A Review of Government Reorganization Plan 2025

A Review of Government Reorganization Plan 2025 Report #287 | May 2025 Milton Marks Commission on California State Government Organization and Economy www.lhc.ca.gov LITTLE HOOVER COMMISSION Dedicated to Promoting Economy Pedro Nava and Efficiency in California State Chair Government Anthony Cannella The Little Hoover Commission, formally known as the Milton Vice Chair Marks “Little Hoover” Commission on California State Government Dion Aroner Organization and Economy, is an independent state oversight agency. David Beier Senator Christopher Cabaldon By statute, the Commission is a bipartisan board composed of Assemblymember Phillip Chen five public members appointed by the governor, four public members appointed by the Legislature, two senators and two Gil Garcetti assemblymembers. José Atilio Hernández Jason Johnson In creating the Commission in 1962, the Legislature declared its Gayle Miller purpose: Senator Roger Niello ...to secure assistance for the Governor and itself in Assemblymember Liz Ortega promoting economy, efficiency and improved services in the Janna Sidley transaction of the public business in the various departments, agencies and instrumentalities of the executive branch of COMMISSION STAFF the state government, and in making the operation of all Ethan Rarick state departments, agencies and instrumentalities, and Executive Director all expenditures of public funds, more directly responsive Tamar Foster to the wishes of the people as expressed by their elected Deputy Executive Director representatives... Krystal Beckham The Commission fulfills this charge by listening to the public, Daniel Harris-McCoy consulting with the experts and conferring with the wise. In the Ashley Hurley course of its investigations, the Commission typically empanels Shara McAlister advisory committees, conducts public hearings and visits government operations in action. Its conclusions are submitted to the Governor and the Legislature for their consideration. Recommendations often take the form of legislation, which the Commission supports through the legislative process. Contacting the Commission All correspondence should be addressed to the Commission Office: Little Hoover Commission 925 L Street, Suite 805, Sacramento, CA 95814 (916) 445-2125 | LittleHoover@lhc.ca.gov This report is available from the Commission’s website at www.lhc.ca.gov. Letter from the Chair May 29, 2025 The Honorable Gavin Newsom Governor of California The Honorable Mike McGuire The Honorable Brian Jones President pro Tempore of the Senate Senate Minority Leader and members of the Senate The Honorable Robert Rivas The Honorable James Gallagher Speaker of the Assembly Assembly Minority Leader and members of the Assembly DEAR GOVERNOR AND MEMBERS OF THE LEGISLATURE: As part of the Little Hoover Commission’s mission to improve state government, state law tasks us with assessing gubernatorial reorganization plans, and with making a recommendation as to whether such plans should be accepted or rejected. On April 4, 2025, Governor Newsom submitted such a plan to our Commission, proposing that the existing Business, Consumer Services and Housing Agency be split in two, creating a Housing and Homelessness Agency and a Business and Consumer Services Agency. This report fulfills our statutory obligation to study the Governor’s proposal and to make a recommendation as to its fate. We believe the reorganization process holds substantial advantages for policymakers, and we are proud of our Commission’s role in that process. We believe the Commission can provide a vigorous, independent and nonpartisan analysis of reorganization proposals, and can also play a role improving such plans by recommending companion legislation. In this case, we have done both. To fulfill our statutory obligation to study the proposal carefully, we held two full days of hearings, taking testimony from Newsom Administration officials, stakeholder groups, academic researchers, organized labor, and others. Our staff conducted extensive research on the key components of the Governor’s proposal, including the assessment of potential lessons from California history, from other states, and even from other countries. Our Commission met to discuss the plan and to develop a consensus about how the Legislature should address it. As this report documents, we recommend that the Legislature allow the plan to take effect, although we also recommend five pieces of companion legislation that were advocated by witnesses at our hearings, and which we believe would improve the state’s programs in the affected policy domains. We hope this report serves as a useful addition to the Legislature’s consideration of Governor Newsom’s proposal, and we are of course ready to assist in the Legislature’s assessment of the plan in any way that is helpful. Sincerely, Pedro Nava, Chair Little Hoover Commission A REVIEW OF GOVERNMENT REORGANIZATION PLAN 2025 | 1 Table of Contents EXECUTIVE SUMMARY ......................................................................3 BACKGROUND ...................................................................................5 Introduction .....................................................................................................5 Reorganizing California State Government .................................................5 Principles of Governmental Reorganization ................................................7 THE GOVERNOR’S PROPOSAL .......................................................10 California Housing and Homelessness Agency ..........................................11 Business and Consumer Service Agency ....................................................12 Implementation Timeline ............................................................................13 Cost of the Reorganization ...........................................................................13 THE COMMISSION’S RECOMMENDATION ....................................16 Approval .........................................................................................................16 COMPANION LEGISLATION .............................................................21 Organizational Structure and Efficiency ....................................................21 Strong and Ongoing Oversight ....................................................................24 Affordable Housing Reforms........................................................................26 APPENDIX A: PUBLIC HEARING WITNESSES ...............................29 APPENDIX B: CALIFORNIA’S HOUSING AND HOMELESSNESS PROGRAMS ........................................................30 NOTES ...............................................................................................33 2 | LITTLE HOOVER COMMISSION Executive Summary On April 4, 2025, Governor Gavin Newsom submitted The Commission’s to the Little Hoover Commission a reorganization Recommendation plan, proposing to split the existing Business, Consumer Services and Housing (BCSH) Agency in Few would object to the proposition that housing two, creating a Housing and Homelessness Agency remains a vexing issue for Californians. There is too and a Business and Consumer Services Agency. little housing, and that which exists is too expensive. To fulfill our statutory obligation to assess the plan, Though the Governor’s plan plainly deals with other the Commission held two full days of hearings, issues, we see the crux of his plan as creation of taking testimony from 20 witnesses offering various the Housing and Homelessness Agency, with the perspectives. We received written submissions resulting increased attention on housing issues. from other stakeholders, and Commission staff conducted extensive research into best practices for The Administration contends that structural governmental reorganization, the history of proposed reforms can increase the state’s role in facilitating California reorganizations, the existing structure of the construction of more – and more affordable the affected policy areas, and other topics. – housing. We agree. It is true that many of the specific reforms envisioned in the plan could in fact We recommend that the Governor’s plan be be achieved even without a reorganization, but we approved, though also that the Legislature pursue believe the changes envisioned in this plan can, if companion legislation making additional changes. properly implemented, make concrete improvements in the state’s housing policy. Reorganization Process We also believe the proposal can improve the The Governor submitted the plan to the Legislature consumer protection and licensing functions of the on May 5, 2025. By law, the Commission must submit agencies involved, enhancing both the safety of its report to the Governor and Legislature by June 4. Californians and the opportunity for economic and Either house of the Legislature may veto the plan by job growth. a simple majority vote, but must act by July 4. Absent legislative rejection, the plan takes effect on July 5. Four central arguments support the proposal. The Governor’s Proposal ◊ The existing Business, Consumer Services and Housing Agency has grown far larger since it was Under the Governor’s proposal, the existing created in 2012, and in fact has outgrown its component entities within the BCSH Agency would current administrative structure. be divided between the two new agencies, and a new Housing Development and Finance Committee would ◊ The responsibilities of the current Agency have grown far more diverse, such that it now includes be created within the Housing and Homelessness component departments with little connection Agency. The Administration estimates the changes in their duties and policy domains. A narrower would cost $4.2 million in the upcoming fiscal and more logical grouping of policy areas would year, and $6.2 million per year once they are fully allow for greater focus by agency leadership, and implemented. The vast majority of that money would would also allow future governors to appoint come from the General Fund. agency leaders with relevant experience. A REVIEW OF GOVERNMENT REORGANIZATION PLAN 2025 | 3 ◊ The creation of the Housing Development and Finance Committee presents the opportunity for greater coordination of programs related to affordable multifamily housing financing. ◊ Witnesses described various inefficiencies with certain aspects of the state’s current housing finance processes. The reorganization holds the potential to help ensure that these areas of inefficiency are addressed. However reorganization alone is not enough, a point made by witnesses who described the plan as a first step, not an ultimate solution. Thus, we recommend the following pieces of companion legislation. ORGANIZATIONAL STRUCTURE AND EFFICIENCY Recommendation 1: Require an examination of all homeless programs and assess whether any currently in other agencies should be overseen by the new California Housing and Homelessness Agency. Recommendation 2: Reduce the administrative burden placed on both those providing and consuming homeless services by streamlining and aligning program, reporting, and application requirements. STRONG AND ONGOING OVERSIGHT Recommendation 3: Require reports from both new agencies on a set timeline that detail progress on specified metrics. Recommendation 4: Establish a formal mechanism for stakeholder feedback on implementation. AFFORDABLE HOUSING REFORMS Recommendation 5: Enact a Memorandum of Understanding between the Governor and the Treasurer to create a unified application and review process for financing affordable housing. 4 | LITTLE HOOVER COMMISSION Background Introduction Reorganizing California State Government The California Constitution obligates the Governor to periodically evaluate the structure of the executive Article 5, Section 6 of the California Constitution branch, and to propose reorganizations as needed. provides that the Legislature may outline in statute a On April 4, 2025, Governor Gavin Newsom submitted process for reorganizing executive branch agencies, to the Little Hoover Commission a reorganization although not with regard to the role of other plan, proposing to split the existing Business, constitutional officers: “Authority may be provided Consumer Services and Housing Agency in two, by statute for the Governor to assign and reorganize creating a Housing and Homelessness Agency and a functions among executive officers and agencies Business and Consumer Services Agency. By law, the and their employees, other than elective officers and plan is submitted to the Commission for “study and agencies administered by elective officers.” A process recommendation.” for reorganizations is outlined in two sections of the California Government Code: 12080, which To fulfill our statutory obligation to assess the plan, outlines the general procedure, and 8523, which the Commission held two full days of hearings, specifies the role of the Commission. In short, the taking testimony from 20 witnesses offering law obligates the Governor to periodically examine various perspectives. A panel of witnesses from the organization of all agencies to determine what the Newsom Administration presented the plan, changes are necessary to improve the efficiency and the Commission additionally heard testimony and management of government programs, reduce from academic experts, advocates from various expenditures, consolidate and coordinate agencies stakeholder groups, organized labor, and others. In and functions, or eliminate duplication.1 The statute addition to written testimony submitted by these detailing this authority is broad in scope, allowing witnesses prior to the hearing, the Commission the Governor to transfer functions among agencies, solicited and received written follow-up statements abolish functions entirely, reduce the number of from many witnesses. Both at the hearings and state agencies through consolidation of those with through our website, the Commission also received similar functions, or establish new entities to perform substantial public comment from stakeholder groups the functions of an existing entity. and others. For a list of hearing witnesses, see Appendix A. Although the reorganization of state government can also be accomplished through regular legislation In addition to these hearings, Commission staff or through budget trailer bills – a method that conducted extensive research into best practices has been used frequently in recent years – statute for governmental reorganization, the history of provides the Governor with an accelerated and proposed California reorganizations, the existing streamlined option. Through this option the structure of the affected policy areas, and other Governor may submit a plan for review by the topics. This report outlines the Commission’s findings Commission. Within an established timeline, the and offers the Commission’s recommendation Legislature may either allow the plan to go into effect that the Governor’s plan be approved, though also or reject it by a majority vote in either house. This advises that the Legislature pursue companion process – described in detail below – offers both legislation making additional changes. an independent assessment of a reorganization plan, and a condensed timeline allowing for a reorganization to take effect in roughly three months. A REVIEW OF GOVERNMENT REORGANIZATION PLAN 2025 | 5 Governor’s Reorganization Plan: A 91-Day Minimum Process Day 1: Reorganization plan sent to Little Little Hoover report due 30 days Hoover for review: identify experts, hold after the plan is submitted to hearing(s), and write a report. the Legislature. Little Hoover Commission Review Period (60+ Days) Legislative Review Period (60 Days) Day 30: Earliest date the Day 91+: Plan takes effect Governor may send the unless rejected by either plan to the Legislature, Senate or Assembly by a starting a 60-day review. majority vote. Final effective date varies depending on when the Governor submits the plan to the Legislature. PROCESS TIMELINE assessing the plan, while the Legislature has 60 days Under the reorganization process outlined in statute, – until July 4 – to consider the proposal. During the the Governor must first submit the plan to Legislative Legislature’s review period, the plan is referred to Counsel for drafting into bill language, clearly policy committees, which must send to the floor a presenting the “nature and purposes of the plan.” report at least 10 days prior to the expiration of the Once the plan has been submitted to Legislative Legislature’s 60-day review period. After receiving Counsel, the Governor submits the plan to the policy committee reviews, either the Senate or Commission for “study and recommendation.” The Assembly may vote to approve or reject the plan by Newsom Administration submitted this plan to the majority vote. The Legislature may not amend the Commission on April 4, 2025. plan directly, though it may effectively do so through additional legislation, as described below. If no action After submitting the plan to the Commission, is taken by either house during the Legislature’s the Governor must wait at least 30 days before 60-day review period, the Governor’s plan becomes submitting the plan to the Legislature. (A effective on the 61st day after its submittal to the reorganization plan may be submitted to the Legislature, in this case, on July 5, 2025. Thus, the Legislature at any time during a regular session, Legislature in effect has a veto over the Governor’s though the Legislature must have 60 days of a proposal, but it must act to exercise that veto, or the continuous session to consider the plan.) Although plan takes effect. the Governor could choose to wait longer than 30 ROLE OF THE COMMISSION days, in past practice Administrations have generally The Commission may not revise or otherwise change submitted reorganization plans to the Legislature a reorganization plan, but it may recommend approximately 30 days after submitting them to the administrative actions or subsequent legislation that Commission. The Legislature received this plan on would effectively change some components of the May 5, 2025. plan. Once the plan is submitted to the Legislature, both For example, in his reorganization proposal in the Commission and the Legislature face statutory 2012, Governor Brown proposed that the Delta timelines. The Commission has 30 days – until June Stewardship Council be moved within the Natural 4 – to issue to the Governor and Legislature a report 6 | LITTLE HOOVER COMMISSION Resources Agency. Although Administration officials on planned objectives within the timeframe they testified that this change would do nothing to reduce established (13 percent) and some even hurt the the Council’s policy independence, other witnesses organization’s performance (14 percent). Researchers disagreed, arguing that such a shift would, at a found that delays in implementation were most often minimum, reduce the appearance of the Council’s attributed to three challenges: unforeseen issues, independence, and potentially damage the Council’s such as technology deployment; leaders who actively work. Although the Commission recommended resisted the changes; and employees who actively that the overall plan be allowed to take effect, it resisted the changes.2 also urged “concurrent legislation to preserve the independence and credibility” of the Council. The Researchers found that Legislature implemented this recommendation delays in implementation through AB 1019 (Buchanan, 2012), which preserved the independence of the Council. This bill was were most often attributed to written to take effect only if the Governor’s proposed three challenges: unforeseen reorganization took effect. issues, such as technology Thus, while a Governor’s reorganization plan may deployment; leaders who not be amended within the formal reorganization process, the Commission may recommend changes actively resisted the changes; through companion legislation, and has chosen to do and employees who actively so in the past. resisted the changes. Principles of Governmental Reorganization Despite the challenges, reorganizations are a common tool to transform government. Historically, Government reform can be achieved through according to an analysis by the IBM Center for the various means, from less rigorous options like Business of Government, four goals typically drive streamlining work processes and clarifying roles government reorganizations:3 and responsibilities to wholesale organizational restructuring. While the latter has the potential to ◊ To make government work better. This may achieve a number of significant goals, it is not without involve rectifying the overlap, duplication, or gaps costs. Reorganizations can be complex endeavors, in government functions that make it difficult requiring significant time and resources that can to manage work and monitor performance. divert attention away from mission-focused work. Reorganizations to improve government operations may result in several benefits such Indeed, a Harvard Business Review study on the as greater attention to a priority issue, reduction effectiveness of reorganizations across sectors and in overlap and duplication among widespread geographies found that while most government programs, creation of a platform for a new or reorganizations delivered some anticipated benefits, expanding program, improved cooperation they also failed to fully achieve their goals. About 75 among large agencies, greater transparency, percent of government reorganizations assessed and improved employee satisfaction and in the study delivered some benefits, but like their performance.4 corporate counterparts, few actually delivered A REVIEW OF GOVERNMENT REORGANIZATION PLAN 2025 | 7 ◊ To save money. Often synonymous with Create a detailed implementation plan. A detailed improving efficiency, reorganizations may be implementation plan that includes defined goals, motivated by goals of reducing government milestones, and a timetable for delivery can help expenditures or eliminating duplicative, wasteful, ensure organizational change occurs on time and or outdated functions. However, in practice, as planned, and can serve as an oversight and reorganizations may involve significant start-up accountability tool to monitor progress.6 Such costs that can diminish the financial benefit of planning also can help new leaders immediately the endeavor. address potential logistical start-up problems, such as appointing individuals to key leadership roles, ◊ To enhance power. This may involve broadly hiring appropriate and sufficient staff, identifying reorganizing agencies to enhance the power of adequate office space, establishing appropriate the executive over implementation of a specific administrative support functions, and identifying and policy area or, in a narrower sense, to reprioritize implementing necessary technology changes related and rearrange the decision-making structure, to networking processes, database integration changing who has a voice in policy decisions. or hardware needs. Detailed pre-planning allows ◊ To address a pressing problem. This may leaders to focus on the mission of their new involve responding to a crisis, perceived crisis, or organization in its critical first year.7 a call for leaders to act in a highly visible way. Move quickly. Although some argue that a staged According to assessments of past state and federal reorganization process leads to more successful governmental reorganization efforts, academic change, some research suggests that it is better experts and other observers have identified to take decisive action.8 Accelerating the pace of several lessons that suggest there are several steps implementation can help a reorganization deliver government leaders can take to improve chances for benefits as soon as possible. Slower organizational success. change not only delays outcomes but can create uncertainty for both employees and stakeholders Do more than “move the boxes.” To produce who rely on government programs.9 meaningful change, government reorganizations should go beyond changing the reporting lines of organizations. They should address how a transformation will affect services that taxpayers receive, and how it will impact employees and how they do their work. A new leadership structure alone will not guarantee a change in how work gets done or that reforms will trickle down to the day- to-day activities of staff who administer programs. Successful reorganizations must redesign work processes and activities to achieve desired outcomes, as well as clarify staff and management roles in the new organization. For success, an organization’s culture – the mindset and behaviors of its employees – must also be changed. If not, it will appear to those on the receiving end of a program that nothing has changed.5 8 | LITTLE HOOVER COMMISSION Guiding Questions for Assessing Government Organizational Reforms In preparation for a comprehensive reorganization of the federal executive branch agencies in 2017, the United States Government Accountability Office outlined four categories of questions to guide the assessment, implementation, and oversight of pending government reform proposals. These questions may help inform the Legislature’s assessment of the Governor’s latest reorganization plan: GOALS AND OUTCOMES What was the agency trying to achieve with its proposed reforms and who should achieve it • How well have the proposed reforms indicated the likely result of the elimination, merging, or restructuring of activities with other levels of government or sectors? • To what extent has the agency established clear outcome-oriented goals and performance measures for the proposed reforms? PROCESS FOR DEVELOPING REFORMS What was the processed used to develop the proposed reforms, and what factors were considered ◊ How and to what extent has the agency consulted with lawmakers, and other key stakeholders, to develop its proposed reforms? ◊ To what extent has the agency addressed areas of fragmentation, overlap, and duplication in developing its reform proposals? IMPLEMENTING THE REFORMS What practices did the agency put in place to support the successful implementation of proposed reforms ◊ Is there a dedicated implementation team that has the capacity, including the staffing, resources, and change management, to manage the reform process? ◊ Has the agency developed an implementation plan with key milestones and deliverables to track implementation progress? STRATEGICALLY MANAGING THE WORKFORCE What practices did the agency use to support the development and implementation if its proposed reforms regarding its workforce and performance management strategies ◊ How does the agency plan to sustain and strengthen employee engagement during and after the proposed reforms? ◊ To what extent has the agency conducted strategic workforce planning to determine whether it will have the needed resources and capacity, including the skills and competencies, in place for the proposed reforms or reorganization? Source: United States Government Accountability Office. “Government Reorganization: Key Questions to Assess Agency Reform Efforts.” GAO-18-427. June 2018. https://www.gao.gov/assets/gao-18-427.pdf. A REVIEW OF GOVERNMENT REORGANIZATION PLAN 2025 | 9 Governor’s Proposal Governor Newsom’s proposal would divide the ◊ Enforce California’s civil rights laws, existing Business, Consumer Services and Housing ◊ License and regulate more than four million Agency into two separate agencies – the California professionals, businesses, financial services, and Housing and Homelessness Agency and the Business state-licensed financial institutions, and Consumer Services Agency. Although the ◊ Regulate, license, and enforce the sale of component entities within the existing BCSH Agency alcoholic beverages and cannabis, and would largely remain unchanged, the Governor does propose creating within the new Housing and ◊ Regulate the horse racing industry. Homelessness Agency an entirely new committee Functionally, most organizations within the focused on housing finance. agency are involved with licensing and regulating As it exists today, the Business, Consumer Services occupations or businesses. This includes standalone and Housing Agency oversees 12 entities listed in the organizations that oversee specific industries, such accompanying figure, which together:10 as horse racing, cannabis, alcoholic beverages, and real estate, along with the Department of Consumer ◊ Regulate, fund, and facilitate the preservation Affairs, which oversees 36 entities that together and expansion of safe, affordable housing, license and regulate hundreds of professions and ◊ Prevent homelessness through the coordination occupations. of funding and services, BUSINESS, CONSUMER SERVICES AND HOUSING AGENCY Alcoholic Beverage Control California Horse California Housing Appeals Board Racing Board Finance Authority Reviews decisions of the Alcoholic Regulates horse racing and Finances affordable housing for Beverage Control Department. pari-mutuel wagering. lower-income Californians. Department of Alcoholic Department of Cannabis Control Cannabis Control Appeals Panel Beverage Control Board Oversees legal cannabis Reviews licensing decisions of the Licenses and regulates alcoholic businesses and products. Department of Cannabis Control. beverage sales in California. Department of Financial Department of Civil Rights Department Protection and Innovation Consumer Affairs Protects Californians from Regulates financial institutions Oversees 36 regulatory boards discrimination, hate violence, and protects financial consumers. licensing 3.4 million professionals. and human trafficking. Department of Real Estate Department of Housing and California Interagency Council Safeguards public interests in real Community Development on Homelessness estate through licensure, regulation, Develops and finances Coordinates efforts to prevent education, and enforcement. affordable housing solutions. and end homelessness. 10 | LITTLE HOOVER COMMISSION the Department of Housing and Community The California Housing and Development and the California Housing Finance Homelessness Agency Agency, this committee would be responsible for administering developer-facing multifamily The Governor’s reorganization plan would create a housing finance programs. These programs new California Housing and Homelessness Agency, would largely be shifted from the Department of responsible for coordinating all state housing and Housing and Community Development, with the homelessness efforts, and advancing civil rights laws goal of streamlining programs and aligning their and protections. It would include the following four asset management and compliance monitoring. entities that exist now within the current Business, By separating functions, this programmatic shift is Consumer Services and Housing Agency: intended to allow the Department of Housing and ◊ Department of Housing and Community Community Development to focus on administering Development, government-to-government financing. ◊ California Interagency Council on Homelessness, The reorganization plan would recast the Interagency ◊ California Housing Finance Agency, and the Council on Homelessness as an independent entity ◊ Civil Rights Department. within the new agency. Both the California Housing Finance Agency and the Civil Rights Department In addition, the plan would establish within this would report to the new Secretary of Housing and agency a new Housing Development and Finance Homelessness, but otherwise appear to remain Committee. Led by the Secretary of the Housing unchanged. and Homelessness Agency and by Directors of HOUSING AND HOMELESSNESS AGENCY California Interagency Council California Housing Civil Rights Department on Homelessness Finance Authority Protects Californians from Coordinates efforts to prevent Finances affordable housing for discrimination, hate violence, and end homelessness. lower-income Californians. and human trafficking. Department of Housing and NEW: Housing Development Community Development and Finance Committee Develops and finances Coordinates and streamlines affordable housing solutions. affordable housing resources. A REVIEW OF GOVERNMENT REORGANIZATION PLAN 2025 | 11 Functionally, these entities would largely remain The Business and Consumer unchanged as a result of the reorganization, with Services Agency one exception. The Commissioner of the Department of Financial Protection and Innovation, rather than The Business and Consumer Services Agency would the Agency Secretary, would be responsible for assume responsibility for the remaining eight entities developing standards for how financial institutions within the current Business, Consumer Services engage in investment-related activities. and Housing Agency, including those that provide consumer protection and business regulation. These The new Business and Consumer Services Agency include: would be led by a cabinet-level Secretary and up to three Deputy Secretaries, nominated by the Secretary ◊ Department of Alcoholic Beverage Control, and appointed by the Governor.11 In implementing ◊ Alcoholic Beverage Control Appeals Board, the plan, “all consumer protection entities” – that is, ◊ Department of Cannabis Control, the departments and boards currently housed in ◊ Cannabis Control Appeal Panel, Business, Consumer Services and Housing Agency and relating to consumer services –would be moved ◊ Department of Consumer Affairs, wholesale to the new Business and Consumer ◊ Department of Financial Protection and Services Agency.12 This would include a transfer of Innovation, personnel, resources, and policies related to the ◊ California Horse Racing Board, and the agency’s consumer protection functions from the Business, Consumer Services and Housing Agency.13 ◊ Department of Real Estate. BUSINESS AND CONSUMER SERVICES AGENCY Department of Alcoholic Alcoholic Beverage Control Department of Consumer Affairs Beverage Control Board Appeals Board Oversees 36 regulatory boards Licenses and regulates alcoholic Reviews decisions of the Alcoholic licensing 3.4 million professionals. beverage sales in California. Beverage Control Department. Department of Financial Department of Cannabis Control Cannabis Control Appeals Panel Protection and Innovation Oversees legal cannabis Reviews licensing decisions of the Regulates financial institutions businesses and products. Department of Cannabis Control. and protects financial consumers. Department of Real Estate California Horse Racing Board Safeguards public interests in real Regulates horse racing and estate through licensure, regulation, pari-mutuel wagering. education, and enforcement. 12 | LITTLE HOOVER COMMISSION would become operational. Within Housing and Implementation Timeline Homelessness Agency, the Interagency Council Should the reorganization plan be approved, the on Homelessness would become an independent Business, Consumer Services and Housing Agency entity and Housing Development and Finance would execute a phased multi-year process to stand Committee would become operational, incorporating up the new entities. The Business, Consumer Services the Executive Committee. Once appropriated, the and Housing Agency provided the Commission Committee will take on administration of initial the following timeline detailing its plans for multifamily housing programs from the Department implementation: of Housing of Community Development. MAY TO JULY 2025 JULY 2026 TO JUNE 2027 The Business, Consumer Services and Housing Organizational change management work and Agency already started work to stand up the two migration of specified programs to the Housing new agencies and housing finance-focused executive Development and Finance Committee would committee, including by launching teams to manage continue. engagement activities. Cost of the Reorganization JULY 2025 TO JUNE 2026 The Business, Consumer Services and Housing As noted above, the component entities of Agency would continue its transition work to execute the existing Business, Consumer Services and the reorganization plan, including by engaging Housing Agency – such as the Department of in “[o]rganizational change management efforts” Consumer Affairs or the Department of Housing and working with labor and human resources and Community Development – would be divided representatives to implement a communication between the two new agencies, including their outreach plan to engage with key stakeholders. budget and personnel. The staff of the BCSH Agency itself would also be divided between the The Housing and Homelessness Agency and the new agencies. However the reorganization would Business and Consumer Services Agency would work also encompass some additional costs. These were to set up structural and administrative frameworks, spelled out by the Administration as part of the May including by establishing tax IDs, headquarters, and Revision of the Governor’s proposed budget, which delegation for hiring and procurement. was released after the Commission’s hearings. The Executive Committee of the Housing In short, the Administration requested an additional Development and Finance Committee would launch, $4.2 million in the 2025-26 fiscal year, and estimated developing an internal structure for the organization the reorganization would cost $6.2 million per year and beginning work to create a single application in new spending once it is fully implemented. These and awards process for affordable housing finance, requests, spelled out in detail in a “Budget Change including by conducting stakeholder outreach. Proposal” submitted to the Legislature, constitute additional funding beyond the Governor’s initial JULY 2026 budget proposed in January.14 Effective July 1, 2026, the Business, Community Services and Housing Agency would be dissolved and the Housing and Homelessness Agency and the Business and Consumer Services Agency A REVIEW OF GOVERNMENT REORGANIZATION PLAN 2025 | 13 2025-26 BUDGET IMPACT ◊ Two new positions – a deputy secretary for fiscal The Administration is requesting $4.2 million in policy and administration and half-year funding additional funding in 2025-26, including $4 million for a business operations analyst. from the General Fund. Of the additional funding, the ◊ Three existing positions that are currently funded vast majority – and all of the General Fund money with limited-term funding that is scheduled – would go toward the creation of the Housing and to expire next month, but would be made Homelessness Agency and the Housing Development permanent under this plan. and Finance Committee (the new sub-entity to be ◊ Seven existing positions that are already funded created under the Housing and Homelessness largely, though not entirely, through the General Agency). Fund would now be shifted entirely onto the General Fund. Personnel Costs The Administration also requested $322,000 in The additional personnel costs for the new Housing additional funding, principally to provide two new and Homelessness Agency total $1,361,000 in salary staff positions, each funded for half a year, for the and benefits and include: Housing Development and Finance Committee. 2025-26 Budget Impact ADDITIONAL FUNDING 2025-26: $4.2 MILLION TOTAL15 OPERATING EXPENSES PERSONNEL & EQUIPMENT Housing and Homelessness Agency $1,361,000 $2,366,000 Housing Development and Finance Committee $ 308,000 $ 14,000 Business and Consumer Services Agency (Non-GF) $ 234,00016 Ongoing Budget Impact ADDITIONAL FUNDING 2027-28 AND ONGOING: $6.2 MILLION TOTAL17 OPERATING EXPENSES PERSONNEL & EQUIPMENT Housing and Homelessness Agency $2,631,000 $1,182,000 Housing Development and Finance Committee $1,269,000 $ 984,000 Business and Consumer Services Agency (Non-GF) $ 234,00018 Source: Business, Consumer Services and Housing Agency. Budget Change Proposal: Business, Consumer Services, and Housing Agency Governor’s Reorganization Plan Resources. May 13, 2025. https://bcp.dof.ca.gov/2526/FY2526_ORG0515_BCP8222.pdf. 14 | LITTLE HOOVER COMMISSION Non-Personnel Costs Personnel Costs The $2.4 million for non-personnel costs includes Personnel costs for the Housing and Homelessness a variety of costs, such as $250,000 for “one-time Agency roughly double in the out years, from facility relocation costs,” $500,000 for “organizational $1,361,000 to $2,631,000, as the additional four change management activities,” and $660,000 to permanent positions are added. For the Housing migrate “all Housing and Homelessness systems and Development and Finance Committee, personnel data to a new Information Technology environment.” costs increase from $308,000 in the coming year to Other cost categories include travel, training, printing $1,269,000 in the out years as the new permanent and the like. positions are added there. ONGOING BUDGET IMPACT Non-Personnel Costs The Administration requested additional funding of $6.4 million in 2026-27, but that includes some one- For the Housing and Homelessness Agency, non- time costs. Beginning in 2027-28, the Administration personnel costs decrease sharply from $2,366,000 estimates additional costs of the reorganization at in the coming year to $1,182,000 in the out years, $6.2 million, including $6.1 million from the General largely due to the disappearance of one-time costs Fund, and it estimates that those costs would be such as relocation, “change management activities,” ongoing. and equipment purchases. On the other hand, in the Housing Development and Finance Committee, non- In comparison to the costs cited above for 2025- personnel costs increase sharply in the out years, as 26, the most substantial change is a significant the Administration proposes that starting in Fiscal increase in ongoing personnel costs. This is Year 2026-27 the Committee execute a $1.1 million because in addition to the positions citied above, annual contract with the Department of Housing and the Administration is proposing to add four Community Development for “administrative and more permanent positions to the Housing and fiscal service support.” Approximately $200,000 of Homelessness Agency, including the Secretary, that contract would be covered by existing funding, the Undersecretary, the General Counsel, and but the Administration is requesting $900,000 in the Assistant General Counsel. Additionally, the additional General Fund money to pay the balance of Administration proposes to add six new permanent that contract. positions to the Housing Development and Finance Committee beginning in 2026-27. Overall non-personnel costs do not decline substantially. While some costs in 2025-26 are one-time and thus disappear in the out years (such as the relocation costs), these are largely replaced by ongoing non-personnel costs, such as a newly funded interagency agreement in which the Housing Development and Finance Committee will pay the Department of Housing and Community Development for “administrative and fiscal service support.” A REVIEW OF GOVERNMENT REORGANIZATION PLAN 2025 | 15 The Commission’s Recommendation We recommend that the Legislature allow the little housing, and that which exists is too expensive, Governor’s plan to take effect, although we also too far from work, or both. It is no surprise that polls recommend companion legislation to improve consistently find that voters rank housing as one of the reorganization. The companion legislation we the state’s most pressing issues. recommend is specified below. Approval California’s Housing Market24 Few would object to the proposition that housing remains a vexing issue for Californians.19 The state 48th ranks 48th among the 50 states in housing units per Among U.S. states in housing units capita.20 The state’s median home price is more than per capita double that of the nation as a whole.21 The state’s median rent is also far higher than the national >2x median. Median home price vs. national Efforts to remedy the crisis have yet to truly take 4th hold. The state has fallen short of all of its housing Highest share of cost-burdened construction goals. Though the Department of renters in the U.S. Housing and Community Development has called for the construction of 180,000 new units per year, the state has not seen an increase of that size since 2007. For more than a decade after the Great Recession, This is the context in which we view Governor the total number of housing units never increased Newsom’s reorganization proposal. Though the by even 100,000 a year.22 The overwhelming majority Governor’s plan plainly deals with other issues, we of houses that have been built in California in recent see the crux of his plan as creation of the Housing years are priced for households of relative affluence. and Homelessness Agency, with the resulting Nor is housing – when it is constructed – built in the increased attention on housing issues. places where it is most needed. Housing is being It should be noted that in comparison to the overall over-produced in inland areas relative to need, problem, state government’s role in these areas is particularly in southern California, leaving shortfalls not large. In the current fiscal year, for example, in the coastal cities where much of the population is the Department of Housing and Community centered. The predictable result is a state of super Development is investing less than $5 billion a commuters. One recent study found that California year in affordable housing, a fraction of the state’s possessed six of the 10 worst commutes in the overall housing market, which exceeds $70 billion nation, and Governor Newsom has said that more in residential construction alone. Nevertheless, we than 300,000 Californians spend more than three believe that state policy can make a difference at hours a day getting to and from work.23 the margin. To his credit, Governor Newsom has While some of these metrics have improved slightly emphasized the construction of housing during his in recent years – in each of the last four years the tenure, particularly by pushing local governments state added more than 100,000 units of housing, for to approve more housing construction in their example – the truth remains that California has too communities. 16 | LITTLE HOOVER COMMISSION To some extent, the reorganization plan could Testifying before our Commission, BCSH Secretary be viewed as a state analog to efforts to push Tomiquia Moss said that the agency had simply local governments to approve more housing. outgrown its current administrative structure. The Governor plainly believes that structural Especially when viewed in conjunction with its reforms can increase the state’s role in facilitating diversity of function, this expansion in size poses a the construction of more – and more affordable challenge for the future, and an argument for two – housing. We agree. It is true that many of the smaller, more focused agencies. specific reforms envisioned in the plan could in fact be achieved even without a reorganization, We believe that the changes but it is equally true that structure matters to any envisioned in this plan can, if organization, perhaps especially in government, where the flexibility of leaders can sometimes be properly implemented, make constrained by the rules of the administrative state. concrete improvements in the We believe that the changes envisioned in this lives of Californians, and in the plan can, if properly implemented, make concrete services they receive from state improvements in the lives of Californians, and in the services they receive from state government. government. And while we have centered much of the foregoing discussion on housing policy, we believe the Diversity of function. The current agency was proposed changes can play an equally important role created at least in part as a reaction to the fact that in improving the consumer protection and licensing its predecessor – the Business, Transportation and functions of the agencies involved, enhancing both Housing Agency – contained too many divergent the safety of Californians and the opportunity for policy domains. Accordingly, as part of the 2012 economic and job growth. reorganization that our Commission studied and Why is the proposed reorganization needed now? supported, transportation programs were sliced In our view, four central arguments emerge: size, away and lodged in their own agency. That was diversity of function, the creation of an entirely new a good change, but even the remaining agency entity, and the potential for greater coordination. We contains profoundly diverse components. It is address each in turn: difficult, for example, to see the practical policy connection between subsidizing the construction of Size. The existing Business, Consumer Services affordable housing and the regulation of horse racing and Housing Agency has grown far larger since it or liquor sales. was created in 2012. In a letter to the Commission, Governor Newsom explained that this reorganization This divergence of policy focus has only grown as the proposal is in response to the expanded scope and state has taken on additional roles in recent years. complexity of work within the agency, and it is true The expansion of the focus on housing policy under that the growth has been substantial. Since the Governor Newsom is an example. The legalization of agency first appeared in the 2013-14 budget, its total recreational marijuana use in 2016 – four years after position authority has grown from approximately the creation of Business, Consumer Services and 5,400 to approximately 8,100, and its budget has Housing Agency – is another. grown from roughly $1.5 billion to $3.4 billion, far outpacing inflation. A REVIEW OF GOVERNMENT REORGANIZATION PLAN 2025 | 17 UCLA Research Shows Mismatch Between Planned Housing Capacity and Needs Difference between population and share of statewide planned housing capacity share by region Population and planned housing capacity share by region Northern California Population Planned Region Difference Share Capacity Share Bay Area 20.3% 13.3% -7.0% Central Coast 3.1% 1.7% -1.4% Sacramento Central Sierra 0.5% 0.8% 0.3% Valley Inland Empire 11.5% 17.5% 6.0% Northern California 1.4% 3.6% 2.2% Sacramento Valley 7.6% 9.1% 1.5% San Joaquin Valley 10.6% 21.7% 11.0% Southern Border 8.9% 8.3% -0.5% Bay Area Southern California 36.2% 24.1% -12.1% Central Sierra Santa Clara County -2.2% San Joaquin Central Valley Coast Kern County +7% San Bernardino County +3.2% Southern California Inland Empire -5.6% -2.5% -1% 1% 2.5% 7% Los Angeles Riverside County County +2.8% -5.5% Orange Southern Border California Regions County -5.6% IMAGE REPRODUCED FROM ORIGINAL SOURCE: UCLA. February 2019. “Not Nearly Enough: California Lacks Capacity to Meet Lofty Housing Goals.” https://www.lewis.ucla. edu/research/california-lacks-capacity-to-meet-lofty-housing-goals/. A narrower and more logical grouping of policy say that few people have substantial expertise in domains would not only allow for greater focus by both housing policy and consumer protection and agency leadership and potentially more synergy professional licensing. The new structure will allow among component departments, but would also future governors a greater opportunity to focus allow future governors to appoint agency leaders in on candidates who have deeper, more relevant with relevant experience. It is no criticism of the experience in narrower areas of policy focus. current secretary nor any of her predecessors to 18 | LITTLE HOOVER COMMISSION Addressing the two interrelated issues described the goals. Witnesses described various inefficiencies above – the size and policy diversity of the current with certain aspects of the state’s current housing agency – can only be done through structural change, finance processes, particularly in programs overseen and thus they are particularly important arguments by the Administration. Detailed below, these areas in favor of the Governor’s proposal. of inefficiency are: the awards phase, where projects apply for and are granted funding; the closing phase, Creation of a new entity. The Administration where funds are committed to a project; and the proposes as part of this reorganization to create an compliance and asset management phase, where the entirely new entity in state government – the Housing state ensures the funded project is meeting its legal Development Finance Committee. Although nothing requirements. would preclude the creation of such an entity even in the absence of a reorganization, it is being proposed Awards. In general, the current process to apply as a component of the current plan, and thus we for funding from the state requires developers to assess it here. apply sequentially to multiple agencies over a 6- to 18-month period in order to fully fund a project.25 This new entity would be overseen by an Executive While witnesses described satisfaction with the way Committee consisting of the new Housing and the Tax Credit Allocation Committee makes funding Homelessness Secretary and the heads of decisions and hears appeals, some suggested that in the Department of Housing and Community programs administered by the Administration, these Development and the California Housing Finance processes are ineffective, lack transparency, and are Agency. Once established, the new Committee would inaccessible. A representative from the Terner Center sit within the Housing and Homelessness Agency, for Housing Innovation described the overall awards and would administer developer-facing multifamily process “maddening and exhausting,” as well as affordable housing programs, most of which are lengthy, redundant, and cumbersome. Stakeholders currently managed by the Department of Housing told the Commission a one-stop shop for funding and Community Development. should help improve this process.26 Although the new entity would not create new Closing. Witnesses testified that the closing process programs, it would be responsible for coordinating, is unnecessarily long and can take up to 18 months aligning, and providing oversight of programs related to complete, compared to four to six months in to affordable multifamily housing financing. Given other states. Some attributed these delays to an the depth of the housing crisis, as described above, organizational culture that does not prioritize we believe the new Committee holds the potential expeditious and cost-effective closures. For example, to substantially improve the administration of these the California Housing Consortium explained that programs, and thus the production of critically “project delays increase project costs, and developers needed housing. often experience delays as a result of program inefficiencies that currently exist within the housing Potential for greater coordination. We also believe programs under the BCSH umbrella.” Stakeholders the reorganization holds the potential for greater testified that a single, centralized process could coordination among programs to produce stronger reduce reporting burdens for developers.27 outcomes. Again, much of this work would not necessarily require a reorganization, but we believe Compliance and Asset Management. The current the Governor’s plan can be significant in achieving process to ensure compliance with funding A REVIEW OF GOVERNMENT REORGANIZATION PLAN 2025 | 19 requirements can be duplicative and wasteful, had been announced. The lack of access to budget particularly for the majority of projects that are estimates earlier in the process left all actors – our funded by multiple state agencies, witnesses Commission, stakeholder groups, and others – explained. For the same project, each funder attempting to judge the plan’s value without knowing may seek similar information – such as financial its cost, a difficult endeavor. Although the cost statements, tenant income verification, and estimates ultimately provided by the Administration inspection reports – but in different forms and do not change our fundamental view that the plan at different times. Stakeholders suggested that a should be enacted, we urge the Administration, single, centralized asset management process for should the plan take effect, to focus on the potential developments that have regulatory agreements for cost savings through greater efficiencies and with multiple state agencies could reduce reporting economies of scale. The estimates identified in the burdens.28 May Revision are not prohibitive, but neither should the Administration ignore the potential for trimming away costs whenever possible. The reorganization holds the potential to increase pressure As for speed, we note that no one disputes that many of the goals of the reorganization can in fact be to ensure that these areas of achieved under the current organizational structure inefficiency are addressed. At of the Business, Consumer Services and Housing Agency. Most important among these is the idea of the same time, we must sound a unified application and approval process for state a note of caution with regard to financing for affordable housing – sometimes called two important components of a “one-stop shop.” Plainly, that unified process can be enacted now, without waiting for the new agencies the plan: cost and speed. to be created, which under the Administration’s timeline will not occur until July 1, 2026. We urge Below, in the section on companion legislation, we the Administration to move forward now with the discuss the need for better coordination among creation of a more streamlined system of housing programs that report to different constitutional finance. It would be both ironic and tragic if what officers. Here we are focused on programs that is arguably the principal goal of the reorganization report to the Governor. The reorganization holds the were delayed by the plan itself. potential to increase pressure to ensure that these Yet despite these important caveats, we remain areas of inefficiency are addressed. enthusiastic about the basic goals of the Governor’s At the same time, we must sound a note of caution Plan, and we recommend that the Legislature allow it with regard to two important components of the to take effect. plan: cost and speed. The estimated cost of the reorganization is detailed in this report. It is unfortunate that these estimates were not available to our Commission nor to the Legislature prior to the May Revision of the Governor’s Proposed Budget, long after the proposal 20 | LITTLE HOOVER COMMISSION Companion Legislation Many witnesses at our hearings sounded a consistent thus additional legislative steps may be especially note – expressing general support for the plan, but important to help ensure full implementation. noting that specific implementation details would Thus, we recommend the following pieces of be crucial in determining its success. Typical of companion legislation. They are grouped into much of the testimony were the remarks of Ben sections addressing organizational structure and Metcalf, former director of the Department of efficiency, strong and ongoing oversight, and Housing and Community Development and now a affordable housing reforms. scholar of these issues at UC Berkeley. In his written testimony, Metcalf said the plan takes “important Organizational Structure and steps in the right direction,” although he also noted Efficiency additional measures will be “needed to ensure successful implementation of the reorganization.” The reorganization plan focuses exclusively on Similarly, Chione Flegal, executive director of Housing dividing the existing components of the Business, California, expressed support for the creation of a Consumer Services and Housing Agency. In the case Housing and Homelessness Agency as “a promising of housing policy, most (though not all) of the state’s and immediate first step.” work is already encompassed by, or coordinated with, the existing agency, and thus a focus on that ...reorganization alone is not agency addresses much of state government’s programmatic agenda on that topic. The proposal enough. To be truly successful, also includes the creation of a new entity on housing a reorganization plan must policy – the Housing Development and Finance produce meaningful results for Committee – that is specifically designed to increase coordination. Californians. Programs attempting to address homelessness, however, are spread throughout state government. We heard these witnesses and heed their warnings. While the plan provides additional guidance for the Despite our conclusion that the Governor’s plan California Interagency Council on Homelessness, should take effect, reorganization alone is not it fails to address whether any of the state’s other enough. To be truly successful, a reorganization plan homelessness programs should be consolidated must produce meaningful results for Californians. into the new Housing and Homelessness Agency. While we believe the Governor’s plan holds that Indeed, it is not clear that the Administration even potential as submitted, we also believe that a considered whether such consolidation is warranted. number of additional steps will help to ensure even (For a list of California housing and homelessness stronger results. These additional measures are programs, see Appendix B.) To ensure the most perhaps made all the more important by the coming efficient organizational structure, the state must take change in executive leadership. Due to term limits, the opportunity presented by the reorganization and Governor Newsom will be departing office within examine whether its homelessness programs should the next two years, even before his own plan can be, at least to some extent, consolidated within the be fully implemented, should the Legislature allow new Housing and Homelessness Agency. it to take effect. The next governor may or may not share Governor Newsom’s focus either on housing policy or on the structure of these agencies, and A REVIEW OF GOVERNMENT REORGANIZATION PLAN 2025 | 21 In similar fashion, the state should consider whether opportunities for further integration, coordination, some streamlining of the administrative procedures and consistency across programs. Under a more used in homelessness programs is merited. The collaborative system, for example, in overseeing Governor’s proposal plainly seeks structural reforms programs providing housing supports to individuals that would make it easier for developers to access exiting prison, the Housing and Homelessness state financing for affordable housing projects. Agency could work with the Department of Health Given that the plan’s goal is to create a California Care Services to ensure these individuals can also Housing and Homelessness Agency, the Commission access community-based care upon their release believes it is imperative the state give the same level through the California Advancing and Innovating of attention to improving the provision and access of Medi-Cal (CalAIM) Justice-Involved Initiative.30 homeless services as it does for affordable housing San Francisco encountered similar jurisdictional financing. Developing a more streamlined and issues when creating its own Department of coordinated system to deliver homeless services will Homelessness. As described by San Francisco result in more efficient use of state resources, and Assemblymember Matt Haney, “huge aspects” of better outcomes for those experiencing or at risk of the homeless response were not included in the homelessness. department – including most of what was helping Recommendation 1: Require an examination of Californians get off the streets. This disconnect led to all homeless programs and assess whether any confusion: currently in other agencies should be overseen “…if you call something the homelessness agency, but by the new California Housing and Homelessness so much of the response to homelessness is still in other Agency. If so, develop a plan for transferring the departments, that can end up having the opposite effect programs to the agency. where you go somewhere believing you’re going to get The Governor’s reorganization plan envisions the set of answers or funding or accountability, but a system in which the California Housing and actually it’s housed elsewhere.”31 Homelessness Agency would be responsible for Inclusion of “homelessness” in the Housing and “coordinating all state housing and homelessness Homelessness Agency’s name signals to the public efforts.”29 Yet, the state’s homelessness programs are that this is where one should engage with the spread across approximately 10 state entities, several state on this issue. As such, it is important that its of which would be outside the new agency. functions align with its name. Further centralizing the It is certainly understandable why some programs state’s homelessness programs, when appropriate, that serve individuals experiencing homelessness within the California Housing and Homelessness would exist outside of the Housing and Agency would bring state closer to delivering on this Homelessness Agency. A state entity focused on promise. health care, for example, is likely better positioned Advocates told the Commission that homeless to administer a program that provides services to programs run by the Office of Emergency Services, those in behavioral health crisis, some of whom are the Board of State and Community Corrections, homeless or at risk of homelessness. Department of Corrections and Rehabilitation, and There are, however, programs administered by non- the Department of Social Services, are among those housing entities that, if located within the California that should be considered for transfer.32 Housing and Homelessness Agency, would open up 22 | LITTLE HOOVER COMMISSION Recommendation 2: Reduce the administrative housing. Chione Flegal, Executive Director of Housing burden placed on both those providing and California, told the Commission that inefficient consuming homeless services by streamlining service access is one of the primary complaints she and aligning program, reporting, and application hears from residents who have been unhoused. requirements. One key issue is that applicants must often apply for supports in singular ways, which can be time In addition to hindering coordination efforts, the consuming and burdensome.35 siloed and fragmented organization of California’s homelessness programs places an undue “…there is so much well- administrative burden on both those providing and accessing homeless services. intended but heavy bureaucratic layers that we are Much like with affordable housing finance, funding homeless services projects can require a patchwork required to sift through while of resources to be financially viable. Gathering we’re being held accountable needed funds can require applicants to track and comply with differing timelines, grant deadlines, for a system that’s almost and programmatic and reporting requirements. required inefficiency.” - Adding to these bureaucratic hurdles, homelessness Graham Knaus, Chief Executive programs use inconsistent definitions of key terms – like “homeless” – which can result in confusion and or Officer, California State even exclusion of those in need of services.33 Association of Counties Providing an example of this administrative disarray, Graham Knaus, Chief Executive Officer for the Initiatives in other states offer promising models of California State Association of Counties, told the how a streamlined and coordinated system could Commission that standing up one rapid rehousing benefit consumers: project in Monterey County required funding from eight different sources, with eight different In Washington, for example, individuals can use applications, from four state departments, all with a single application to apply for a housing, rental their own reporting requirements. He highlighted his assistance, and supportive services through the frustration with this paradoxical system: “…there is state’s Apple Homes and Health Initiative. The so much well-intended but heavy bureaucratic layers collaborative effort brings together the state’s that we are required to sift through while we’re being Health Care Authority, Department of Commerce, held accountable for a system that’s almost required and Department of Social and Health Services, local inefficiency.”34 While the rapid rehousing project governments, nonprofit organizations, and others.36 was ultimately able to overcome these barriers, his frustration with the process is reasonable: more time In Texas, state leaders have made it easier for and resources spent on program administration individuals to identify housing that meets their leaves less to serve those in need. needs. The state Department of Housing and Community Affairs operates a Vacancy Clearinghouse Further, these fragmented internal processes make that allows individuals to search the state’s entire it that much more challenging for individuals to housing portfolio for available units. Users can access the services they need to obtain or maintain A REVIEW OF GOVERNMENT REORGANIZATION PLAN 2025 | 23 search by housing type, such as senior housing, or necessary to assess whether concrete goals are being learn whether and the available units are accessible met or if further change is needed, and to hold its to those sensory or mobility disabilities.37 leaders accountable. There are, however, inherent challenges to Recommendation 3: Require reports from both consolidating the state’s homeless programs. For new agencies on a set timeline that detail one, applicants seeking state funding to provide progress on specified metrics. care vary widely by program, and can include Past studies of successful governmental nonprofits, cities, counties, or continuums of care. reorganizations recommend that an implementation Further, given the diversity of homeless programs, plan be used as a tool for oversight and monitoring. questions relevant for some applicants might be Such a plan can be used to help communicate not relevant for others. For instance, organizations changes to recipients of the impacted services – as seeking to build interim housing will likely need to well as the employees who provide them – and also give information that would not be relevant to those can serve as a mechanism to guide oversight and providing mental health treatment, and vice versa. monitor progress. Coordinating these resources together to make it easier for individuals to quickly and seamlessly In supplemental materials submitted to the access and maintain housing and supportive Commission, the Administration presented a vision services from a variety of sources presents its own for what success might look like as a result of this set of logistical challenges. The state must consider reorganization: whether all the information that is sought is needed, and, if applications are consolidated, whether the ◊ “Affordable housing is funded quickly and consolidation itself poses a burden to potential efficiently with minimum bureaucracy. applicants. ◊ All state resources are effectively harnessed to meet the state’s housing and homelessness goals In recognition of these considerations, the state across the entire housing continuum to prevent should focus its efforts on identifying opportunities homelessness, build rental housing affordable to to streamline existing requirements and improve the low-income Californians, and support first-time user experience. Pairing reform efforts with metrics homebuyers. – such as the length of time it took to access care or the number of applications completed – can help ◊ The state can nimbly respond to emerging the state maintain focus on creating a better user- industries and issues while balancing consumer experience. protections with economic opportunity.” Strong and Ongoing Oversight In addition, the Administration identified a number of aspirational outcomes to achieve these ends. For The reorganization creates an opportunity for the the new Housing and Homelessness Agency: shorter state to improve outcomes for Californians. But to timelines to fund and build affordable housing ensure successful execution, implementation of this developments; consolidation of funding application reorganization must be accompanied by strong and processes; fewer projects with insufficient funding ongoing oversight and assessment. By establishing awards to proceed; greater regulatory coordination ongoing reporting requirements on key metrics and across departments. For the Business and Consumer creating a mechanism for stakeholders to weigh in, Services Agency: streamlined policymaking; the Legislature can ensure the state has the tools 24 | LITTLE HOOVER COMMISSION enhanced enforcement; resource optimization; facilitate continued oversight by the Legislature and improved performance management. stakeholders. Regular reporting can further these goals, both by Recommendation 4: Establish a formal providing the raw data for assessing the impact mechanism for stakeholder feedback on on service provision, and by creating a regular implementation. timeline on which that data will be provided to In testimony and public comment, the Commission the Legislature and made public. However, while heard about challenges with the administration of helpful in articulating intent, neither the plan – the affordable housing programs under the current nor accompanying materials – specify the metrics Business, Consumer Services and Housing Agency. by which success of this reorganization will be Some spoke about issues of transparency and not measured or how and when progress will be tracked understanding how funding decisions are made. and reported. For example, state officials should be Others spoke about working through a culture of able to articulate with clarity and in real-time metrics distrust, where state officials default to a funding such as: denial rather than working with applicants to resolve ◊ The cost savings and efficiencies created as a issues of concern in a timely manner. Together, result of this reorganization. they said, these challenges result in project delays that increase costs and slow the construction of ◊ The number of affordable housing projects affordable homes in our state. awarded state funds and the number of unit ultimately constructed. Despite these concerns, many stakeholders appeared ◊ The reduction in the cost of production of hopeful that a new agency would be poised to affordable housing. address these issues, ultimately speeding up the ◊ The reduction in the time to construct affordable production of affordable housing. For example, housing – from the time to obtain necessary Marina Espinoza, Policy Director of the California building permits to the completion of a project. Housing Consortium, told Commissioners that “a new agency can foster a culture change that prioritizes ◊ The number of unsheltered individuals who good customer service and promotes collaboration, access programs or supportive services, by age, transparency, innovation, and predictability to ensure gender, and ethnicity. that the state’s housing programs run smoothly.” ◊ The number of unsheltered individuals who However, she noted, “the Administration cannot move into emergency housing, transitional transform the way the state’s housing programs housing, or permanent housing, by age, gender, work in a silo.” She told Commissioners, “It is critical and ethnicity. that industry experts and other stakeholders have But in order to ensure that progress is made, the opportunities to provide feedback to help the state needs to be able to measure outcomes and Administration identify what needs to be done to track resources spent to move the needle forward on improve the state’s affordable housing programs.”38 a few key indicators. The Legislature should require the new agencies to report on the progress of key There appears to be some precedent for building metrics at a specified interval. A regular reporting a mechanism for stakeholder feedback into schedule, determined in advance, would ensure implementation of state government reorganizations. follow-up by the Administration and would help to For example, a representative from the Service Employees International Union Local 1000 A REVIEW OF GOVERNMENT REORGANIZATION PLAN 2025 | 25 shared that a 2017 reorganization of the Board of ombudsman or a formal advisory committee for Equalization succeeded in part through a four-month the new Housing and Homelessness Agency. The union-department workgroup that identified and Commission does not favor one form over others, resolved issues – both expected and unforeseen. though notes that different models could result in Additionally, this concept of involving stakeholders additional new costs and/or administrative burdens in the decisions of government aligns with various depending on how it is structured. previous Commission recommendations to prioritize Affordable Housing Reforms customer service in the delivery of state programs and services.39 California’s affordable housing financing programs are too fragmented. The state’s tools to fund “...the Administration cannot multifamily affordable housing fall under the purview of two constitutional officers: the Governor and the transform the way the state’s Treasurer. California is the only state that divides housing programs work in a these functions between two elected officials,40 and silo... It is critical that industry the state’s model is far from ideal. experts and other stakeholders In a 2020 review of the state’s housing agencies, the have opportunities to California State Auditor found that these agencies did not coordinate their application deadlines and provide feedback to help the requirements. “For example,” wrote the Auditor, Administration identify what “although every agency requires applicants to provide evidence of prior experience with affordable needs to be done to improve housing development, the amounts and types of the state’s affordable housing experience required of applicants differ across programs.” - Marina Espinoza, all four agencies. This lack of standardization is inefficient for developers and generally unwarranted Policy Director, California given that these are all multifamily programs with Housing Consortium similar goals.”41 Testifying at the Commission’s hearings on the In implementing this reorganization plan, the reorganization plan, one former affordable housing Legislature should require the new Housing and developer described the “completely maddening” Homelessness Agency to create a formal mechanism process of producing multiple applications – each for the stakeholders who rely on affected programs “ever so slightly different” – for various funding to both stay appraised of the Administration’s sources. “There is a cost,” she said, “and the cost is to progress on implementation of the reorganization those who need affordable housing and can’t receive and allow to them to provide real-time feedback it because of how challenging this is.”42 and guidance. Doing so could help ameliorate past concerns and ensure successful progress toward the That cost can be quantified. Both the Terner Center state’s ultimate goal of producing more affordable and the California Housing Partnership estimate an housing. The Commission notes that there are increase in four to six months and approximately various vehicles through which the state could $17,500 to $20,000 per unit for each additional create such a mechanism, including establishing an state funding entity involved in the financing of a 26 | LITTLE HOOVER COMMISSION Little Hoover’s Past Work: Professional Licensing In its 2016 report, Jobs for Californians: Strategies to Ease Occupational Licensing Barriers, the Little Hoover Commission made the bold recommendation that “[t]he Legislature should require reciprocity for all professionals licensed in other states as the default, and through the existing sunset review process, require boards to justify why certain licenses should be excluded.”43 Although this proposal is not among the recommended modifications to the reorganization plan, the Commission presents it here as a concept for policymakers to consider in future discussions around licensing reform. In 2019, Arizona passed legislation – the first of its kind – to recognize all professional licenses regardless of their state of origin.44 This reform, known as “universal licensing recognition,” is described by the Goldwater Institute as a “pro-growth policy which recognizes out-of-state occupational licenses based on the training or testing requirements a licensed applicant has already completed.”45 Model legislation for universal licensing recognition holds that states should grant professional licenses to workers licensed outside that state provided that: these workers received their license based on an exam or the attainment of educational or work experience standards; their license is in good standing; they do not exceed the scope of their original license; and have at least one year of work experience.46 At least in theory, universal licensing recognition does not eliminate licensure requirements or reduce license quality.47 Instead, this policy is intended to enable licensees to enter the workforce quickly with reduced administrative burdens for both applicants and boards. As Professor Rebecca Haw Allensworth has noted, it has the potential for bipartisan appeal, both reducing red tape and granting middle-class workers swifter access to the marketplace.48 California’s professional boards have adopted various licensing reciprocity and streamlining policies.49 That said, establishing and overseeing universal recognition could result in unintended operational and regulatory consequences. In her response to the Commission, BCSH Secretary Tomiquia Moss noted that “[the Department of Consumer Affairs] is not in a position to monitor every state and address any potential change that is made,” and warned that “once consumer harm is identified, it would take statutory changes to fix, which would likely require an additional year to complete while consumers would be at risk.”50 Universal licensing recognition thus raises a number of significant questions. Will improved workforce access be offset by reduced consumer protections? Will administrative efficiencies relating to license processing be offset by the need for more bureaucracy elsewhere? These are questions worth debating as policymakers and stakeholders seek to promote a robust California economy while safeguarding residents. A REVIEW OF GOVERNMENT REORGANIZATION PLAN 2025 | 27 new affordable housing project.51 In reality, these and coordinated review process for grants, soft costs are compounded because the overwhelming loans, low-income housing tax credits, tax exempt majority of projects include multiple public sources bonds, federal funds as applicable, and other types of funding.52 The California Housing Partnership of subsidies for multifamily affordable housing. The estimates that because most developments apply working group is to submit their recommendations to to two or three state entities to assemble the debt, the four housing entities and the Legislature by July equity and subsidy needed, this can total as much as 1, 2026. By January 1, 2027, the four housing entities $50,000 per unit or more than $463 million a year in must submit to the Legislature a plan to update unnecessary costs.53 their programs to implement the working group’s recommendations. Recommendation 5: Enact a Memorandum of Understanding or other cooperative arrangement These actions are a long-needed first step to between the Governor and the Treasurer to creating a unified application and coordinated create a unified application and review process review process. We believe that in addition to the for financing affordable housing. Legislature’s requirement, a more formal instrument of cooperation among the programs that ultimately California is taking steps to address the problems report to different constitutional officers will help of fragmentation. Indeed, the reorganization plan to create a truly consolidated application and states that a key responsibility for the new Housing coordinated review process, helping to better meet Development and Finance Committee will be to the housing needs of Californians. facilitate a one-stop shop for developer-facing multifamily affordable housing finance programs. We understand that due to the Constitutional prohibition on the use of the reorganization process to change the duties of elected officials, the Governor’s proposal could not recommend removing programs from the Treasurer’s purview, and we do not recommend that here. Requiring a full merger at this time could result in the unintended consequence of losing efficiencies in some programs that are widely viewed as operationally effective. However, we believe that additional, structured cooperation between the programs is needed. The Legislature has mandated a similar reform. In 2023, lawmakers enacted AB 519 (Schiavo), which created the Affordable Housing Finance Workgroup. This working group will create recommendations and a timeline for the Department of Housing and Community Development, the California Housing Finance Agency, the California Tax Credit Allocation Committee, and the California Debt Limit Allocation Committee to create a consolidated application 28 | LITTLE HOOVER COMMISSION Appendix A: Public Hearing Witnesses Public Hearing on Governor Newsom’s 2025 Government Reorganization Plan (Day 1) APRIL 23, 2025 (listed alphabetically) ◊ Lewis Brown, Jr., Senior Policy Manager for California State Policy, Corporation for Supportive Housing ◊ Marina Espinoza, Policy Director, California Housing Consortium ◊ Chione Lucia Muñoz Flegal, Executive Director, Housing California ◊ Zeenat Hassan, Senior Attorney, Civil Rights Practice Group, Disability Rights California ◊ Sarah Karlinsky, Research Director, Terner Center for Housing Innovation at UC Berkeley ◊ Kimberly Kirchmeyer, Director, Department of Consumer Affairs ◊ Kevin Kish, Director, Civil Rights Department ◊ Ben Metcalf, Managing Director, Terner Center for Housing Innovation at UC Berkeley ◊ Tomiquia Moss, Secretary, Business, Consumer Services and Housing Agency ◊ Susan Rodriguez, Chief Negotiator, Service Employees International Union (SEIU) Local 1000 ◊ Arnold Sowell, Jr., Executive Director, NextGen Policy ◊ Mark Stivers, Senior Director of Advocacy, California Housing Partnership ◊ Gustavo Velasquez, Director, Department of Housing and Community Development ◊ Brian Weinberger, Senior Policy Advisor, NextGen Policy Public Hearing on Governor Newsom’s 2025 Government Reorganization Plan (Day 2) APRIL 24, 2025 (listed alphabetically) ◊ Rebecca Haw Allensworth, Associate Dean for Research, David Daniels Allen Distinguished Chair of Law, Vanderbilt University ◊ Jason Fox, Vice President of Advocacy & Public Affairs, California Society of Certified Public Accountants ◊ Robert Herrell, Executive Director, Consumer Federation of California ◊ Fred Jones, Legal Counsel and Advocate, Professional Beauty Federation of California ◊ Graham Knaus, Chief Executive Officer, California State Association of Counties ◊ Sanjay Wagle, Senior Vice President of Governmental Affairs, California Association of REALTORS A REVIEW OF GOVERNMENT REORGANIZATION PLAN 2025 | 29 Appendix B: California’s Housing and Homelessness Programs BUSINESS, CONSUMER SERVICES AND HOUSING AGENCY Department of Housing and Community Development Affordable Housing and Funding for infill and compact development of housing, transportation, and land preservation in Sustainable Communities Program proximity to transit. CA Covid-19 Rent Relief Program For local governments, including tribes, seeking emergency rental assistance funds. CalHome Program For local public agencies and nonprofit corporations to provide first-time homebuyer and housing rehabilitation assistance and counseling. Community Development Block Funding for creating and expanding community and economic opportunities for low-income Grant Program households. Emergency Solutions Grants Funds for housing relocation and stabilization, subsidies for permanent housing, flexible housing Program subsidy funds, emergency housing interventions, and systems support to assist people at risk of or experiencing homelessness. Encampment Resolution Funding Grants for local jurisdictions to transition people living in encampments into safe and stable Program housing. Excess Sites Local Government Grants to support and accelerate affordable housing project on excess state sites. Matching Grants Program Family Homelessness Challenge For local jurisdictions to develop innovative programs to address and end family homelessness. Grant HOME American Rescue Plan Grants to individuals or households at risk of or experiencing homelessness for housing, rental Program assistance, supportive services, and non-congregate shelter. HOME Investment Partnerships Funds tenant assistance, single-or multi-family home acquisition, or rehabilitation or new Program construction for low-income renters, homebuyers or homeowners. Homeless Housing, Assistance and Grants for local jurisdictions to support regional coordination and local response to address Preventing Grant Program challenges and increase permanent housing solutions for those experiencing homelessness. Homeownership Super NOFA Funding for homeownership construction and rehabilitation, first-time homebuyer assistance, manufactured housing acquisition, and technical assistance to low-income and agricultural households. Infill Infrastructure Grant Program Grants for infrastructure improvements necessary to facilitate new infill housing in residential and/ or mixed-use projects. Joe Serna, Jr Farmworker Housing Grants and loans for development or rehabilitation of rental and owner-occupied housing for Grant Program agricultural workers. Loan Portfolio Restructuring For existing HCD borrowers to restructure their loans to preserve affordable housing units. Program Local Early Action Planning Grants Funding to assist local jurisdictions in updating their housing plan and implementing process improvements to accelerate housing production. Local Housing Trust Fund Program Matching grant funds to local trusts to create, rehabilitate, or preserve affordable housing, transitional housing, and emergency shelters. Manufactured Housing Funds various activities to keep mobile home parks safe and affordable. Opportunity and Revitalization Program Multifamily Housing Program Low-interest, long-term deferred payment loans for new construction, rehabilitation, and preservation of permanent and transitional rental housing for low-income households. National Housing Trust Fund Federal funding administered by HCD to increase and preserve affordable housing, focusing on Program rental housing for extremely low-income households. No Place Like Home Program Funds development of permanent supportive housing for people who need mental health services and are experiencing or at risk of homelessness or chronic homelessness. Permanent Local Housing Grants for local governments to use in housing-related programs for unmet housing needs in Allocation Program communities. 30 | LITTLE HOOVER COMMISSION BUSINESS, CONSUMER SERVICES AND HOUSING AGENCY (CONT.) Department of Housing and Community Development (Cont.) Pet Assistance and Support For homeless shelters to provide pet shelter, food, and basic veterinary care to pets owned by Program individuals experiencing homelessness. Portfolio Reinvestment Program Funds to rehabilitate and extend the long-term affordability of HCD-funded projects. Predevelopment Loan Program Short-term loans for predevelopment costs to preserve, construct, rehabilitate or convert assisted housing for low-income households. Prohousing Incentive Program Funds for to assist local governments accelerate affordable housing production and conservation. Regional Early Action Planning For regional government planning activities to facilitate compliance with 6th cycle of Regional Grants of 2019 Housing Needs Allocation. Regional Early Action Planning For planning and implementation to accelerate infill and affordable developments, vehicle miles Grants of 2021 traveled reductions, and fair housing. SB 2 Planning Grants Funds and technical assistance for local governments to adopt and implement plans and process improvements that streamline housing approvals and accelerate housing production. Transitional Age Youth Program Funds to help adults 18-24 secure and maintain housing, with priority given to those formerly in foster care or probation systems. Tribal Homeless Housing, Grants to support culturally responsive interventions to prevent and address homelessness within Assistance, and Prevention Grants tribal communities. Program Veterans Housing and Long-term loans for acquisition, construction, rehabilitation, and preservation of affordable rental Homelessness Prevention Program housing for very low-income and low-income veterans and their families. HEALTH AND HUMAN SERVICES AGENCY Department of Social Services Bringing Families Home Program Provides financial assistance and housing-related wraparound services to families involved with the child welfare system who are at risk of or experiencing homelessness. CalWORKs Homeless Assistance Helps families enrolled in CalWORKs secure or maintain permanent housing or provides temporary shelter. CalWORKs Housing Support Provides families enrolled in CalWORKs with rapid rehousing, rental assistance, and wraparound Program case management. Community Care Expansion Provides funding for acquisition, construction, and rehabilitation to preserve and expand adult and Program senior care facilities that serve SSI/SSP and Cash Assistance Program for Immigrants applicants and recipients, including those who are experiencing or at risk of homelessness. Home Safe Program Provides various housing stability services, such as financial assistance, case management, and eviction prevention, for individuals in Adult Protective Services. Homekey+ Built off of Project Roomkey and then Project Homekey, funds grants to local public entities to develop a broad range of housing types and to convert commercial properties and other existing buildings to permanent or interim housing for individuals experiencing or at risk of homelessness. Housing and Disability Advocacy Funds outreach, case management, disability advocacy, and housing-related support to individuals Program who are likely eligible for disability benefits. Department of Health Care Services Behavioral Health Bridge Housing Funds county behavioral health agencies and tribal entities to address the immediate housing Program needs of people experiencing homelessness who have serious behavioral health conditions. Mobile Crisis Services Funds mobile crisis services for Medi-Cal members experiencing a behavioral health crisis. Department of Community Services and Development Low Income Home Energy Provides federally funded assistance to reduce the costs associated with home energy bills, energy Assistance Program crises, weatherization, and minor energy-related home repairs. A REVIEW OF GOVERNMENT REORGANIZATION PLAN 2025 | 31 TREASURER Tax Credit Allocation Committee Low-Income Housing Tax Credit Corporations provide equity to build affordable housing in exchange for tax credits. OTHER STATE ENTITIES Governor’s Office of Emergency Services Domestic Violence Housing First Provides funding for victims/survivors of domestic violence to receive permanent housing and Program ongoing supportive services. Homeless Youth and Exploitation Provides funds for comprehensive services to help homeless youth exit street life, with a focus on Program specialized services for youth experiencing sexual exploitation. Homeless Youth Emergency Funds food, shelter, counseling, and outreach services to relocate homeless youth, connecting Services and Housing Program them with basic health services and long-term housing-focused stabilization planning. Specialized Emergency Housing Funds to expand emergency shelter, emergency housing assistance, and supportive services for Program people who are victims of crime with special needs. Transitional Housing Program Provides victims of crimes with transitional/short-term housing with services and has the goal of moving them into permanent housing. Department of Veterans Affairs CalVet Home Loan Program Offers loans to veterans for the purchase of homes, farms, units in cooperative developments, and mobile homes. Veterans Support to Self-Reliance Funds supportive services for certain veterans age 55+ within the construct of Housing First and Pilot evidence-based practices. Department of Corrections and Rehabilitation Long-term Offender Reentry Establishes contracts with provider organizations for services such as transitional housing. Recovery Program 32 | LITTLE HOOVER COMMISSION Notes 1. California Government Code, Section 12080.1. 9. Stephen Heidari-Robinson. See endnote 2. 2. Stephen Heidari-Robinson. “Making Government 10. The California Privacy Protection Agency is Reorgs Work.” Harvard Business Review. March placed under the budget of Business, Consumer 30, 2017. https://hbr.org/2017/03/making- Services and Housing Agency, however it is not a government-reorgs-work. statutory responsibility of the BCSH Agency and is considered independent. Source: Government 3. Hannah Sitare, Executive Director, National Code, Section 12804. Also, Business, Consumer Commission on the Public Service. “Government Services and Housing Agency and Department of Reorganization: Strategies and Tools to Get Finance. April 3, 2025. Personal communication It Done.” IBM Center for The Business of with Commission staff. Government. August 2004. https://www. businessofgovernment.org/sites/default/files/ 11. Proposed Gov. Code Sec. 12804.3(a). SistareReport.pdf. 12. Office of Governor Gavin Newsom. Government 4. Paul C. Light, Testimony before the U.S. House Reorganization Plan. April 4, 2025. https://lhc. Committee on Government Reform, April 3, ca.gov/wp-content/uploads/GRP2025Proposal. 2003. Cited in: IBM Center for The Business of pdf. Government. “Government Reorganization: 13. Proposed Gov. Code Sec. 12804.2(c)(1) ff. Strategies and Tools to Get It Done.” 14. Business, Consumer Services and Housing 5. Stephen Heidari-Robinson. See endnote 2. Agency. Budget Change Proposal: Business, Also, Minnesota Management and Budget. Consumer Services, and Housing Agency “Restructuring: Is it time to reorganize? Making Governor’s Reorganization Plan Resources. May the decision, implementing the change.” https:// 13, 2025. https://bcp.dof.ca.gov/2526/FY2526_ mn.gov/mmb/mad/resources/restructuring/. ORG0515_BCP8222.pdf. 6. Stephen Heidari-Robinson. See endnote 2. 15. Little Hoover Commission staff analysis. The 7. Milton Socolar, Acting Comptroller General of component totals listed under “personnel” the United States, General Accounting Office. and “operating expenses & equipment” in this March 20, 1981. “Implementation: The Missing chart add up to almost $4.3 million rather Link In Planning Reorganizations.” Report to than $4.2 million, but they do not include an the Committee on Governmental Affairs of the accompanying $69,000 reduction in the budget of United States Senate. GGD-81-57. https://www. the Department of Consumer Affairs. Taking that gao.gov/assets/ggd-81-57.pdf. Also, Minnesota reduction into account reduces the total request Management and Budget. See endnote 5. to $4.2 million. 8. McKinsey & Company. “Taking organizational 16. Little Hoover Commission staff analysis. This redesigns from plan to practice.” December 1, reflects an increase of $409,000 in personnel 2010. https://www.mckinsey.com/capabilities/ costs but a reduction in some other costs. people-and-organizational-performance/ The net increase is $234,000 and is listed here our-insights/taking-organizational-redesigns- as “personnel” because that is the largest from-plan-to-practice-mckinsey-global-survey- component. These funds will be covered by a results#/. A REVIEW OF GOVERNMENT REORGANIZATION PLAN 2025 | 33 pro-rata assessment against departments and 24. McKinsey Global Institute and Public Policy other entities within the new Agency, rather than Institute of California. See endntoe 20. Also, Joint by the General Fund. Center for Housing Studies of Harvard University. State of the Nation’s Housing 2024. https://www. 17. See endnote 15. jchs.harvard.edu/state-nations-housing-2024. 18. See endnote 16. 25. Sarah Karlinsky, Research Director, Terner Center for Housing Innovation, UC Berkeley. May 5, 19. For a general review of problems facing 2025. Written communication to the Commission. California’s housing market, see: Little Hoover On file. Commission. “California Housing: Building a More Affordable Future.” [Report #267]. March 26. Mark Stivers, Senior Director of Advocacy, 2022. https://lhc.ca.gov/wp-content/uploads/ California Housing Partnership. Written Reports/267/Report267.pdf. testimony to the Little Hoover Commission. April 14, 2025. On file. Also, Sarah Karlinsky, 20. California often is cited as ranking 49th in homes Research Director, Terner Center for Housing per capita; this figures comes from an October Innovation, UC Berkeley. Oral testimony to 2016 McKinsey Global Institute Report. “A the Little Hoover Commission. April 23, 2025. Tool Kit to Close California’s Housing Gap: 3.5 Video available at https://www.youtube.com/ Million Homes by 2025.” https://www.mckinsey. watch?v=senJdUK7uGg&t=7390s. 2:03:10. com/featured-insights/urbanization/closing- californias-housing-gap. Also, Hans Johnson, 27. Sarah Karlinsky. See endote 25. Also, Ray et al. “Homeownership Trends in California.” Pearl, Executive Director, California Housing Public Policy Institute of California. June 14, 2022. Consortium. Written testimony to the Little https://www.ppic.org/blog/homeownership- Hoover Commission. April 15, 2025. On file. trends-in-california/. 28. Sarah Karlinsky. See endote 25. Also, Chione 21. Median housing prices for California are available Flegal, Executive Director, Housing California. from both Redfin and Zillow. Although they differ Written testimony to the Little Hoover slightly, both show the state as more than double Commission. April 15, 2025. On file. the national median. 29. Governor Gavin Newsom. See endnote 12. 22. California Department of Finance. January Population and Housing Estimates. https://dof. 30. Chione Flegal. See endnote 28. ca.gov/forecasting/demographics/estimates/. 31. Assembly Committees on Business and Accessed April 30, 2025. Professions and Housing and Community 23. Governor Gavin Newsom. April 29, 2025. Development. Joint Informational Hearing on https://bsky.app/profile/governor.ca.gov/ the Governor's Reorganization Plan: Business, post/3lny7vx2oj226. Accessed May 1, 2025. Consumer Services, and Housing Agency. May 13, 2025. https://calmatters.digitaldemocracy.org/ hearings/259145. 32. Chione Flegal. See endnote 28. Also, Lewis Brown, Jr., Senior Policy Manager for California State 34 | LITTLE HOOVER COMMISSION Policy, Corporation for Supportive Housing. 39. Little Hoover Commission. “A Customer- Written letter to the Little Hoover Commission. Centric Upgrade For California Government.” On file. [Report #229]. October 2015. https://lhc.ca.gov/ report/customer-centric-upgrade-california- 33. Zeenat Hassan, Senior Attorney, Civil Rights government/. Practice Group, Disability Rights California. Written Testimony to the Little Hoover 40. Betty T. Yee. “California Fiscal Focus.” October Commission. April 21, 2025. On file. 2019. https://www.sco.ca.gov/2019_10summary. html. 34. Rapid rehousing programs typically provide individuals and families with financial resources 41. California State Auditor. “California’s Housing and supportive services so they can quickly Agencies.” Report 2020-108. Page 25. November exit homelessness. Graham Knaus, Chief 2020. https://information.auditor.ca.gov/pdfs/ Executive Officer, California State Association of reports/2020-108.pdf. Counties. Verbal Testimony to the Little Hoover 42. Sarah Karlinsky, Research Director, Terner Commission. Hearing on the Governor’s 2025 Center for Housing Innovation, UC Berkeley. April Reorganization Plan (Day 2). April 24, 2025. 23, 2025. Oral testimony to the Little Hoover https://www.youtube.com/watch?v=Q_1jsL6yVD0. Commission. Video available at https://www. 35. Chione Flegal, Executive Director, Housing youtube.com/watch?v=senJdUK7uGg&t=7390s. California. Verbal Testimony to the Little 2:03:10. Hoover Commission. Hearing on the 43. Little Hoover Commission. “Jobs for Californians: Governor’s 2025 Reorganization Plan (Day Strategies to Ease Occupational Licensing 1). April 23, 2025. https://www.youtube.com/ Barriers.” [Report #234] October 2016. https:// watch?v=senJdUK7uGg. lhc.ca.gov/report/jobs-californians-strategies- 36. Lewis Brown, Jr. See endnote 32. Also, ease-occupational-licensing-barriers/. Washington State Department of Commerce. 44. Rebecca Haw Allensworth, Associate Dean for Apple Health and Homes Initiative. https:// Research, David Daniels Allen Distinguished www.commerce.wa.gov/permanent-supportive- Chair of Law, Vanderbilt University. May 5, housing/ahah/. 2025. Written testimony to the Commission. 37. Texas Department of Housing and Note: Arizona was the first state to pass Community Affairs. Vacancy Clearinghouse. such legislation. See, the Universal Licensing https://hrc-ic.tdhca.state.tx.us/hrc/ Recognition factsheet posted on the Arizona VacancyClearinghouseSearch.m. Also, Zeenat Governor’s website: https://azgovernor.gov/sites/ Hassan. See endnote 33. default/files/universallicensingrecognition1_0. pdf. According to the Goldwater Institute (see 38. Marina Espinoza, Policy Director, California endnote 45), 14 additional states have since Housing Consortium. Verbal Testimony to the adopted universal licensing recognition. Little Hoover Commission. Hearing on the Governor’s 2025 Reorganization Plan (Day 45. Goldwater Institute. “Breaking Down Barriers to 1). April 23, 2025. https://www.youtube.com/ Work with Universal Recognition.” https://www. watch?v=senJdUK7uGg. goldwaterinstitute.org/universalrecognition/. A REVIEW OF GOVERNMENT REORGANIZATION PLAN 2025 | 35 46. Goldwater Institute. “Breaking Down 53. Matt Schwartz, Mark Stivers, and Anthony Vega. Barriers to Work: Universal Recognition of See endnote 51. Occupational Licenses Act.” 2020. https:// www.goldwaterinstitute.org/wp-content/ uploads/2023/01/Breaking-Down-Barriers-to- Work-Act_2020.pdf. 47. State Policy Network. “What is Universal Licensing Recognition?” June 7, 2021. https://spn.org/ articles/what-is-universal-licensing-recognition/. 48. Rebecca Haw Allensworth. See endnote 44. 49. California’s Contractors State Licensing Board has reciprocity agreements with Arizona, Louisiana, and Nevada. Source: https://www.cslb.ca.gov/ Contractors/Applicants/Reciprocity/General_ Reciprocity_Information.aspx. Also, Tomiquia Moss, Secretary, Business, Consumer Services and Housing Agency. May 7, 2025. Written communication to the Commission. Page 11. On file. Several California boards offer will grant licensure to out-of-state licensee applicants if they have passed a nationally-recognized exam. 50. Tomiquia Moss. See endnote 49. 51. Carolina Reid. “Reducing the Complexity in California’s Affordable Housing Financing System.” Terner Center for Housing Innovation, UC Berkeley. April 21, 2025. https://ternercenter. berkeley.edu/blog/reducing-the-complexity-in- californias-affordable-housing-finance-system/. Also, Matt Schwartz, CEO; Mark Stivers, Senior Director of Advocacy; and Anthony Vega, Managing Director of Research, California Housing Partnership. “Here’s How the State of California Can Save $463 Million Annually.” May 8, 2025. https://chpc.net/heres-how-the-state-of- california-can-save-463-million-annually/. 52. Carolina Reid. See endnote 51. 36 | LITTLE HOOVER COMMISSION Little Hoover Commission Members CHAIR PEDRO NAVA | Santa Barbara JOSÉ ATILIO HERNÁNDEZ | Burbank Appointed by Assembly Speaker Pérez in April 2013, then Appointed by Speaker of the Assembly Anthony Rendon reappointed by Speakers Rendon in 2017 and 2021 and in April 2023. Founder and CEO of IDEATE California, a Rivas in 2024. Elected Chair in March 2014. Government public relations and policy management firm. Also, founder relations advisor. Former State Assemblymember from and Board Chairman of ideateLABS. Former Director for 2004 to 2010, civil litigator, deputy district attorney and External Affairs and Community Relations for ConnectEd: member of the state Coastal Commission. The California Center for College and Career. VICE CHAIR ANTHONY CANNELLA | Ceres JASON JOHNSON | Napa Appointed by the Senate Rules Committee in March 2022. Appointed by Governor Newsom in June 2023. Member Elected Vice Chair in July 2023. Civil engineer and principal of the Land Trust of Napa County Board of Trustees and with Northstar Engineering Group. Former State Senator Horary Commander of Travis Air Force Base. Former from 2010 to 2018. Previously served on the Ceres City Managing Partner at Founders Den. Founder and former Council and was twice elected mayor of that city. CEO at August Home Inc. DION ARONER | Berkeley GAYLE MILLER | Sacramento Appointed by the Senate Rules Committee in April Appointed by Governor Newsom in January 2025. Currently 2019. Partner for Aroner, Jewel, and Ellis. Former State Managing Director at Brookfield Asset Management. Assemblymember from 1996 to 2002, chief of staff for Previously served as Senior Counselor on Infrastructure Assemblymember Tom Bates, social worker for Alameda and Clean Energy Finance for Governor Newsom and Chief County, and the first female president of Service Employees Deputy of Policy at the California Department of Finance. International Union 535. SENATOR ROGER NIELLO | Fair Oaks DAVID BEIER | San Francisco Appointed by the Senate Rules Committee in February Appointed by Governor Edmund G. Brown Jr. in June 2014 2025. Elected in 2022 to represent Senate District 6, which and reappointed in January 2018. Managing director of encompasses portions of Placer County, including cities Bay City Capital. Former senior officer of Genentech and such as Auburn, Granite Bay, and Lincoln, as well as parts Amgen, and counsel to the U.S. House of Representatives of Sacramento County, including cities such as Antelope, Committee on the Judiciary. Folsom, Orangevale, and Rancho Cordova. SENATOR CHRISTOPHER CABALDON | West ASSEMBLYMEMBER LIZ ORTEGA | San Leandro Sacramento Appointed by Speaker of the Assembly Anthony Rendon Appointed by the Senate Rules Committee in February in March 2023. Elected in November 2022 to represent 2025. Elected in 2024 to represent Senate District 3, which Assembly District 20. Represents Hayward, San Leandro, encompasses portions of Contra Costa, Napa, Solano, most of Union City, portions of Dublin and Pleasanton, and Sonoma, Yolo, and Sacramento Counties. several unincorporated communities. ASSEMBLYMEMBER PHILLIP CHEN | Yorba Linda JANNA SIDLEY | Los Angeles Appointed by Speaker of the Assembly Anthony Rendon Appointed by Governor Edmund G. Brown Jr. in April in October 2021. Elected in November 2016 to represent 2016 and reappointed in February 2020. Partner at Ichor District 55. Represents portions of Los Angeles, Orange Strategies and appointed to the Board of the Los Angeles and San Bernardino counties and the cities of Brea, Chino City Employee Retirement System (“LACERS”). Former Hills, Diamond Bar, La Habra, Industry, Placentia, Rowland general counsel at the Port of Los Angeles and city attorney Heights, Walnut, West Covina and Yorba Linda. at the Los Angeles City Attorney’s Office. GIL GARCETTI | Los Angeles Full biographies are available on the Commission’s Appointed by Governor Gavin Newsom in November website at www.lhc.ca.gov. 2021. Professional photographer and author of ten books. Former Los Angeles County District Attorney, teaching Fellow at Harvard University’s Kennedy School, and president of the California Science Center Foundation’s Board of Trustees. A REVIEW OF GOVERNMENT REORGANIZATION PLAN 2025 | 37 “DEMOCRACY ITSELF IS A PROCESS OF CHANGE, AND SATISFACTION AND COMPLACENCY ARE ENEMIES OF GOOD GOVERNMENT.” By Governor Edmund G. “Pat” Brown, addressing the inaugural meeting of the Little Hoover Commission, April 24,1962, Sacramento, California Milton Marks Commission on California State Government Organization and Economy www.lhc.ca.gov