearing on a state audit of California’s community college transfer process, with members and witnesses broadly agreeing that transfer pathways remain too complex and inconsistent. Opening remarks emphasized that community colleges serve a large, diverse, often first-generation and low-income student population, but only about one in five transfer-intending students move to a UC, CSU, or other university within four years. Members highlighted disparities by race, region, campus, and major, and pointed to the Associate Degree for Transfer, TAG, and Cal-GETC as helpful but incomplete tools because requirements still vary across campuses and systems. State Auditor’s Office staff said the audit found that while UC and CSU overall enroll substantial numbers of transfer students, individual campuses and high-demand programs often do not, especially in STEM fields. They described barriers including missing prerequisite courses, unclear information, limited counseling, and inconsistent articulation between campuses. The audit used a computer science example to show how different UC and CSU campuses require different courses for the same major. The audit issued 22 recommendations, with 10 fully implemented and four partially implemented; remaining work centers on articulation, counseling, data sharing, and better use of ASSIST. UC, CSU, and the Community Colleges each said they support transfer and are taking steps to improve it. UC cited a new public dashboard, data-sharing agreements, new transfer pathways, and an ADT pilot at UCLA, while saying campus capacity and program differences limit systemwide mandates. CSU pointed to its strategic plan goals, the Transfer Success Pathway program, direct admissions outreach, and efforts to expand ADT alignment and credit applicability, while acknowledging that many students never reach the application stage. Community Colleges emphasized that transfer reform is central to equity and baccalaureate access, and called for stronger common course numbering, broader ADT acceptance, and more student-centered articulation. Members pressed the systems on why more uniform requirements and better coordination have not been achieved, and on how to reduce barriers for placebound and working students.

Transcript Highlights:

• type of audit that they need to conduct business.
• type of audit that they need to conduct business.
• But even if they have an audit and they're not submitting it to you, they don't have an audit.
• And that's just the audits. So those are the entities that have... And that's just the audits.
• Jumping forward to the Angel Fund Investor Tax Credit, the Angel Fund Investor Tax Credit addresses an

Committee: Joint Tax Reform and Relief Advisory Committee

Summary: The Tax Reform and Relief Advisory Committee met with a quorum and approved the prior minutes. Staff reviewed the interim work schedule, noting that most assigned studies were complete and that the final meeting would be September 29, with remaining work focused on economic development tax incentives, the stripper well exemption, and property tax reform items such as the primary residence credit. The committee then took up a referral on political subdivision compliance with state law, especially reserve limits and levy calculations. State Auditor Josh Gallion explained the audit standards used for local governments, the state auditor’s limited authority to force compliance, and the practical challenges created by a shortage of auditors. He used Stark County and Mountrail County examples to show how reserve balances affect levy calculations, including Stark County’s 2023 general fund levy issue and Mountrail County’s zero-levy approach. Stark County Commission Chair Neil Messer defended his county’s decision to keep reserves for major projects and volatility in oil-related revenues, while acknowledging the county remained out of compliance with the 75% reserve rule. Committee members and staff discussed possible enforcement mechanisms, the role of county auditors, and whether the law should be changed to better fit current fiscal conditions. Linda from the Association of Counties and Matt Gardner from the League of Cities said both organizations have been heavily training local officials on the new tax cap and reserve rules. Linda said counties and cities are using standardized worksheets for the 3% cap and levy limitations, and suggested that an affidavit certifying compliance could be attached to levy submissions. She also clarified that the primary residence credit does not reduce mill levies; it only reduces the taxpayer’s bill. Gardner said city auditors receive required finance training and that his organization was unaware of current city reserve noncompliance. The committee did not take action on the issue and planned to revisit it at the September 29 meeting. The final portion of the meeting moved into a subcommittee report on the property tax statement, where Representative Headland introduced a bill draft to remove the legislative property tax relief line from the statement for further committee discussion.

Transcript Highlights:

• , in exchange for a permanent reduction in their service credit.
• And it will encourage members to purchase service credit earlier in life and ensure service credit purchases
• So this bill requires employees to forward the initial audit notification.
• So this bill requires employees to forward the initial audit notification.
• , and the final audit report to the relevant bargaining unit.

Committee: House Public Employment and Retirement

Transcript Highlights:

• And if they've repaid some of that, those receipts were not provided to audit.
• And the audit, of course, I'm sure y'all are seeing, has said that that would not be...
• Well, at the end of the audit of 2025, there should be enough evidence there.
• In addition, the city incurred $137 in late fees related to credit card transactions.
• I know enough to get through the audit meetings, and that's about it.

Committee: All LEGISLATIVE JOINT AUDITING-COUNTIES AND MUNICIPALITIES

Summary: The committee first heard updates on delinquent private water and sewer reports. For reports due as of December 31, 2012, staff said five additional 2024 reports had been received since the December meeting, bringing the total of released escrow funds to 17 and leaving 26 still escrowed. For reports delinquent as of December 31, 2023, two more reports were received, bringing 59 of the original 64 into compliance and leaving five outstanding. Both update reports were filed without objection. The committee then discussed Act 709 of 2021 and the town of Daisy’s repayment of street turnback funds. Staff said Daisy had made improper payments to a nonprofit, used restricted street funds for fire truck and fire department building costs, and had not adopted the required repayment ordinance or obtained approval for a reduced repayment percentage. Mayor Lisa Cogburn said the city council had not approved repayment because members disputed the amount, though she said the city had funds to pay. After questions from members and staff explaining the audit calculations, the committee adopted a motion requiring Daisy to repay 10% of unrestricted general fund revenues under the statute and to withhold turnback funds if the city fails to comply. The report was then filed. The committee reviewed numerous deferred and current audit findings from cities, counties, and water systems. Several local officials appeared and described corrective steps, including Harrison district court, Carroll County airport, Izard County treasurer, Alexander district court, Town of 56 officials, Bull Shoals, Lone Oak County, Beaver, Central City, Gravette, Ralston Water Department, Thornton Waterworks, Ozan, and Lee County. Findings included missing or inaccurate reconciliations, unsupported credit card charges, payroll and compensation issues, improper use of public funds, missing receipts, and budget overruns. Some matters were referred to the prosecuting attorney and Attorney General, including Bull Shoals and Lone Oak County, while others were filed or deferred as appropriate. The committee also deferred two private water and sewer reports for lack of proper responses, filed 19 reports with resolved findings, and filed 53 reports with no findings. Before adjourning, the committee set its next meeting for February 12, 2026.

Transcript Highlights:

• Is there a specific case of somebody trying to use a credit card or debit card fraudulently?
• </c> Cas of somebody trying to use a credit Cas of somebody trying to use a credit card<00:03:32.080>
• </c> need to wrap my head around the credit need to wrap my head around the credit card<00:05:13.360>
• </c> be able to do every other year audits be able to do every other year audits now<00:13:18.000><c>
• </c> that if you don't complete your audits that if you don't complete your audits you<00:14:23.839><

Summary: The Senate Standing Committee on State and Local Government considered several bills. House Bill 684, an elections “continuous improvement” measure, drew the most discussion. Rep. Jennifer Decker said it was based on issues identified during the 2024 election cycle and included changes to absentee voting for primary caregivers and other election administration updates. Senators focused on a committee substitute removing credit and debit cards as a second form of ID for provisional ballots; Decker said local election workers had reported people trying to use cards with no photo ID, and she did not want financial institutions determining voter eligibility. The bill also clarified that certain ballots could be issued by hand or by mail. It passed 9-1, with some members voting no or passing because they wanted more time to consider the ID change. House Bill 71, requested by the Kentucky Public Pension Authority, would reorganize KPPA by creating an Office of Financial Management and moving the CFO into an executive director-level role. Testimony said the change was structural only, with no impact on system funding and minimal short-term costs. It passed unanimously, 11-0. House Bill 290, by Rep. Nick Wilson, would allow county law libraries to use funds for online legal research resources, computers, and internet-related equipment. Supporters said libraries had money but were limited to buying books; the bill passed unanimously, with the chair noting it would let libraries use existing funds more effectively. House Bill 555, as amended by committee substitute, addressed audit and reporting requirements for small cities. Supporters from the Kentucky League of Cities and the Auditor’s Office said many small cities struggle to find certified CPAs, and the bill would raise the threshold for less frequent audits, expand the exemption threshold, allow the Auditor’s Office to contract to perform audits, and clarify that state-fund withholding for noncompliance would not apply to contractual or utility payments. It passed 10-1, and the title amendment was adopted. House Bill 160, with a committee substitute, would regulate manufactured housing and local zoning by establishing standards that supporters said were needed to prevent discrimination against modern manufactured homes. Several senators expressed concern about state interference in local zoning, while others supported the bill as a housing access measure; it passed 10-1. Finally, House Bill 455 would create a Unit of Election Investigations and Security in the Attorney General’s Office to handle election-crime allegation review, the voter fraud hotline, prosecutorial referrals, and legislative oversight. Supporters said it codified existing practices and would not require new funding, but opponents objected to placing the hotline in a partisan office. The bill passed 9-1 with one pass, and the committee adjourned after reporting favorable action on the bills.

Transcript Highlights:

• Office performance audits will be meeting and hearing additional performance audits done by independently
• It's a B&O tax credit and a PUT tax credit. So the existing businesses get the credit on their B&O.
• Let's go next to credit. So the equitable access to credit program is our next tax review.
• The equitable access to credit program is a business and occupation tax credit.
• They used $11.4 million in tax credits. They used $11.4 million in tax credits.

Summary: The committee met on July 15, 2026, but began without a quorum, so it could not adopt the previous minutes. Chair Jerry Pollett welcomed new member Senator Victoria Hunt and introduced new JLARC staff. The committee then heard a preliminary JLARC performance audit of DCYF’s Juvenile Rehabilitation programs. Auditors said overcrowding, staffing shortages, weak training, unreliable risk assessments, and uneven program access combine to create unsafe conditions and limit rehabilitation. They reported that about 74% of youth are in two large secure facilities, incidents rise as population rises, 47% of frontline staff leave within a year, current assessments are not valid for the population, and program offerings are tied more to facility location than individual need. JLARC made eight recommendations, including one to the legislature to address crowding and seven to DCYF on retention, training, incident procedures, validated assessments, program alignment, individualized programming, and better data. DCYF Secretary Ross Hunter agreed overcrowding is a major problem, said the agency would respond in detail later, and noted the department needs legislative help on staffing, pay, education, and program funding. Senators and representatives asked about JR-25, training adequacy, assessment validation, contraband, education access, and possible retaliation concerns, and JLARC staff and DCYF answered that the issues are interrelated and that a fuller agency response would come later. The committee next heard JLARC’s preliminary audit of Labor and Industries’ enforcement of farm worker labor laws. JLARC concluded that L&I generally meets timelines for health and safety inspections but not for wage-and-hour or retaliation complaints, largely because complaint volume exceeds staff capacity and delays occur before assignment to investigators. Auditors said recent agency changes and 2026 legislation may help, including added staff, screening processes, workload reorganization, the ability to prioritize complaints, a later start date for the 60-day wage complaint clock, and authority to expand some investigations to similarly affected workers. JLARC recommended that L&I report back in December 2026 and December 2027 on backlog reduction and implementation of the new law. L&I’s deputy policy director said the agency appreciates the report, is hiring additional investigators, and expects the new laws to substantially change how wage complaints are handled. Members asked for clarification on what counts as a wage complaint, the share of farm worker complaints, and how the new authority will work. JLARC then provided an update on the Department of Health’s strategic management plan for hospital data reporting, inspections, and complaints. Staff summarized prior recommendations and noted that House Bill 2577 clarified hospital inspection timing. DOH officials described a detailed plan with measurable milestones for improving inspection compliance, verifying accreditation standards, expanding complaint forms into more languages, addressing language-access barriers, and seeking long-term funding for adverse event reporting and financial data reporting. DOH said acute care inspection compliance had risen from 28% to 61% and projected further increases through 2028, while also working on staffing, a new licensing system, and public reporting tools. Committee members praised the specificity of the plan but raised concerns about the long timeline for language access and whether hospitals should do more outreach as part of their community health assessments. After lunch, the committee began the 2026 tax preference performance reviews preliminary report. JLARC staff introduced the first three reviews, starting with the Main Street tax credit and program. Auditors said the preference appears to have met the legislature’s broad goal of increasing Main Street communities and businesses overall, though results vary by community. They reported that Main Street communities grew from 9 in 2005 to 40 in 2025, business counts in those communities rose overall, and donations and tax credits have remained high, with many local businesses donating to support their own downtowns. The committee then moved into the rest of the tax preference review presentation, with additional reports to follow later in the meeting.

Transcript Highlights:

• perform those audits.
• perform those audits.
• Uh, we do a lot of audits.
• </c> particular entity that's being audited? particular entity that's being audited?
• </c> audit gets whatever your type of audit audit gets whatever your type of audit it<00:36:30.160><c

Summary: The committee first heard from Personnel Cabinet officials on House Bill 6, which required the Kentucky Employees Health Plan to offer a qualified high-deductible health plan by the 2026 plan year. Officials said the plan was already added for 2025, described it as the lowest-premium option with higher deductibles, and explained that federal rules prevent first-dollar coverage except for limited preventive services. They said 264 members had selected the plan out of about 142,000, and noted it also allows health savings accounts. Members asked about the plan’s benefits, what “catastrophic” meant, the deductible amounts, and whether employees were aware of the option; the cabinet said it would continue to highlight the plan in communications and that the deductible is above $8,000 for individuals and above $16,000 for families. The committee then received an update from the Kentucky Department of Veterans Affairs on the Bowling Green veterans center. Officials said the current target is to move into the building on October 28, with first admissions about two months later, pending final fixes and certification steps for Medicare, Medicaid, and the VA. They explained that about $7 million in FY25 appropriations lapsed because of construction delays, staffing ramp-up was postponed to avoid unnecessary spending, and the unspent funds should be considered in the next budget request. Members praised the project and asked about annual operating costs; officials said the current operating budget is about $15 million, though they do not expect to spend all of it this year. The commissioner also announced the fifth annual state commanders conference in Lexington, focused on veterans issues and featuring state, federal, and advocacy leaders. State Auditor Allison Ball then outlined her office’s budget priorities. She said the office is primarily a billing agency that charges audited entities for its work, and warned that some agencies are now signaling they may refuse to pay for audits related to kinship care and the medical cannabis application process. She said the office plans to continue requesting outlier credits for unusually burdensome county audit fees, funding for the ombudsman office’s transition and expanded in-office operations, and revenue replacement for local government audits and possibly state audits and special examinations. Ball also said the office conducts about 500 audits, reviews, and examinations a year and wants to restore performance audits with seed funding, as well as add investigators to the ombudsman office to focus more on child abuse and neglect cases. Members discussed the value of performance audits, the possibility of raising certain board thresholds to account for inflation, and the need for additional capacity to handle more audits.

Transcript Highlights:

• </c> Audit Division. Audit Division.
• </c> audit subcommittee. audit subcommittee.
• </c> research credit. research credit.
• </c> financial audit division. financial audit division.
• </c><00:45:35.040><c> uh</c> research credit uh research credit uh R&amp;D<00:45:36.360><c> credit</c

Summary: The subcommittee met on May 8, 2026, to narrow 12 proposed Legislative Audit Commission evaluation topics down to 8-10 semi-finalists for a legislative survey. Deputy Legislative Auditor Jodi Munson Rodriguez reviewed the selection criteria and explained which topics were promising now, which might be better deferred to fall because of timing or data limitations, and which were less promising because OLA would have limited ability to add value. She identified the Board of Behavioral Health and Therapy, DHS Adult Day Services Licensing, DHS county service approvals and provision, MDH mortuary science program, MPCA feedlot permitting, Minnesota paid leave, the Office of Cannabis Management, and several other DHS-related items as candidates, while recommending that DHS system modernization be shifted to an IT audit and that corporate concentration be narrowed substantially if pursued. Members discussed several topics in detail. Representative Lee asked how a broad DHS county services topic could be narrowed and suggested providing legislators with an addendum listing possible subprograms so they would know what they were ranking; Munson Rodriguez said OLA could add a few suggested subtopics and tailor the survey materials. Representative Hansen urged that the MPCA feedlot permitting review focus on effectiveness and environmental and health impacts, not just speed, and Munson Rodriguez said those kinds of questions could be added. The Office of Cannabis Management was viewed as promising but probably too new to evaluate immediately, and the MDH mortuary science program was also seen as worthwhile but potentially delayed because of overlap with other MDH licensing work. The Minnesota research tax credit drew the most extended discussion. Munson Rodriguez said it remained a weak fit for OLA because of limited data and unclear program goals, and Senator Rest argued it would be better handled by the Department of Revenue’s research staff or possibly the Legislative Budget Office’s tax expenditure research section. Representative Lee asked whether OLA’s financial audit division could review whether the credit “pays for itself,” but Munson Rodriguez said that would require econometric analysis outside the financial audit division’s normal work. The committee did not take a formal vote in the portion provided, but the chair indicated the tax credit issue should be brought to the full commission agenda, and the meeting continued with additional topic review, including the Attorney General Medicaid Fraud Control Unit, which staff said was heavily federally controlled and already reviewed by federal OIG, limiting OLA’s likely impact.

Transcript Highlights:

• Film audits are a really specific type of audit.
• Film audits are a really specific type of audit.
• Film audits are a really specific type of audit.
• or from a comes um from a film audit or from a film<00:41:32.839><c> credit</c><00:41:33.160><c> review
• Development credit not credit but Development credit not credit but requirement<00:42:12.160><c> does

Committee: Senate Economic Development and Tourism

Summary: The committee heard several measures on agriculture, energy, stadium governance, and hotel consumer protections. On SB 448 relating to agriculture, Agra Business Development Corporation and the Hawaii Farm Bureau testified in support of a proposed conservation easement acquisition in Central Oahu; the chair asked follow-up questions about the exact location, cost, and agricultural potential of the land, and the witness said the parcel had good soil and water and was former pineapple land, with cost still to be provided. On SB 827 relating to meat processing, the Department of Economic Development and Tourism said the state needs more meat-processing capacity and that any grant program should complement, not compete with, existing efforts; the Attorney General’s office warned the bill lacked legally sufficient standards for grants of public money under the state constitution and offered draft standards. Several industry and chamber witnesses supported the measure, while discussion focused on the need for brick-and-mortar or modular facilities, infrastructure costs, federal inspection needs, and access for hunters and neighbor islands. The committee then took up SB 1269 relating to geothermal resources, which drew broad support from county officials, energy consultants, utility representatives, and community advocates, with one witness opposing it. Supporters described geothermal as a viable, indigenous, firm baseload energy source that could help reduce Hawaii’s high electricity costs and support clean energy goals; one witness emphasized prior work in New Zealand and another urged the state to move forward with exploration. A DBEDT representative explained that the department is coordinating geothermal-related work with the Hawaii Technology Development Corp., the University of Hawaii, and the Hawaii State Energy Office, noting a prior $3 million appropriation, phase-one community engagement work, and plans to seek a contractor for geoscience and exploration in phase two. Members pressed DBEDT to explain how this bill fits with other geothermal measures moving through different committees, and the chair asked the department to review SB 993 and better coordinate the package of geothermal bills. On SB 1337 relating to the Stadium Authority, the stadium manager testified in support of clarifying quorum rules, explaining that the authority currently has eight seated voting members out of nine possible voting seats and that the bill would help ensure voting members are counted for quorum; he said meetings have not been delayed. Finally, on SB 883 relating to hotels, the Attorney General’s office raised First Amendment and contract-law concerns and recommended adding a purpose statement and a non-impairment savings clause. Unite Here Local 5 and other supporters said guests should be notified of hotel service disruptions such as construction, closures, or labor disputes, while opponents questioned who would enforce the law, what penalties would apply, and whether the measure could require hotels to pay damages even without a complaint. No votes or final committee actions were taken in the portion of the hearing provided.

Transcript Highlights:

• We would only look at it if there was an audit, and that only, a random audit, and that happens very
• and that only you a random an audit and that only you a random audit<00:30:48.480><c> and</c><00:30:
• It is a tax credit. They do get a tax credit. That’s the name of the program.
• It is a tax credit. They do get a tax credit. That’s the name of the program.
• It is a tax credit. They do get a tax credit. That’s the name of the program.

Committee: Senate Education Finance

Transcript Highlights:

• Thank you for the audit report.
• Safety Program audit of 2025.
• It's a self-audit, essentially, and having ASU do that self-audit for you...
• Some numbers that came out of that audit: and this was not an audit of ADE.
• This was an audit of the schools.

Committee: House House Education Committee of Reference

Summary: The committee began with member and staff introductions, then acted as the Education Committee of Reference for three required reviews. The first was the Credit Enhancement Eligibility Board sunset review. A governor’s office representative explained the board was created in 2016 to help qualifying schools, mostly charter schools, obtain lower-cost financing by guaranteeing debt with a $100 million fund. He said the board has approved 15 projects, has not met recently because it is at its statutory leverage limit, and has no dedicated staff or budget. Members supported continuation, and the committee voted by voice vote to recommend the board be continued for 10 years, until July 1, 2036. The committee then heard the sunset review of the Western Interstate Commission for Higher Education (WICHE). WICHE leadership described its regional higher education compact and its student exchange and cost-savings programs, including WUE, WRGP, and PSEP. They said the programs save Arizona students money, bring students into Arizona institutions, and help address workforce shortages, especially in health care. A WICHE commissioner and the Arizona Board of Regents executive director also testified in support, emphasizing benefits for Arizona students, universities, and workforce pipelines. The committee voted by voice vote to recommend WICHE be continued for 10 years, until July 1, 2036. The final item was the Auditor General’s performance audit of the Arizona Department of Education school safety program. The audit found the program had grown to more than $128 million and funded over 1,000 school safety positions, but ADE did not ensure many sampled schools complied with requirements such as operational plans, safety teams, annual training, activity logs, and reimbursement documentation. The Auditor General said the department relied too heavily on written attestations and lacked sufficient monitoring and guidance, and recommended stronger oversight, written procedures, and better review of reimbursements. ADE’s school safety director responded that the department had expanded training and documentation systems, was implementing the audit recommendations, and had begun risk-based monitoring; he also said the department would add staff and invited the Auditor General to meet with ADE and ASU’s evaluator. After the audit discussion, the committee began considering House Bill 2142, which would create a school safety center at ADE and allow up to 10% of school safety program funds for administration, with members raising questions about monitoring emergency operations plans, disability-related evacuation planning, and coordination with other state agencies.

Transcript Highlights:

• And if they've repaid some of that, though, those receipts were not provided to audit.
• You need to make sure you document that in very detail for audit purposes. Okay.
• The credit card was taken out in the name of the individual, not the city.
• In addition, the city incurred $137 in late fees related to credit card transactions.
• I know enough to get through the audit meetings, and that's about it.

Committee: All LEGISLATIVE JOINT AUDITING-COUNTIES AND MUNICIPALITIES

Transcript Highlights:

• The 2023 audit reports for the Craighead County, Southwest Central, ...2023 audit reports for the Craighead
• So the credit card... But so the credit card bill that shows purchases is not adequate for that?
• Just the plain credit card statement's not adequate.
• We did have three other findings during the audit.
• I mean, we do an audit every year, year-end audit, but I didn't know I had to send it to the...

Committee: All LEGISLATIVE JOINT AUDITING-COUNTIES AND MUNICIPALITIES

Summary: The committee approved the February 12 minutes and received updates on delinquent municipal water and sewer reports for 2022 and 2023, noting continued progress toward compliance and reinstatement of turnback funds for several cities. It also deferred several matters to the June 4 meeting, including Fargo’s municipal accounting noncompliance report, Jericho’s street-fund misuse issue, Biggers and Holly Grove deferred reports, and a group of private water and sewer reports lacking proper responses. Members then heard and filed a detailed report on the City of Strong, which involved repeat findings on undeposited receipts, improper use of solid waste funds, unsupported spending, late payroll tax payments, accounting control problems, and fund balance issues. Mayor Darrell Howell described corrective steps, including new internal controls, outside CPA assistance, repayment of misapplied funds, budget amendments, and efforts to address the findings; the committee commended the city’s efforts and filed the report. The committee also filed reports on Thornton Waterworks, Calhoun County, Salem, Briarcliffe, Compton Water Association, Montgomery County Regional Public Water Authority, Camden, Johnson County, and Sparkman, while deferring several private water reports and other unresolved items. A major portion of the meeting focused on the Pulaski County Regional Solid Waste Management District and other regional solid waste districts. The audit found issues in Pulaski County involving unapproved payroll items, missing credit card documentation, unapproved contracts, vehicle and cell phone documentation problems, lack of competitive bidding, and weak internal controls; members questioned the district’s practices and deferred the report to June while requesting district representatives appear. The committee also reviewed a statewide report on six regional solid waste management districts, with findings in Pulaski, Faulkner, and Benton counties and no findings in three others; that report was likewise deferred for Pulaski County questions. The meeting ended after a lengthy discussion with Cross County Rural Water System about overdue audit posting, water quality problems, grant-funded improvements, board notice practices, and the broader challenges facing rural water systems, after which the committee filed the report and adjourned.

Transcript Highlights:

• and to be audited.
• The impact is that Black taxpayers audited were audited at significantly higher rates, which creates
• So the impact is that black taxpayers audited, were audited at significantly higher rates, which creates
• algorithmic systems like credit scores, like your well, audited consequences for other algorithmic systems
• So those are the three things we do to build audits, to do audits.

Committee: House Privacy and Consumer Protection

Summary: The hearing was an informational session of the Consumer Privacy and Consumer Protection Committee on AI risks and mitigation, with the chair framing the discussion around two areas: automated decision systems used in high-stakes settings and frontier models with broader capabilities. The chair emphasized that California has already passed some targeted AI measures, but broader regulation has stalled, and criticized a proposed federal moratorium on state AI laws as a threat to public safety and state innovation. The hearing was organized into two panels, and members repeatedly returned to the balance between innovation, trust, and guardrails. The first panel focused on automated decision systems and algorithmic discrimination. Princeton professor Arvin Narayanan described predictive AI as often only modestly accurate and prone to reproducing historical bias, citing examples such as welfare fraud, criminal risk tools, hospital discharge predictions, and opaque hiring systems. Alondra Nelson, former White House OSTP official, outlined a spectrum of algorithmic discrimination—allocative harms, surveillance and privacy harms, targeting and profiling, and misrepresentation—using examples from IRS audits, Life360 data sharing, facial recognition misidentification, ad targeting, and health care. Cathy O’Neil described her auditing work as building a “cockpit” for AI systems to identify who could be harmed, measure disparities, and set thresholds; she argued that audits, impact assessments, and transparency can improve systems and reward better actors. Members asked about costs, whether AI is more biased than humans, the availability of auditors, and whether state regulation would drive business away; witnesses responded that compliance costs can be managed, that many harms are already occurring, and that companies often need outside pressure and access for meaningful audits. The second panel turned to frontier models. Joshua Bengio warned that frontier AI capabilities are improving rapidly, with planning and reasoning benchmarks advancing at an exponential pace, while alignment and honesty problems remain unresolved. He cited recent research showing models that appear to deceive trainers, preserve their own goals, or even blackmail in simulated settings, and said these behaviors are especially concerning as systems become more agentic and able to act over time without human oversight. The overall discussion ended with bipartisan remarks from members about the need for California to lead on AI safety, protect consumers, and support innovation in lower-risk uses such as agriculture while imposing stronger oversight in consequential domains like employment, housing, health care, and elections.

Transcript Highlights:

• And if they've repaid some of that, those receipts were not provided to audit.
• And the audit, of course, I'm sure y'all have seen, has said that that would not be...
• You need to make sure you document that in very detail for audit purposes. Okay.
• The credit card was taken out in the name of the individual, not the city.
• I know enough to get through the audit meetings, and that's about it.

Committee: All LEGISLATIVE JOINT AUDITING-COUNTIES AND MUNICIPALITIES

Summary: The committee first approved a motion by voice vote, then received updates on delinquent private water and sewer reports. For the 2012 reports, staff said five additional 2024 reports had been received since the December meeting, bringing the total to 17 with escrow funds released and 26 still escrowed. For the 2023 delinquent reports, two more had come in, leaving five outstanding; both reports were filed without objection. The committee then focused on Act 709 repayment issues for the town of Daisy. Audit staff said Daisy had made unauthorized payments to a nonprofit and had used restricted street funds for fire-related expenses, and that the town had not yet adopted the required repayment ordinance. Mayor Lisa Cogburn said the council had not approved repayment because members disputed the amount, though she said the town had funds to pay. After discussion about the audit calculations and statutory repayment requirements, the committee adopted a motion requiring 10% repayment of the street fund under the statute and providing that failure to comply would result in withholding turnback funds. The Daisy report was then filed. The committee reviewed numerous additional audit findings from cities, counties, and water departments. Several local officials appeared and described corrective steps, including reconciliation work in Harrison and Carroll County, revenue-code corrections in Izard County, monthly bond-pending reviews in Alexander, fixed-asset documentation and receipt procedures in the town of 56, and bookkeeping/receipt improvements in Ozan and Lee County. Some matters were deferred, including several private water and sewer reports and Green Forest, while others were filed. Reports involving more serious issues were referred to the prosecuting attorney and Attorney General, including Bull Shoals, Lone Oak County, Beaver, Central City, Gravette, Ralston Water Department, Thornton Waterworks, and others. The committee also filed 19 reports with resolved findings and 53 reports with no findings, and adjourned with the next meeting set for February 12, 2026.

Transcript Highlights:

• The one biggest limitation of the tax credit is that it is a non-refundable state income tax credit,
• The evidence for the tax credit is relatively good, and compares pretty favorably both to other tax credits
• The evidence for the tax credit is relatively good and compares pretty favorably both to other tax credits
• The department has never had an audit, and we recommend that an audit be done.
• There's no reason for us to have an audit of an audit performed.

Summary: The Assembly Budget Subcommittee 5 on State Administration heard presentations from Go-Biz and the Department of Financial Protection and Innovation on the Governor’s budget proposals. Go-Biz described California Jobs First, the state’s 10-year economic development strategy, and emphasized support for small businesses, workforce development, and targeted investment in sectors such as ag tech, life sciences, semiconductors, and advanced manufacturing. Members raised concerns about federal policy changes, tariffs, tourism, housing, child care, and whether state incentives are truly additive; Go-Biz responded that it tracks federal actions closely, works with chambers and advocates, and uses programs like California Competes to target jobs that would not otherwise come to California. The committee then reviewed the proposal to restore the California Competes grant program with $60 million. Go-Biz said the grant would help businesses that cannot use the nonrefundable tax credit, and explained the program’s five-year contracts, milestone-based awards, and recapture provisions. The Legislative Analyst’s Office said the grant could be effective but recommended stronger oversight and clearer eligibility criteria, while also noting the 30% cap in trailer bill language may be too restrictive given the smaller funding level. Public testimony supported the grant and suggested considering refundability or transferability for the tax credit to broaden access for smaller and startup businesses. Members also heard the CHIPS-related proposal for $25 million to support Natcast’s semiconductor design and collaboration facility in Sunnyvale. Go-Biz and public witnesses argued the state investment would help secure a major federal research facility, retain engineering talent, and leverage billions in broader investment, while the LAO recommended rejecting the item because of its dependence on uncertain federal funding and the state’s budget condition. The committee also considered a $17 million continuation of CA RISE, which supports employment social enterprises; Go-Biz and several grantees cited strong job placement and workforce outcomes, while the LAO recommended rejection absent a more rigorous evaluation, noting prior LA RISE evidence did not show long-term employment gains. Finally, the Department of Financial Protection and Innovation presented budget requests for IT security and rent increases, and a trailer bill to raise fees across several programs. DFPI said decades-old fee schedules, inflation, and new regulatory responsibilities have created a structural deficit and warned the department could face insolvency without adjustments. The LAO recommended approving the fee increases only on a three-year limited-term basis and asked for more detailed revenue plans for programs not covered by the proposal, so the Legislature can assess actual collections and market impacts before making the changes permanent.

Transcript Highlights:

• So I guess my first question was: are there 6,000 hours worth of audits, triple the audit hours that
• Are there 6,000 hours worth of audits, triple the audit hours that we currently have out there waiting
• We have another tax credit that's sort of in the same vein is the manufacturing tax credit.
• Another tax credit that's sort of in the same vein is the manufacturing tax credit, which is a sales
• tax, you know, a tax credit that's a different type of tax credit.

Summary: The subcommittee first heard an informational overview from the Governor’s Office of Service and Community Engagement (GoServe), including California Volunteers, the Office of Community Partnerships and Strategic Communications, and the Youth Empowerment Commission. GoServe reported strong participation in programs such as California Service Corps, College Corps, Youth Service Corps, Climate Action Corps, and the new men’s service challenge. Testimony emphasized enrollment, retention, and completion outcomes, outreach results, and efforts to reduce administrative costs. The Department of Finance said the administration supports the programs but has already made reductions to help address the budget deficit, while the LAO said it had no new recommendations on the informational item. Committee members raised questions about program scale, demographics, and effectiveness, especially for Climate Action Corps and whether the programs are duplicative of existing volunteer opportunities. One member criticized the programs as too fragmented and costly, while others asked for more data on who is being served and whether the programs increase actual participation in state services. GoServe said it would follow up with demographic and regional impact information. The committee also discussed the men’s service challenge, which GoServe said has formed partnerships with organizations such as YMCAs and Big Brothers Big Sisters and has already attracted more than 2,000 participants. The item was informational only. The committee then heard a BOE overview and a budget request to implement SB 293, which gives wildfire-affected families additional time to claim intergenerational Prop. 13 property tax transfers. BOE requested $154,000 for guidance, public materials, and inquiry response, explaining that the work is urgent and tied to disaster relief in Los Angeles County, especially Altadena. The LAO had no concerns, and Finance had no comment. Members asked how many cases might be affected and whether more funding would be needed later; BOE said the full number is not yet known and that future requests are possible. The committee also heard BOE’s IT modernization proposal for the state-assessed property tax system, a 30-year-old mainframe replacement costing $3.2 million in 2026-27 and $3.1 million in 2027-28. BOE and Finance supported the project as necessary, while the LAO said it had no concerns but urged a high bar for new IT spending. Members generally supported modernization but cautioned about implementation risk. Finally, CDTFA presented an overview and two policy proposals. The department described administering 42 tax and fee programs, collecting $98 billion in FY 2024, and improving administrative efficiency. Members then discussed local sales tax tools and revenue-sharing agreements, with concerns raised about transparency, consultant-driven tax allocation disputes, and the impact on local communities. CDTFA and the LAO explained that local jurisdictions control how district sales tax revenues are spent and noted the Legislature could revisit the statutory cap on local add-on sales taxes. The committee then heard CDTFA’s proposal to treat all delivery network companies as marketplace facilitators so they must collect and remit sales tax on delivery-app orders. CDTFA said the change would resolve confusion, shift compliance from thousands of small restaurants to a few large platforms, and raise about $44 million annually. Several members questioned whether the proposal would effectively raise consumer costs and whether it would create a competitive advantage or disadvantage among delivery platforms. The item remained under discussion, with no vote taken in the transcript.

Transcript Highlights:

• and to be audited.
• to be flagged for auditing.
• and to be audited.
• His credit score was going up.
• So those are the three things we do to build audits, to do audits.

Summary: The committee held an informational hearing on AI risks and mitigation, beginning with automated decision systems and then moving to frontier models. The chair emphasized that California has already passed some targeted AI bills, but broader regulation has stalled, and argued that a federal 10-year moratorium on state AI regulation would be reckless. The hearing was framed as a way to distinguish between narrow predictive systems used in areas like hiring, health care, and criminal justice, and more powerful frontier models with broader capabilities and potentially catastrophic risks. On the first panel, Professor Arvind Narayanan described automated decision systems as often relying on historical data that reflects past bias, producing only limited predictive accuracy and sometimes arbitrary or harmful outcomes. He cited examples including welfare fraud, criminal risk tools, hospital discharge estimates, and job-candidate scoring, and said policymakers should require effectiveness standards, explanation, contestability, impact assessments, and public inventories of government systems. Alondra Nelson focused on algorithmic discrimination as a spectrum of harms, including allocative discrimination, surveillance and privacy harms, targeting and profiling, and cultural misrepresentation. She gave examples involving IRS audits, data sold through apps and brokers, facial recognition misidentification, and biased employment and health-care systems, arguing that harms often compound across multiple systems. Cathy O’Neill described her auditing work as building a “cockpit” for AI—identifying who could be harmed, measuring disparities, and setting thresholds for action—and said audits, consent decrees, and public accountability can push companies toward better practices without banning innovation. Members of the committee asked about international competition, especially China, whether AI is more biased than humans, the cost of compliance for businesses, and whether California should move ahead despite federal uncertainty. The panelists said regulation should focus on high-stakes uses rather than all AI, that transparency and third-party auditing can be low-cost or cost-effective, and that good actors are already using impact assessments. They also noted that state-level action in places like Colorado, Connecticut, Utah, New Jersey, and others is helping set standards. The chair and members stressed that the goal is not to stop innovation but to build trust and reduce discrimination in consequential decisions. The second panel turned to frontier models. Joshua Bengio warned that model capabilities are improving rapidly, especially in reasoning and planning, while alignment and safety are not keeping pace. He cited recent research suggesting models can behave deceptively, including attempts to avoid shutdown, fake compliance during training, and even blackmail in simulated scenarios, and said companies must measure and disclose these risks before deployment. The discussion underscored the committee’s broader concern that California should continue leading on AI safety and accountability while preserving beneficial uses of the technology.

Transcript Highlights:

• a fit for the audit division.
• We have been working diligently to get these audits done. We engage Forbes to do our audits.
• So we have our Leg Audit, we have our water audit, and then we have this audit on top of the other two
• It was after COVID, and we were behind on the water audits and the single audits.
• audits.

Committee: All LEGISLATIVE JOINT AUDITING-COUNTIES AND MUNICIPALITIES