Lawmakers warn federal enforcement and grant cuts are already straining California tax revenue, UC research and local public health

At a California State Assembly Budget Subcommittee on Accountability and Transparency hearing, state and university officials told lawmakers that federal reductions in tax enforcement staff and recent federal grant terminations are beginning to affect California’s tax collections, university research funding and local public-health programs.

The comments came as Roger Lackey of the Franchise Tax Board described how the FTB depends on federal tax processes and information sharing to prepare and verify state returns and carry out compliance work, and as University of California provost Katherine Newman and Department of Finance official Mary Halterman outlined cuts to federal research and appropriations that have already affected California institutions.

Why it matters: State income and corporate taxes are California’s largest revenue sources, and officials warned that even modest declines in federal enforcement and in federal grant flows can have outsized effects on the state budget, higher-education research pipelines and local health services.

Franchise Tax Board operations and revenue risk

Roger Lackey, speaking for the Franchise Tax Board, explained the operational links between federal and state tax administration. He said the state builds its return forms and the tax‑software schema after federal changes are finalized, and that about “95% of taxpayers actually file electronically.” He added that most of the returns the FTB receives—“99% of tax returns that are received by [the] Franchise Tax Board…