Senate Budget and Fiscal Review— Holly J. Mitchell, Chair SPECIAL SUBCOMMITTEE ON COVID-19 RESPONSE Senator Holly J. Mitchell, Chair Senator Jim Nielsen Senator Anna M. Caballero Senator Brian Dahle Senator John M.W. Moorlach Senator Richard Pan Senator Richard D. Roth Senator Nancy Skinner Senator Bob Wieckowski Consultant: Joe Stephenshaw Agenda Thursday, April 16, 2020 State Capitol - Room 4203 at 2:00 p.m. Note: The Senate is committed to facilitating the ability of the public to take part in the hearing, and will provide safe opportunities for public participation. The Senate will live stream the hearing on our website at http://www.sen.ca.gov. The public may submit comment or testimony in writing to the committee, or participate via telephone at the conclusion of the hearing, during the public comment period. The Chair will provide the call-in number during the hearing. Informational Hearing Budget Overview of California’s COVID-19 Response Panelists: Gabe Petek, Legislative Analyst Vivek Viswanathan, Chief Deputy Director, Department of Finance Chris Hoene, Executive Director, California Budget and Policy Center Pursuant to the Americans with Disabilities Act, individuals who, because of a disability, need special assistance to attend or participate in a Senate Committee hearing, or in connection with other Senate services, may request assistance at the Senate Rules Committee, 1020 N Street, Suite 255 or by calling 916-651-1505. Requests should be made one week in advance whenever possible. Senate Budget Special Subcommittee on COVID-19 Response April 16, 2020 The Following Background Material is Included for Background Purposes. Items Will Not Be Discussed Individually. Subcommittee Background Issues are a Sampling of COVID-19 Related Issues and not an Exhaustive List. Background ......................................................................................................................................3 Section 36 Letter - Homeless Funding.............................................................................................6 Section 36 Letter – Hospitals Infrastructure ....................................................................................8 Section 36 Letter – Safety Net Programs .......................................................................................12 Section 36 Letter – Small Business Assistance ............................................................................16 Section 36 Letter – Correctional Institutions ................................................................................18 Section 36 Letter – Personal Protective Equipment - $495 Million ..............................................20 Section 36 Letter – Access to Child Care .....................................................................................22 Subcommittee 1 Background Issues ..............................................................................................24 Subcommittee 2 Background Issues ..............................................................................................31 Subcommittee 3 Background Issues ..............................................................................................34 Subcommittee 4 Background Issues ..............................................................................................38 Subcommittee 5 Background Issues ..............................................................................................42 2 | Page Senate Budget Special Subcommittee on COVID-19 Response April 16, 2020 Background Since December 2019, countries around the world have been dealing with the outbreak of a novel (new) coronavirus. The virus is known as “SARS-CoV-2" and the disease it causes is called “coronavirus disease 2019” or COVID-19. According to tracking by the New York Times, as of the past Tuesday, April 14, 2020, over 1.8 million people worldwide had been affected resulting in just over 120,000 deaths and the virus had been detected in at least 177 countries. According to the New York Times tracking, as of Tuesday morning, at least 580,000 people across every state, plus Washington, D.C., and four U.S. territories, had tested positive for the virus, and at least 23,000 patients with the virus had died. For California, the Department of Public Health reports that, as of April 12, 2020, there were 22,348 COVID-19 cases in our state with 687 deaths. Due to the severity of the COVID-19 crisis, on March 4, 2020, Governor Newsome issued an Executive Order declaring a state of emergency and on March 19, 2020, issued a stay at home order. From a budget perspective, the following actions have been taken that have impacted California’s ability to respond to the crisis: • The Legislature passed SB 89 (Committee on Budget and Fiscal Review), Chapter 2, Statutes of 2020, on March 16, 2020, which appropriates up to $1 billion for any purpose related to the March 4, 2020 proclamation of a state of emergency related to the coronavirus. SB 89 established a process whereby the Administration must notify the Joint Legislative Budget Committee (JLBC) 72 hours prior to the use of any of the funds. To date, the Administration has notified the JLBC regarding the use of approximately $650 million from this appropriation (these funding requests are described in more detail later in the agenda). • The Governor transferred $1.3 billion to the Disaster Response Emergency Operations Account (DREOA), bringing its balance to $1.4 billion. The DREOA is the source of funds that the Administration uses to quickly respond to emergencies. This account is within the Special Fund for Economic Emergencies. • Through the Executive Order in which the Governor announced the DREOA transfer, he stipulated that he would utilize these funds and any other legally available state funds to help address the COVID-19 emergency. Making it clear that, if need, he will use emergency powers to spend above the current balance of the DREOA. • The Federal Government has passed three COVID-19 funding packages: o Phase I, the Coronavirus Preparedness and Response Supplemental Appropriations Act was enacted into law March 6, 2020 and provided $8.3 billion in emergency funding to treat and prevent the spread of COVID-19 through ensuring vaccines 3 | Page Senate Budget Special Subcommittee on COVID-19 Response April 16, 2020 developed to fight the coronavirus are affordable, that impacted small businesses can qualify for Small Business Administration Economic Injury Disaster Loans and that Medicare recipients can consult with their providers by telephone or teleconference, if necessary or desired. o Phase II, the Families First Coronavirus Response Act, became law March 18, 2020. This act provided for a $100 billion package that includes provisions for paid sick leave, free coronavirus testing, expanded food assistance, additional unemployment benefits, and requirements that employers provide additional protection for healthcare workers. o Phase III, The Coronavirus Aid, Relief, and Economic Security Act (CARES) provides an estimated $2 trillion stimulus package to battle the harmful effects of the COVID-19 pandemic. Some of the major components of the CARES Act include: . Creates a $150 billion Coronavirus Relief Fund for state, local and tribal governments. $30 billion for an Education Stabilization Fund for states, school districts and institutions of higher education for costs related to the coronavirus. $45 billion for the Disaster Relief Fund for the immediate needs of state, local, tribal and territorial governments to protect citizens and help them respond and recover from the overwhelming effects of COVID-19. $4.3 billion, thorough the Centers for Disease Control and Prevention, to support federal, state and local public health agencies to prevent, prepare for, and respond to the coronavirus. $25 billion for transit systems. Expanding unemployment insurance from three to four months, and provides temporary unemployment compensation of $600 per week, which is in addition to and the same time as regular state and federal UI benefits. A $500 billion lending fund for businesses, cities and states. $1,200 direct payments to many Americans and $500 for each dependent child. We are still in the midst of assessing the approximately $26 billion that is estimated to flow to California from the first three federal stimulus packages. Besides understanding how the funding will flow, there is also a provision in the largest pot, the Coronavirus Relief Fund, that stipulates that the funding can't be used for currently budgeted costs. California is projected to receive approximately $15.3 billion for state and locals from this fund (approximately $6.9 billion of which will go directly to locals) so it's important to understand how our actions correspond with the intent of the fund. The federal stimulus that has been approved to date will provide considerable help to our state. However, given the magnitude of the impact that the COVID-19 crisis will have on our state’s economy, additional relief is likely needed. As such, on April 8, 2020, Governor 4 | Page Senate Budget Special Subcommittee on COVID-19 Response April 16, 2020 Newsom wrote to Speaker Pelosi asking that $1 trillion in direct and flexible relief be provided to states and local governments in the next federal stimulus bill. On April 10, 2020, the Department of Finance (DOF) provided an interim fiscal update to the Legislature. In it, DOF notes that: • The economic disruption from the pandemic is expected to result