Administration seeks funds to split housing and consumer services into two cabinet agencies; LAO urges pause

Assembly Budget Subcommittee 5 heard officials on a May Revision proposal to reorganize the Business, Consumer Services and Housing portfolio into two cabinet-level agencies and to fund work needed to implement the plan.

"We are requesting resources to support our 2025 Governor's Reorganization Plan," Business, Consumer Services and Housing Agency Secretary Tamika Moss told the subcommittee, saying the split would let each agency focus on a narrower policy set and strengthen oversight and implementation.

The administration said the proposal includes creating a California Housing and Homelessness Agency with a Housing Development and Finance Committee meant to centralize awards and finance tools. Department of Housing and Community Development Director Gustavo Velasquez said the change would provide “dedicated leadership and focus on housing and homelessness at the cabinet level” and improve data, federal program administration and housing accountability.

The Department of Finance and administration officials said resources in the 2025–26 budget year are needed to carry out tasks such as delegations for hiring, procurement and facilities, change-management work, and to stand up the proposed committee so it can operate by an intended July 1, 2026, effective date. Megan Tokonaga Block of the Department of Finance said delaying funding would push implementation past the date proposed in the reorganization plan and could hinder the transition.

The Legislative Analyst's Office, represented by Paul Steenhausen, recommended rejecting the May Revision funding for now. The LAO said the Little Hoover Commission review and the Legislature’s separate statutory review are still in process and that the proposal adds ongoing general-fund commitments—about $4 million in the budget year and rising to about $6 million annually—at a time of a statewide shortfall. "Approving May Revision funding for the June budget before deciding the Legislature’s position on the reorganization itself would be like putting the cart before the horse," Steenhausen said.

Members of the subcommittee voiced mixed views. Some members said they support the concept of reorganizing to increase focus on housing but criticized the timing, arguing the Little Hoover Commission review and legislative policy decisions should be resolved first and that the May Revision also zeroes out many housing investments. Other members said implementation lead time matters and that the administration’s change-management work could justify early funding to avoid disruption.

Administration witnesses emphasized the reorganization was signaled in January and has been discussed in informational hearings; Moss said months matter for recruitment, contracts and transition tasks and argued that delay would slow the state’s ability to administer large existing funding streams.

The hearing produced no formal legislative action or vote. The LAO urged the Legislature to defer funding decisions until it has completed its review and had time to consider statutory questions and the state’s fiscal constraints. The administration said it would continue to brief members and that proponents remain available for follow-up information requests.

Ending note: The administration requested funding to begin implementing the reorganization in the 2025–26 budget year with a proposed effective date of July 1, 2026; the Legislature must still decide whether to approve the requested implementation resources or defer them pending statutory review.