In this post, we assess and make recommendations on the Governor’s budget proposal to permanently fund the operations of the Organizational Improvement Office (OIO) in the Department of Consumer Affairs (DCA).
DCA Oversees Boards, Bureaus, and Other Entities. DCA oversees 36 entities, including various boards and bureaus. Together, these entities license more than 3.4 million people in more than 280 professional categories, such as doctors, acupuncturists, and cosmetologists. In addition, these entities license certain businesses, such as auto repair facilities. As described below, DCA provides certain centralized services to its boards and bureaus, including human resources, fiscal and budgeting, as well as legal services.
DCA Allocates Cost of Certain Services Through Pro Rata. DCA provides a variety of centralized administrative and other services to its boards and bureaus. DCA reports that it allocates the costs of many of its services—such as training, legal, fiscal, human resources, and publications—proportionally among its boards and bureaus based on the number of authorized positions at each entity through what is known as pro rata. The operations of the boards and bureaus are generally funded through their own special funds, which are typically supported by licensing fees. Accordingly, boards and bureaus pay their pro rata share for services with resources from these funds.
OIO Leads Business Modernization and Process Improvement Efforts. OIO collaborates with the boards, bureaus, and DCA centralized services on business modernization information technology (IT) projects and process improvement reviews. In 2015, DCA established OIO’s predecessor, the Organizational Change Management unit, in response to findings from the California State Auditor that future IT projects should include a process for planning and implementing effective organizational change management. The 2017-18 budget provided ten positions and $1.3 million for three years for the Organizational Change Management unit to support the boards and bureaus through business process reviews, as well as the department as a whole with planned special projects. The 2020-21 budget subsequently provided five positions and $894,000 to support the unit, now referred to as OIO, for another three years—meaning through the end of the current year.
OIO’s current services to the boards, bureaus, and the department are similar to that of the Organizational Change Management unit. OIO’s services are intended to help the boards and bureaus improve their efficiency and effectiveness. OIO does not directly charge the entities for the services it provides them. Instead, the costs of OIO’s operations are supported by the pro rata.
Funding for Permanent OIO Staff and Operations. The Governor’s budget for 2023-24 proposes $1.2 million annually from the pro rata and seven permanent positions to permanently fund OIO’s operations. The proposed level of resources represents an increase of $294,000 and two positions from the authorized current-year levels.
Unclear if OIO Efforts Have Led to Measurable Benefits and Savings. OIO has provided information on multiple workload outcomes, such as the number of business processes it has documented and the recommendations it has made for DCA centralized services, boards, and bureaus. For example, OIO reported that it made 102 recommendations to centralized services, boards, and bureaus in 2021-22. In addition, it has identified anecdotal examples of improving efficiency. For example, OIO reported that it worked with the Board of Registered Nursing to reduce certain application processing times by 64 percent in two years. However, OIO has not quantified how, if at all, examples like these have translated into measurable net benefits or net cost savings. For example, OIO should be able to translate reducing licensee application processing time lines into personnel hours that result in cost savings, or OIO should be able to report on the extent to which savings have been redirected to the boards’ and bureaus’ other priorities. Without such detailed information, it is difficult for the Legislature to know if the benefits or savings of OIO’s current work outweigh the costs to the boards and bureaus.
Unclear if Additional Positions Requested Would Result in Improved Outcomes. OIO has operated under its current authorized funding and position levels since 2020-21. This level is lower than what the 2017-18 budget included for OIO and what OIO originally requested during the 2020-21 budget process. In response, OIO utilized temporary help and modified its approach to working with the department, boards, and bureaus to operate within its existing levels over the past three years. For example, OIO assigned one staff member to most projects, when it previously would have assigned two. OIO indicates that the proposed increase in positions would allow the office to return to its previous approach and take on additional special projects. However, OIO’s workload measures, such as process maps and discovery workshops and recommendations, have generally stayed the same or increased since 2018-19. Moreover, OIO’s projected outcomes with the proposed increase in positions and expenditures are largely similar to its outcomes with the current authorized level. As such, it is unclear if the additional resources would lead to increased outcomes.
Special Funds That Would Fund the Proposal Are Nearing Insolvency. The proposed increase in expenditures would create pressure on boards’ and bureaus’ special funds that are structurally imbalanced. Currently, 11 boards and bureaus are projected to have special funds become insolvent in 2024-25. Although DCA is working with these boards and bureaus to bring their funds into balance (such as through annual savings or fee increases through the regulatory or legislative process), additional expenditures that are passed to the boards and bureaus through the pro rata place additional pressure on these funds. Accordingly, the Legislature will want to apply a higher bar to spending from these funds.
Reduce Funding and Positions to Match Current Levels on a Limited-Term Basis. We recommend that the Legislature reduce the proposed funding and positions to match the current authorized levels of $894,000 and five positions. OIO has been able to operate at existing levels to accomplish its work, and it is not clear if the additional positions and expenditures are justified. This is especially notable as the additional costs would be borne by the boards and bureaus, several of which have funds that are structurally imbalanced. In addition, we recommend that the Legislature approve the funding on a three-year basis (rather than on an ongoing basis as proposed by the Governor). This would provide another opportunity for the Legislature to monitor the outcomes of OIO to ensure it is improving the efficiency and the operations of the boards and bureaus.
Require OIO to Report on Measurable Benefits and Savings. We also recommend that the Legislature require OIO to quantify how its work has generated benefits and savings at the boards and bureaus and report these results to the Legislature by January 10, 2026. This will give the Legislature insight into whether OIO’s benefits outweigh its costs to the boards and bureaus, which could inform future funding decisions when the limited-term resources recommended above expire.