The California Debt and Investment Advisory Commission (CDIAC) provides information, analysis, education, and technical assistance on debt issuance and public finance. The commission consists of nine members, chaired by the State Treasurer. The Governor’s budget proposes $3.7 million for support of CDIAC in 2017‑18. This is an increase of about $339,000, or about 10 percent, from current-year estimated expenditures. CDIAC is supported by the California Debt and Investment Advisory Commission Fund, which is funded by fees from the sale of state or local government debt issues.
Governor’s Proposal. The Governor’s budget for 2017‑18 proposes an increase in expenditure authority of $200,000 for CDIAC. CDIAC argues that this funding is necessary to offset personal services expenditures that are taking up an increasing percentage of its budget.
Insufficient Justification of Need for Higher Budget Authority. In each of the past five fiscal years, CDIAC has underspent its budgeted authority by at least $200,000. Accordingly, it is not clear why additional budget authority is needed for the commission to maintain its current operations. We note that, based on our discussions with CDIAC, it is planning to conduct additional activities in future years, such as providing more web-based trainings and using CDIAC staff to identify and assist local agencies in financial distress. To the extent that additional funding is needed to complete these types of additional activities, CDIAC should put forward a proposal justifying those specific expenditures.
While CDIAC argues that its proposed augmentation is necessary because personal services are increasing as a share of its budget, we note that there is no ideal share of personal services costs. Some entities have higher shares and some lower—representing the nature of their workload and decisions about how they prioritize spending on personnel versus other types of expenditures. Furthermore, it is not uncommon for departments to have fluctuations in personal services costs. This can occur because the department employs more senior staff or chooses to reclassify staff to higher paid classifications, as is the case with CDIAC. However, departments are generally expected to manage their authorized positions within their budgeted authority.
Recommend Rejection. We recommend that the Legislature reject the Governor’s proposal to provide CDIAC with additional expenditure authority. At this time, CDIAC’s existing expenditure authority appears to be sufficient for it to conduct its existing activities. While there may be value to additional activities that CDIAC would like to perform, CDIAC should come back with specific budget requests that identify and justify the costs associated with those activities.