An Initial Assessment of the California Performance Review

On August 3, 2004, the California Performance Review (CPR) released its report on reforming California's state government, with the aim of making it more efficient and more responsive to its citizens. This report provides our initial comments on the CPR report. Specifically, we: (1) provide an overview of its reorganization framework and other individual recommendations, (2) discuss the savings it assumes from its major proposals, and (3) raise key issues and considerations relating to CPR's various proposals.

Introduction

On August 3, 2004, the California Performance Review (CPR) released its report to the Governor on reforming California government. The report lays out a framework for reorganizing and consolidating state entities, and contains 278 issue areas and 1,200 individual recommendations aimed at making state government more modern, efficient, accountable, and responsive to its citizens. The CPR also adopted the 239 proposals included in a report recently issued by the Corrections Independent Review Panel. The CPR asserts that the state would achieve about $32 billion in savings over the next five years if all of its recommendations were fully adopted.

The CPR has four volumes. The first sets forth its major goals, the second lays out a reorganization plan for state government, the third provides a budget and financial review of California state government, and the fourth contains CPR's individual proposals.

LAO's Bottom Line. The CPR provides the state with a valuable opportunity to comprehensively examine how it does business. It has made a serious effort at rethinking the current organization of state government and how it delivers services to the people of California. We find that many of its individual recommendations would move California toward a more efficient, effective, and accountable government.

At the same time, the rationale for some of its reorganization proposals is not clear, it does not examine whether the state should continue to perform certain functions, and many of its fiscal savings estimates are overstated.

For these reasons, it will be important for the Legislature to evaluate the merits of the proposals individually, looking at their policy trade-offs, their likely effectiveness, and their fiscal implications. The Legislature also may wish to consider broadening the scope of reforms offered by CPR to include a more comprehensive examination of the state and local tax system, the role of constitutional officers, the state's system of funding education, and the relationship between state and local government.

Organization of This Report. This report, which provides our initial reaction to the CPR report, has three sections:

• "Section 1" provides an overview of CPR's reorganization plan and its other proposals, reviews CPR's estimated savings from its proposals, and discusses key issues for the Legislature to consider in reviewing the plan.
• "Section 2" looks at the reorganization framework in more detail and discusses key principles that should guide a reorganization.
• "Section 3" reviews CPR's key proposals in each of the major areas of the budget, providing some context for the proposals and our initial reaction to them.

Section 1: Overview

CPR's Major Components

The CPR has two major components—a reorganization of state entities and other individual recommendations. Below we briefly describe both of these components.

Reorganization of State Entities

The CPR proposes a major reshuffling of the state's agencies, departments, boards, commissions, and other entities. In reorganizing state government, the CPR proposal focuses on aligning similar programs and consolidating administrative functions in order to eliminate duplication of effort and improve customer service. The major components of the reorganization are:

• Creation of 11 Mega-Departments. The core of the CPR reorganization is the creation of 11 large, mega-departments. These mega-departments would merge the policy-setting function of agencies with the program administration function of departments.
• Office of Management and Budget. The CPR reorganization would also consolidate the state's policy and budget oversight agencies into a unified Office of Management and Budget (OMB). The OMB would be responsible for oversight on budgetary, state employment and retirement, technology, and regulatory matters.
• Tax Commission. The CPR proposes to merge three of the state's principal tax collections agencies—the Franchise Tax Board, Employment Development Department, and the Department of Motor Vehicles. The Board of Equalization (BOE), however, would be retained as an independent entity.
• Discontinuation of Many Boards and Commissions. The report recommends discontinuing 117 independent boards, commissions, and task forces—including the Air Resources Board, Energy Commission, Student Aid Commission, Board of Prison Terms, and Youth Authority Board. For the majority of these discontinuations, the CPR consolidation would move these entities' activities under one of the new mega-departments.

Individual Recommendations

As noted above, the CPR identifies 278 issue areas and contains about 1,200 specific proposals affecting a wide range of government programs. Although the proposals cover a vast number of individual areas, they can be generally placed into one or more of the following five broad categories.

• Enhancing Program Efficiencies and Service Levels. Some major examples in this area are: (1) a major proposal to consolidate the eligibility determination process for California Work and Responsibility to Kids (CalWORKs), Medi-Cal, and food stamps; (2) both general and specific proposals relating to the state's workforce; (3) proposals to expand use of new technologies, such as SMART cards for Medi-Cal, and electronic benefit transfer cards; (4) proposals to increase reliance on the Internet for such things as motor vehicle fee payments and benefit and licensing applications; and (5) various contracting and procurement reforms.
• Shifting Program Responsibilities and Funding. These include a targeted realignment of state and local health and social services programs, as well as several proposals to shift costs away from state government to other entities. These include (1) seeking additional federal funds, (2) shifting property taxes from enterprise special districts for the benefit of the state, (3) shifting responsibility for certain highways from the state to local governments, and (4) increasing student fees on out-of-state residents.
• Privatization. These include the contracting out to the private sector such functions as child support administration, job training, and health care for prison inmates.
• Changes in Governance. These include the elimination of boards and commissions, the consolidation of county offices of education into regional bodies, the elimination of the community colleges' Board of Governors, and a new structure for overseeing the state's use of information technology.
• Changes in Policy. While CPR primarily focuses on issues related to efficiencies and service delivery, it does include several proposals that involve significant changes in underlying policies. Examples include the imposition of a sales tax credit for new business investment, changes in the regulation of timber and other natural resources, expanded use of high occupancy toll lanes, allowing community colleges to offer bachelor degrees, expanding the lottery, and changing the cutoff age for kindergarten enrollment.

CPR's Savings Estimates

The CPR indicates that its proposals, if fully adopted, would generate savings of slightly over $1 billion in 2004-05 and $32 billion over the next five years combined. According to CPR estimates, about one-third of the cumulative savings would accrue to the General Fund and the remaining two-thirds would accrue to special funds, federal funds, and local funds. Figure 1 (see next page) shows that on an annual basis, savings to the General Fund are projected to be in the range of $2 billion to $3 billion per year starting in 2005-06, while annual savings to other funds are projected to average $5 billion to $6 billion.

Proposals With Major Fiscal Effects

As shown in Figure 2 (see page 7), proposals in 15 issue areas account for almost 88 percent of the total savings estimated by CPR for the next five years. Nearly one-half the total is related to just three broad proposals: one to maximize federal grants ($8.2 billion), another to transform eligibility processing for Medi-Cal, CalWORKs, and food stamps ($4 billion), and the third related to the creation of a workforce plan for California state employees that would result in fewer employees ($3.3 billion). Significant savings are also scored for transportation funding proposals which include seeking higher federal taxes on fuels containing ethanol, changes in enrollment cutoff dates for kindergarten, biennial vehicle registration (mostly one-time revenues from the acceleration of fees paid by motorists), increased lottery sales, and increases in college and university tuition for out-of-state residents.

Savings Overstated. In many instances, the CPR was conservative in scoring savings from its individual proposals—acknowledging that actual savings, while likely, simply could not be estimated. However, in other instances, the CPR scored savings that are uncertain or overstated. This is especially the case with regard to many of the proposals with the largest identified savings shown in Figure 2. Specifically, we found that:

• Many of the Proposals Not Fully Developed. This is particularly the case for the third proposal in Figure 2, where the CPR scores over $3 billion in cumulative savings from the development of an as-yet unspecified workforce plan.
• Savings Depend on Federal Actions Rather Than Specific CPR Recommendations. This applies to the proposal to maximize grant funds from the federal government, as well as the proposal to seek a higher federal tax rate on fuels containing ethanol (which would result in added transportation-related distributions to California). California has long argued for additional federal grants to recognize such factors as its higher-than-average poverty levels and its higher-than-average costs associated with illegal immigration. However, significant increases in federal funds would require changes in federal funding formulas, with potentially negative implications for other states. California is already lobbying Congress for increased federal taxes on fuels containing ethanol. It is not clear how the process change recommended by CPR will result in the report's assumed level of federal funds.
• The Potential Savings Are Beyond What Is Reasonably Achievable. This applies to several proposals involving consolidations of eligibility determination and procurement processes, lottery savings, and the proposed tax relief for new business equipment investment.
• Offsetting Costs Not Consistently Recognized. This is the case for many proposals which would require an initial expenditure of funds in order to realize future savings. Implementation of new information technology systems is one such example.
• Savings From Similar Proposals Have Already Been Adopted in the 2004-05 Budget. This is the case for the tax amnesty, surplus property, nonresident student fee, and several corrections proposals.

Taking into account these factors, we believe that a more realistic savings assumption attributable to state actions would be less than one-half of the $32 billion shown. While any estimate of savings is highly uncertain, we believe that a more reasonable cumulative estimate for all funds over the next five years would be roughly $10 billion to $15 billion. In annual terms, this translates into $3 billion or less per year, divided roughly evenly between the General Fund and other funds. Regarding the revised General Fund total, nearly one-half of the savings would be attributable to a single proposed change—the delay in the enrollment entry date for kindergartners who are less than five years old at the beginning of the school year.

Our lower overall savings estimate does not make the goals or proposals offered by the CPR any less valid. The state would clearly benefit from changes that enhance workforce productivity, improve and streamline services, and reduce inefficiencies in government—even if the savings were only a fraction of the CPR estimates. At the same time, it is important to recognize that even if all the CPR's recommendations were adopted, the fiscal savings would only cover a relatively small portion of the large structural shortfall facing California's budget in the future. Stated another way, even if the proposals were adopted, the state will continue to face hard choices regarding program funding levels and taxes in order to balance its future budgets.

Issues and Considerations

The CPR has developed an impressive list of proposals in a relatively short timeframe, which provides the state with a valuable opportunity to examine many aspects of how it does business. At the same time, the report raises a large number of important policy issues which need to be considered.

Does a Massive Reorganization Make Sense?

California's past successes and failures with reorganization plans strongly suggest that reorganizations should be undertaken only when (1) there is a clearly defined problem with the existing system and (2) there is a convincing reason to believe that the new system will address the problem and, more generally, enable the state to provide services more efficiently and effectively. We believe there are a number of areas that the CPR has identified where these fundamental criteria may apply. For instance, in the health area, the proposed centralization of a number of public health programs could improve their effectiveness.

Yet, in many other areas, the reorganization plan lacks a strong rationale. As we discuss in more detail in "Section 2," among the problems we identify are:

• The reorganization proposal often lacks sufficient detail to evaluate whether a proposed consolidation would improve state government.
• In some cases, functions are proposed to be joined that are not particularly compatible.
• In some cases, existing departments are divided—with their component functions distributed among several new departments. This may create new coordination problems.
• By moving to mega-departments which would have wide-reaching responsibilities, the CPR risks making departments so large that they become unmanageable.
• The proposed reorganization would result in significant implementation costs, particularly in the short term. In many cases, the fiscal estimates of the CPR do not take into account these expenses.

Given these concerns, we recommend that the Legislature not focus its attention on the large-scale statewide reorganization that the CPR envisions. Instead, the Legislature should seek out more specific opportunities to pursue consolidations on a smaller scale. Many of the current problems that CPR identified could be solved with simpler solutions. A combination of limited consolidations and other types of solutions (such as improved leadership, policy changes, better coordination between departments, interagency agreements, and cross-departmental training) offers a better chance of improving the effectiveness of state government while limiting the risks involved.

Should the Scope of Reforms Be Broadened?

The CPR's proposals encompass a broad range of issues. However, there are a number of fundamental issues that were not considered in the analysis. For example, while the CPR reorganization plan regroups and consolidates a vast number of existing functions of state government, the CPR does not examine the more fundamental question of which functions should continue to be provided by the state. In addition, although the CPR presents a modest realignment proposal, the report does not comprehensively address the state-local system of service delivery. Similarly, while including a single tax incentive proposal, the CPR does not examine California's overall system of state and local taxes.

Finally, while the plan proposes specific changes to the Constitution as it relates to transportation and a biennial budget, it does not address many other constitutional issues, such the role of constitutional officers and agencies in the restructured government. The latter is a significant consideration in the context of the CPR's proposed reorganizations. As noted in "Section 2" and "Section 3" of this report, the future roles of the Superintendent of Public Instruction and the BOE—two constitutionally created entities—are left somewhat undefined in the context of the restructured government proposed by the CPR.

Addressing these more fundamental issues may have been beyond the scope of what the CPR believed was its mission, especially given the relatively limited time it had to complete its review. However, the lack of reforms in these areas inherently limits the amount of improvement in governmental services that can be achieved through the CPR.

For example, while some of the CPR proposals may improve efficiency and coordination of state functions, citizens may continue to be faced with the fragmentation of services between state and local governments. Similarly, while the creation of a new tax commission may result in some added efficiencies in the collection and auditing of certain taxes, the exclusion of the BOE from the consolidation means that the state's two largest taxes—the personal income tax and sales tax—will continue to be administered by separate agencies. To address these issues, the Legislature may wish to broaden the scope of reforms it considers.

What Is Next?

The release of the CPR is intended to be a first step in a dialog on governmental reform. Its specific proposals have not yet been embraced by the administration. Rather, the Governor has directed the CPR commission to hold public hearings to seek input on the report's recommendations.

Ultimately, the reorganization plan could be proposed by the Governor through the specific reorganization process provided for in state law (and discussed in "Section 2"). Some of the other recommendations—such as those requiring departments to develop performance measures—could be implemented administratively by the Governor. Other recommendations could be included in the Governor's 2005-06 or later budgets, or proposed through separate legislation.

Thus, while some of the 1,200 CPR proposals can be adopted administratively, many of them will require legislative approval in order to be implemented. The merits of each proposal would need to be weighed on its own. In "Section 3" we review some of the CPR's key proposals in major program areas and offer our initial comments on them. Some of the recurring issues raised by our analyses are:

• More Details Needed. While many of the more modest proposals are highly detailed, many major proposals are less so. Also, the fiscal estimates associated with many of the proposals—including their start-up costs—have not been developed. As specific proposals are put before the Legislature, these details will need to be included in order to be able to measure the proposals' true costs and benefits.
• Key Policy Tradeoffs. As noted earlier, some of the CPR proposals would involve significant changes in state policies in the areas of education, environmental regulation, and transportation funding, which would need to be weighed by the Legislature.
• Oversight and Control. Some of the proposals would significantly reduce legislative oversight and control in key budget and policy matters. Examples include the CPR's proposal to eliminate numerous boards and commissions and its proposal to consolidate information technology (IT) investments into a single "IT Investment Fund" which would receive continuous appropriation of state funds. Along similar lines, some of the proposed changes to the education governance structure would have impacts on state versus local control regarding community college spending.

For these reasons, it will be important for the Legislature to weigh the merits of each proposal—taking into account its fiscal effects, its policy implications, and whether it represents the most effective way of achieving the fundamental goals of state government.

Section 2: CPR Reorganization

One of the major components of the CPR report is a reorganization of the state's departments, agencies, boards, and other entities. Below, we describe this reorganization plan and then provide some of our initial observations.

Principles of the CPR Reorganization

The CPR report puts forth two principles that are at the center of its approach to reorganizing state entities:

• Programs Should Be Aligned by Function. The report attempts to combine entities that work in the same policy area or provide similar services. This approach aims to eliminate duplication and improve the performance of state programs.
• Administrative Services Should Be Consolidated. In addition, the report aims to unify support services within each new department such as human resources, legal affairs, and purchasing—with the goals of greater efficiencies and achieving "economies of scale."

In addition to these principles, the report also emphasizes improving customer service and ensuring that the best and most effective practices of individual departments are used throughout state government.

Components of the Reorganization

Mega-Departments. Currently, the state is organized with both agencies and departments. Agencies generally perform policy-setting and oversight roles in a particular policy area. Under an agency's supervision, departments implement programs. For instance, the Department of Financial Institutions (DFI) regulates banks and credit unions under the guidance of the Business, Transportation, and Housing Agency. The core of the CPR reorganization is the creation of 11 large, mega-departments. The proposed 11 departments are listed in Figure 3 (see next page). These mega-departments—called "departments" by CPR—would merge the policy-setting function of agencies with the program administration function of departments.

In most cases, these new departments would represent the merger of several existing departments. For instance, both DFI and the Department of Corporations would merge as a new Financial Services Division within the proposed Commerce and Consumer Protection Department. Other divisions within the same department would include most functions from existing departments such as the Department of Motor Vehicles (DMV) and the Department of Real Estate. In other cases, existing departments are divided—with their component functions distributed among several new departments. For example, functions from the Department of Fish and Game would be distributed to the Environmental Protection, Natural Resources, and Public Safety and Homeland Security Departments.

Discontinuation of Many Boards and Commissions. The state has hundreds of boards, commissions, and task forces which serve a variety of roles—including administering grant programs, regulating industries, and providing policy advice. These entities generally are governed by a board appointed by the Governor, Legislature, or other state officials. Some board members receive full-time salaries while many others only receive reimbursements for their travel and other expenses. The CPR identified 339 existing boards, commissions, and task forces across state government. The report recommends discontinuing 117 of these entities, including the Air Resources Board, State Lands Commission, Energy Commission, State and Regional Water Quality Boards, Student Aid Commission, Victims Compensation and Government Claims Board, Board of Prison Terms, and Youth Authority Board. For the majority of these discontinuations, the CPR consolidation would move these entities' activities under one of the new mega-departments. In other words, the government activity would continue but be governed by a departmental secretary, rather than an independent board. On the other hand, the CPR would eliminate both the function and the entity in about four dozen cases. Most of these entities entirely eliminated provide policy advice to the state (such as the Rural Health Policy Council and the 911 Advisory Board) rather than administer programs. The report notes that the elimination of these advisory boards could be replaced with ad-hoc advisors on an as-needed basis.

Other New Entities. In addition to the creation of the mega-departments, the CPR proposes to create several other new entities in state government, including:

• Office of Management and Budget. The state currently has a number of "control" agencies which provide policy and fiscal oversight to the state's other entities. For instance, the Department of Finance (DOF) is the state's fiscal and budget review department. Likewise, the Department of Personnel Administration (DPA) provides departments with services related to state employment. The CPR proposes to consolidate these types of entities into a single Office of Management and Budget (OMB). The OMB would be responsible for oversight on budgetary, state employment and retirement, technology, and regulatory matters. Functions from DOF, DPA, the state's data centers, Department of General Services, and the Office of Administrative Law would be transferred to the OMB.
• Tax Commission. The CPR proposes that the state's principal tax collection agencies be consolidated into the California Tax Commission. The commission would include components of the Franchise Tax Board, Employment Development Department, and DMV. The report, however, indicates that the Board of Equalization would be retained as an independent agency.

Some Entities Largely Unaffected. In some areas, the CPR proposes few, if any, changes to existing department structures. For instance, constitutional officers are left largely unaffected. In addition, the Military Department would remain an independent entity outside of the mega-department structure. The Departments of Food and Agriculture and Veterans Affairs would be elevated to mega-departments, but their roles and responsibilities would remain largely unchanged.

Implementation

The report acknowledges that fully implementing its governmental reorganization is an "ambitious" undertaking. The report provides few details on a timeframe for implementation but suggests the use of a centralized performance review team to coordinate any consolidations.

The Reorganization Process. State law provides a specific process for the Governor to propose reorganizations to the Legislature. Since 1968, various Governors have submitted 29 reorganization plans through this process. The Legislature approved 18 of these plans. Figure 4 (see next page) lists these plans, and the box (see end of section) provides a historical perspective on reorganizing state government as it relates to the health and social services area.

Figure 5 (see page 15) provides a sample timeline for the reorganization process. In total, a reorganization plan can take 90 days to become effective. Among the key components of the process are:

• Goals. State law encourages the Governor to seek reorganizations which reduce expenditures, increase efficiency, and eliminate duplications of effort.
• Little Hoover Commission. As part of the process, the Governor submits any plans to the Little Hoover Commission for review and public hearings. The Commission has 60 days to report any findings to the Governor and the Legislature.
• Civil Service Transition. Plans must provide for the transfer of existing state employees from their original department to a new entity carrying out the same function.
• Legislative Review. The statute provides for a 60-day legislative review period and calls for policy committees in each house to issue a report on a plan. A plan goes into effect after the 60-day period unless the Legislature takes action to reject it. Either house can reject a plan by passing a resolution by a majority vote. The vote is "yes" or "no"—the plan cannot be amended by the Legislature.

LAO Comments/Key Considerations

In reviewing the CPR reorganization plan, there are many considerations for the Legislature. Figure 6 (see next page) lists some of the criteria that we would suggest the Legislature use in evaluating any proposed reorganization. Below, we outline some additional considerations specific to the CPR and offer our initial comments on the proposed reorganization. Later in this report, we provide more program-specific comments on some of the more significant components of the reorganization.

Opportunities for Greater Efficiencies Exist, But More Details Needed. Consistent with the CPR, we believe that many aspects of state government's organization can be improved. Our initial review of the CPR's consolidation proposal finds that the report has correctly identified some good candidates for consolidation. For instance, in the health area, the proposed centralization of a number of public health programs could improve their effectiveness. Likewise, the merger of the Departments of Mental Health and Alcohol and Drug Programs could allow the state to better coordinate services to those dually diagnosed patients who are currently served by both departments. At this stage, however, the reorganization proposal often lacks sufficient detail to evaluate whether a proposed consolidation would improve state government. Until the full details of a proposed reorganization are put forth, drawing conclusions about many of CPR's suggestions is difficult.

Reshuffle or Change the Scope of Government? For the most part, the CPR reorganization is a reshuffling of existing state activities. Examining the organization of government services is a necessary and important task. It is not always clear, however, that CPR asked a more fundamental question—should the state continue to perform its current functions and provide its current services? As such, the reorganization plan may have missed the opportunity to rethink what level of government should be responsible for each service or if certain government services are still necessary.

Is Changing the Organizational Structure the Solution? As noted above, some of the proposed consolidations offer promise to improve the quality of government services. In other cases, there may be more simple solutions to a massive reorganization. For instance, to increase coordination between two departments, interagency agreements could be developed in place of a full merger. In addition, the administration could use cross-departmental training to spread those management and other practices it has identified as particularly effective.

Possible Unintended Consequences. We recognize that any proposed overhaul of state government on the scale of CPR would invite many questions regarding why certain entities are proposed to be placed in one department versus another. In many instances, reasonable minds can differ over in which location a program would be most effective. That said, our initial review raised some concerns with a number of CPR's choices. The full implementation of the CPR reorganization could lead to some unintended negative consequences. The examples noted below are illustrative that the Legislature will need to carefully examine each consolidation component in detail.

• Functions May Not Be Compatible. In its reshuffling of state departments, the CPR in some cases may have joined functions that are not particularly compatible. For example, the CALFED Bay-Delta Program (overseen by the California Bay-Delta Authority) is designed to approach the Delta from a variety of resource protection perspectives. By moving the authority from the current Resources Agency to the new Infrastructure Department, the CPR could shift the program's focus towards water infrastructure issues and away from other resources issues. Such a shift would represent a significant policy choice for the Legislature. In addition, the CPR proposes to integrate the Department of Managed Health Care (DMHC) with other health programs within the new Health and Human Services Department. These other health programs contract for services with health maintenance organizations (HMOs). These are the same HMO entities that the DMHC regulates. By having a single department regulate and conduct business with HMOs, there is a potential for conflicting goals.
• Possibility of Creating New Coordination Problems. In some cases, the CPR proposes to divide current departments and send their various components to multiple mega-departments. In doing so, the CPR aims to better align various functions. The splintering of existing departments, however, could create new coordination problems. For example, the DMV's investigators, who focus on identity theft and fraud, would be sent to the Public Safety and Homeland Security Department and separated from the rest of the department. As a result, these investigators could become disconnected from the DMV field offices that can often help prevent such problems from developing in the first place.
• Mega-Departments May Become Unmanageable. By moving to mega-departments which would have wide-reaching responsibilities, the CPR risks making departments so large that they become unmanageable. In particular, some of the mega-departments would have such expansive goals, missions, and "span of control" that they may find it difficult to administer their day-to-day responsibilities.

Missed Opportunities. While the CPR reorganization affects most state entities, the Legislature should not consider the plan an exhaustive list of possibilities. In some areas, there appears to be additional room for consolidations to improve state government. For instance, by keeping the Department of Veterans Affairs outside of most of the reorganization plan, CPR may not have considered the option of merging the veterans' homes with the state's other 24-hour care facilities. Similarly, CPR aimed to consolidate all education programs within the Education and Workforce Preparation Department. Yet, the CPR maintains the existing roles and responsibilities of the Superintendent of Public Instruction (SPI). Maintaining the overlapping responsibilities of the SPI and other education administrators represents a missed opportunity to repair a central governance issue in K-12 education.

Considering the Merits of Independent Boards. The CPR reorganization emphasizes a transition away from independent boards and commissions and towards executive program management. In evaluating these types of decisions, the Legislature should consider both the benefits and drawbacks regarding the use of independent boards. Among the benefits of independent boards are:

• Boards can include experts in the policy field and offer a variety of policy perspectives.
• Boards may offer more independent, forward-thinking proposals than might be typical from a state department.
• Board meetings are more open to the public than the department decision-making process.
• The Legislature often has the ability to oversee a board's management through the nomination approval process. In other cases (such as the High Speed Rail Authority), the Legislature has the authority to appoint board members directly.

On the other hand, independent boards also may have some disadvantages, including:

• Boards may cost more to operate, due to the salaries and associated costs of board members.
• A department can often shuffle resources among multiple programs as dictated by workload. In contrast, since they administer individual programs, boards typically do not have the same degree of flexibility.
• Boards may have difficulty in coordinating their work with state departments when their program responsibilities overlap. When programs all report to the same director under a single department, coordination may improve.

Unknown Implementation Costs. The proposed reorganization, if implemented, would result in significant implementation costs, particularly in the short term. In many cases, the fiscal estimates of the CPR do not take into account these expenses, such as the costs for integrating data and budget systems and relocating offices. As an example, the recent closing of the Technology, Trade, and Commerce Agency cost millions of dollars in shutdown expenses—nullifying most of the savings for the first year. While these types of implementation costs typically do not provide sufficient justification on their own to dismiss a proposed reorganization, the Legislature should be aware of them in making its decisions. This is particularly true in the cases when the recommendations are being implemented primarily to generate budget savings.

 

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