Senate Convenes First COVID-19 Budget Oversight Hearing

On Thursday afternoon, the Senate Budget & Fiscal Review Special Subcommittee on COVID-19 Response held its first oversight hearing to review the Newsom Administration’s use of $1 billion in state emergency funds, the use of the Disaster Response-Emergency Operations Account, and federal funding for COVID-19 response activities. After a lengthy delay due to technical issues with the Senate’s video server and with the majority of subcommittee members participating remotely, the subcommittee’s hearing began with opening remarks from Chair Senator Holly Mitchell and Vice Chair Senator Jim Nielsen. Senator Mitchell discussed the gravity of the current situation, the role of the Legislature in exercising oversight of Administration’s expenditures in responding to COVID-19, and the likelihood of difficult fiscal times ahead.

The hearing’s first panel featured Legislative Analyst Gabe Petek who presented an overview of the current economic status and forecasted economic experience as a result of COVID-19. The LAO has determined that the state has entered a recession and the economy’s recovery will likely depend on the trajectory of the virus itself. Petek discussed the role of the federal government in responding to COVID-19, including its ability to run budget deficits, appropriations made to state and local governments, and the likelihood of the need for further federal action around financial supports. Furthermore, Petek indicated California likely faces a challenging fiscal outlook with the state experiencing a situation in which General Fund expenses outpace revenues. Given the modified tax deadlines and difficulty in determining revenue estimates, the LAO recommends the Legislature adopt a cautious “baseline” budget in June that maintains existing service levels.

The next panel featured representatives from the Department of Finance (DOF), California Health and Human Services (CHHS) Agency, and the California Office of Emergency Services (Cal OES). DOF’s Vivek Viswanathan discussed the Administration’s planning and forecasting for a recession scenario, including enacting a balanced budget, paying off the “wall of debt,” and significantly investing in the state’s reserves. DOF expressed appreciation for the Legislature’s rapid action in approving up to $1 billion to support COVID-19 response activities and further indicated it expects California will incur $7 billion in direct COVID-19 expenses, as well as increased caseload expenses with Medi-Cal and other safety net programs. Given the fluid nature of the current situation, DOF indicated it had limited information to share with the Legislature regarding contracts entered into for COVID-19 supplies and resources, expenditure planning, and May Revision estimates.

DOF further indicated the Newsom Administration has committed $769 million of the $1 billion made available by the Legislature on a variety of areas, including hospital and laboratory preparedness, personal protective equipment, homelessness sheltering and services, childcare services, and direct financial assistance. DOF also discussed its $1.3 billion transfer to the Disaster Response-Emergency Operations Account to support procurement of personal protective equipment and critical medical supplies in response to COVID-19.

The last panel of the hearing featured Chris Hoene of the California Budget and Policy Center who discussed economic implications of COVID-19 on Californians, particularly those who are vulnerable, low-income, undocumented, and persons of color. Hoene identified a series of key gaps in recent federal actions that provided economic, financial, and workplace supports to citizens and Californians working in certain sectors. Hoene recommended future economic aid provided in response to COVID-19 prioritize local governments, children, families, and low-income Californians who have been disproportionately impacted by the ongoing pandemic.

Following the three panel presentations, subcommittee members had the opportunity to ask questions of the presenters. Senator Holly Mitchell began by questioning the DOF around the collection status of revenues, anticipated expenses to be incurred in responding to COVID-19, and processes governing the use of the state’s rainy day fund, as well as questioning the LAO around the use of other budgetary reserves that have been established in recent years. Other subcommittee members queried panelists around the new supply chain for personal protective equipment, unemployment insurance claims and projections, federal COVID-19 legislation and appropriations, homelessness services, stay-at-home orders, safety net program availability, and state budget processes. Notably, Senator Richard Pan posed a series of questions around adequately resourcing local health departments to conduct contact tracing and tracking, statewide testing capacities, distribution of personal protective equipment, and health care worker protections.

Public comment included representatives from local government, health and public health, education, businesses, and others. CHEAC Executive Director Michelle Gibbons during public comment highlighted the critical work of local health departments during the COVID-19 pandemic and urged the Legislature and Administration to dedicate significant resources to bolster local health department capacity and the public health infrastructure.

As a reminder, the Assembly will convene its budget subcommittee on COVID-19 oversight on Monday, April 20 and Monday, April 27 at 10:00 am. A recording of the Senate subcommittee hearing can be found here. The full subcommittee hearing agenda is available here.