The Department of Fair Employment and Housing (DFEH) enforces laws that promote equal opportunity in housing, employment, and public accommodations, and that protect citizens from hate violence. Specifically, DFEH has responsibility for enforcing the state's main equal opportunity law, the Fair Employment and Housing Act, and resolving complaints in a timely manner.
The budget proposes expenditures of $22 million ($18 million from the General Fund and $4 million federal funds) for support of the department in 2000-01. This represents an increase of $2.7 million (14 percent) over estimated current-year expenditures.
We recommend the Legislature approve the department's request for $1,047,000 from the General Fund and two new positions but on a two-year, limited-term basis to establish a pilot mediation program for alternative dispute resolution. We also recommend the Legislature adopt supplemental report language detailing the goals and evaluation criteria for the program.
The budget includes $1,047,000 from the General Fund to establish a pilot mediation program for alternative dispute resolution (ADR). The program is intended to reduce dispute resolution time and decrease enforcement workload. The request includes funding for two permanent positions for mediation unit administration, and funding to contract for ADR services. The department also plans to redirect two positions from the enforcement division to the pilot program. The department indicates that this redirection is possible because the pilot program will reduce enforcement workload. The department has modeled this proposal after a similar federal program and expects to handle around 1,200 cases a year.
The mediation unit will serve 15 district offices across the state. These offices had an annual caseload of 10,564 in 1998-99. Thus, the department expects to refer around 10 percent of the caseload to the pilot mediation program (the federal program refers around 35 percent). This level of effort for the pilot program appears reasonable. However, because this is a pilot program, it is not clear if this program will resolve these cases more effectively or efficiently than the current process. In fact, answering these basic questions is a valid purpose for a pilot program.
Consequently, we recommend the Legislature approve the proposed staff and funding but on a two-year, limited-term basis and reevaluate the program after two years. We also recommend the Legislature adopt supplemental report language detailing enforcement goals for the program as well as evaluation criteria to determine the program's effect on complaint resolution.
We recommend the Legislature delete $273,000 from the General Fund and six positions requested to provide administrative services because the department has not demonstrated a need for additional positions. (Reduce Item 1700-001-0001 by $273,000.)
The budget includes $273,000 from the General Fund for six positions in the Administrative Services Division. The department has indicated that an 18 percent increase in Enforcement Division staff has occurred since 1997-98, while the number of support positions has remained unchanged. The requested positions would provide additional administrative support for the department.
It is not clear from the available documentation that the existing staff level is inadequate. The department has not provided any workload data substantiating the need for additional staff and simply states that more administrative staff is needed because of the increase in enforcement staff. It is not apparent that the department has been adversely affected by its current staff level or that administrative functions are lacking resources. Furthermore, as mentioned above in our discussion of the pilot mediation program, the department expects a decline in enforcement workload as a result of the program. Consequently, we recommend the Legislature delete $273,000 under Item 1700-001-0001 because the department has not demonstrated the need for additional administrative staff.
We recommend the Legislature delete $113,000 from the General Fund and two permanent positions requested to provide public information and technical assistance because the department has not demonstrated a need for additional positions. (Reduce Item 1700-001-0001 by $113,000.)
The Governor's budget includes a request for two permanent positions at a cost to the General Fund of $113,000 to provide public information and technical assistance services. According to the department, this proposal is to resume various functions that were eliminated under departmental restructuring actions that began in the late 1980s.
Documentation from the department indicates that the restructuring efforts focused on complaint investigation rather than training and information development. The department's submittal in support of this proposal, however, does not show that the current training and information development programs are inadequate or that the number of existing staff is inadequate. Further, the most recent Controller vacancy report indicates that 40 of the 315 authorized positions were vacant (a 13 percent rate). Thus, it is unclear why the additional staff are needed. Consequently, we recommend the Legislature delete the requested $113,000 and two positions.
We recommend the Legislature delete $199,000 from the General Fund for increases in facilities rent because we find no analytical basis for granting an adjustment to the department that has been denied to virtually all other state agencies. (Reduce Item 1700-001-0001 by $199,000.)
The budget proposes a total of $199,000 for increased rental costs at various buildings. The department currently occupies office space in privately owned buildings, with the exception of the Santa Ana, Oakland, and San Francisco district offices. The information submitted in support of this request indicates that rent for the facilities occupied by the department will increase by $199,000 between 1998-99 and the budget year.
Our review found that only the department and four other agencies-- the Departments of Industrial Relations and Justice, the State Library, and the State Treasurer's Office--received budget augmentations for rental increases in state buildings. Presumably, all other state departments will absorb the rent increases.
We can find no analytical basis for granting an augmentation to pay for rent increases for these five departments when other departments and agencies are not provided such funds. We note that the administration's own budgeting guidelines indicate that departments will not receive funding for such price increases. Consequently, we recommend the Legislature reduce Item 1700-001-0001 by $199,000.
We discuss this issue in greater detail in our analysis of the Department of Finance's budget in this chapter.
The Department of Managed Care (DMC) was created by Chapter 525, Statutes of 1999 (AB 78, Gallegos) to regulate health maintenance organizations (HMOs). The Department of Corporations (DOC) previously had this responsibility. (The Department of Insurance regulates health insurance companies.) The Knox-Keene Act specifies what regulatory activities the state must perform in this program area. These include (1) licensing health plans; (2) taking and investigating consumer complaints regarding health plans; (3) performing medical and financial exams of health plans every three and five years, respectively; (4) taking enforcement action against plans that are in violation of the act (up to and including taking over a health plan); and (5) providing an ombudsperson to assist in resolving complaints and providing information.
Chapter 525 states that DMC will be established on July 1, 2000 or by executive order of the Governor, whichever occurs first. Chapter 525 also transfers all HMO regulation from DOC to the new department. At the time this analysis was written, the Governor had not issued an executive order to establish the department earlier than July 1. The Governor apparently intends to issue an executive order to establish the department before the start of the budget year because the budget proposes funding for DMC in the current year.
Budget Proposal. As shown in Figure 1 (see next page), the budget proposes total expenditures of $13.9 million in the current year ($13.5 mil-lion for regulatory activities and $0.4 million for the Office of Patient Advocate [OPA]) and $27.9 million in 2000-01 ($27 million for regulatory activities and $0.9 million for OPA). The department will be funded from the newly created Managed Care Fund. Regulated health plans pay an annual per-enrollee assessment and various fees to generate revenue for department activities. Previously, these assessments and fees went into DOC's Corporations Fund. When the new department is established, revenues generated from health plans will be transferred to the Managed Care Fund.
| Figure 1 | ||||
| Proposed Expenditures for Department of Managed Care | ||||
| (Dollars in Millions) | ||||
| 1999-00 | 2000-01 | |||
| Positions | Funding | Positions | Funding | |
| Transfer from Department of Corporations | 147 | $6.1 | 190 | $14.9 |
| Additional resources related to Chapter 525, Statutes of 1999 (AB 78, Gallegos) | 24 | 5.1 | 63 | 7.1 |
| Implementation of other legislation | 34 | 2.1 | 52 | 4.2 |
| Enforcement Division workload | 16 | 0.6 | 16 | 1.1 |
| Medical and dental survey cost increase | -- |
-- |
-- | 0.6 |
| Totals | 221 | $13.9 | 321 | $27.9 |
We withhold recommendation on the entire budget proposal for the Department of Managed Care--$13.9 million and 221 positions in the current year and $27.9 million and 321 positions in 2000-01--until the Legislature receives more complete information on the establishment of the new department.
Transfer of Resources From DOC. Chapter 525 transfers the responsibilities for HMO regulation from DOC to DMC. As a result, the budget proposes a staggered transfer of DOC's health plan-related regulatory functions as well as some administrative staff. Under the budget proposal, effective January 1, 2000, the 115-position Health Plan Division and the 32-position Health Plan Enforcement Division would transfer to DMC, for a total of 147 positions and $6.1 million. The DOC would provide administrative services to DMC through the end of the current year. Effective July 1, 2000, however, 43 DOC administrative staff would transfer to DMC. Thus, the budget proposes 190 positions and $14.9 million to be transferred from DOC for 2000-01.
Additional Resources Related to Chapter 525. In addition to these transferred resources, the budget proposes additional resources to implement Chapter 525--$5.1 million and 24 positions in the current year, increasing to a total of $7.1 million and 63 positions in 2000-01. This request includes resources for DMC's executive office, policy staff, OPA, staff for two advisory committees (one altered and one created by Chapter 525), and administration.
Implementation of Other Legislation. In addition to Chapter 525, the Legislature approved several other laws in 1999 that affect DMC. The most notable are Chapter 529, Statutes of 1999 (SB 260, Speier); Chapter 533, Statutes of 1999 (AB 55, Migden); and Chapter 542, Statutes of 1999 (SB 189, Schiff).
Chapter 529 establishes the Financial Solvency Standards Board to develop financial standards for contracts between health plans and medical providers and requires DMC to regulate medical providers to ensure their financial stability. The budget proposes $0.5 million in the current year and $0.8 million in 2000-01, along with four positions, to implement this legislation. Of these amounts, $0.3 million in the current year and $0.5 million in 2000-01 would provide contract funds for (1) actuarial and health economics experts and/or (2) training related to medical providers for DMC's financial examiners.
Chapter 533 requires health plans, effective January 1, 2001, to provide enrollees the option to have independent medical review of denials of care. The DMC must contract with independent entities to review the cases filed.
Chapter 542 includes several provisions, such as (1) shortening the time DMC has to review complaints from 60 days to 30 days, (2) requiring DMC to take enforcement action in specified circumstances, (3) expanding eligibility for external independent review (provided by the health plan) of experimental treatment denials and making such denials eligible for the independent medical review system established by Chapter 533, (4) requiring DMC to review cases submitted for independent medical review to determine if any enforcement action is warranted, (5) requiring administrative penalties in specified circumstances, and (6) requiring DMC to report to the Legislature on implementation of Chapter 542.
To meet the requirements of Chapter 533 and Chapter 542, the budget proposes 30 positions and $1.6 million in the current year increasing to a total of 48 positions and $3.4 million in 2000-01. About half of the positions are attorneys, eight of which are proposed to be one-year limited term to handle the license amendments filed by the health plans to comply with the 1999 statutes. In addition, $0.9 million of the 2000-01 request is for the independent medical review contract.
Enforcement Division Workload. The budget proposes doubling the staff of the Health Plan Enforcement Division by adding 16 positions at a cost of $0.6 million in the current year and $1.1 million in 2000-01. This is to meet the workload that has developed since the division was created in 1998. This work has included taking over three financially troubled health plans.
Surveys. The budget also includes an augmentation of $0.6 million in 2000-01 for rate increases adopted by the contractors who perform the medical surveys of health and dental plans.
Many Details Unclear. Many details regarding the new department remain unclear at this time. Examples of these details include the following:
At a minimum, the Legislature needs clarification of the above details in order to ensure that the new department will address the Legislature's expectations and
priorities. Consequently, we withhold recommendation on the entire budget proposal for DMC until the Legislature receives more complete information on the
establishment of the new department.
The Energy Resources Conservation and Development Commission (commonly referred to as the California Energy Commission) is responsible for forecasting energy supply and demand, developing and implementing energy conservation measures, conducting energy-related re-search and development programs, and siting major power plants.
The budget proposes commission expenditures of $237.2 million from various state and federal funds in 2000-01. This is $25.2 million, or 9.6 per-cent, less than current-year estimated expenditures. This reduction is due in part to (1) Public Interest Energy Research (PIER) program funds carried over into the current year and an assumption that no PIER funds will be carried over into 2000-01 and (2) other one-time expenditures in the current year for a variety of projects that are not carried forward to the budget year. These reductions are partially offset by increased expenditures in the budget year of (1) $12.5 million for fuel cell and clean fuels projects and (2) $1.7 million for increasing workload associated with PIER and the Energy Facilities Siting program.
We withhold recommendation on the $400,000 request for consulting funds for anticipated workload in the Energy Facilities Siting program until the commission provides an updated schedule of expected application filing dates and corresponding workload projections prior to budget hearings. We further recommend that the Legislature consider requiring applicants to pay a siting application fee to cover the commission's costs to review proposed projects.
The commission's Energy Facilities Siting program was budgeted at $6.9 million and about 70 positions for the current year. The budget proposes $400,000 from the Energy Resources Programs Account (ERPA) for additional consultant contracts for the program in 2000-01. The proposal is based on the commission's projection of increased workload related to reviewing energy facility siting applications the commission currently expects to receive in 2000-01.
The Warren-Alquist Act requires the commission to approve the construction of electricity-generating power plants, unless the plant generates less than 50 megawatts of electricity or is a hydroelectric, wind, or solar facility. After approving a proposed power plant, the act requires the commission to ensure that the facility is in compliance with all applicable federal, state, and local laws, as well as any conditions of certification required by the commission. The commission must approve any modifications to these plants. For plants not subject to its jurisdiction (such as those that predate the siting approval process), the commission must approve plant modifications unless the modifications meet the megawatt or type-of-facility exclusions noted above.
Anticipated Filing Dates Tend to Slip. The commission periodically updates its schedule of when it expects project proponents to file applications for the siting review process. This schedule changes frequently as project details often change as projects develop, requiring proponents to file the siting application later than initially expected. These adjustments then alter the commission's staffing needs. As a result, we withhold recommendation on the request for $400,000 in consulting funds until the commission provides an updated schedule of expected application filing dates and corresponding workload projections prior to budget hearings.
Legislature Should Consider Application Fee to Fund Program. Currently, the siting program is funded from ERPA, which is supported by a surcharge on ratepayers' electricity bills. Now that private companies (rather than predominantly investor-owned utilities, as before restruc-turing of the electricity industry) are proposing to build power plants as a business investment, we recommend that the Legislature consider requiring applicants to pay a fee to file a siting application. This fee could be set to cover the commission's costs to review proposed projects. As part of the necessary cost of doing business in this area, firms would then bear these expenses--not taxpayers in general.
We withhold recommendation on the proposal for $12.5 million from Petroleum Violation Escrow Account (PVEA) funds and one two-year limited-term position pending receipt of (1) information on the future costs of the proposed projects and (2) the low-emission vehicle analysis and program plan for the proposed vehicle subsidy program. Also, funding for this proposal, along with an additional $30 million from the PVEA, is dependent on the Legislature's decision on whether to fund PVEA projects through the budget bill or separate legislation.
The PVEA Is a Declining Revenue Source. The PVEA revenues come from federal settlements with oil companies resulting from the companies charging excessive prices for petroleum. These settlements are largely concluded. As a result, in the last few years, revenues have declined and will continue downward. The Governor's budget estimates $1.8 million in current-year revenue from settlements and $1.7 million in 2000-01. In addition, the state owes interest to the PVEA that was improperly credited to the General Fund rather than the account. The Governor's budget proposes to repay the PVEA plus interest from the General Fund in the current year ($4 mil-lion) and the budget year ($28.6 million). It is not clear how these payments will occur because there is no appropriation for this purpose in either the 1999-00 Budget Act (for the $4 million) or in the 2000-01 Budget Bill (for the $28.6 million). However, after accounting for these payments and other revenues, along with current-year expenditures, the balance available for appropriation in 2000-01 totals $45.3 million. Figure 1 (see next page) shows the Governor's proposed PVEA spending proposals for 2000-01.
Energy Commission's Proposed Projects. With respect to the Energy Commission, the budget proposes $1 million in PVEA funds and one two-year limited-term position for the Governor's Fuel Cell Vehicle Partner-ship, which he announced in April 1999. The project is a collaboration between car manufacturers, oil companies, the Air Resources Board (ARB), and the commission to introduce fuel cell vehicles to the California market. The proposal would (1) cofund two hydrogen fueling sites for five transit buses to demonstrate hydrogen fuel cell technology and (2) develop safety standards for the sites and a related training program.
The budget also proposes $11.5 million in PVEA funds for the Clean Transportation Fuels Initiative, which includes (1) $6 million for clean fuels (such as compressed natural gas) fueling stations for school and transit districts; (2) $5 million to provide subsidies for vehicles that use a cleaner fuel alternative; and (3) $500,000 to study issues that continue to affect hydrogen fueling infrastructure, such as safety testing procedures, the use of agricultural waste to produce hydrogen, and hydrogen fuel quality.
We have some concerns with these proposals, including:
The appropriateness of using PVEA funds, which are a declining revenue source, for multi-year projects like the fuel cell partnership.
The request for the proposed vehicle subsidy program is premature because the program plan is not yet established and depends on current-year analysis by the commission and ARB on the emission and energy efficiency benefits of low emission vehicles.
| Figure 1 | ||
| PVEA Projects Proposed in 2000-01 Governor's Budget | ||
| (In Millions) | ||
| Department/Project | Budget Item | Amount |
| General Services
Additional cost of purchasing alternative fuel vehicles for state fleet |
1760-001-0853 |
$12.4 |
| Compressed natural gas fueling stations for state fleet | 1760-301-0853 | 2.0 |
| Subtotal | ($14.4) | |
| Energy Commission
Alternative fuel fueling stations for public transit buses |
3360-001-0853 |
$6.0 |
| Subsidize alternative fuel vehicles | 5.0 | |
| Two hydrogen fueling stations for fuel cell demonstration buses | 1.0 | |
| Administration of existing programs | 0.9 | |
| Study of hydrogen fuel cell issues | 0.5 | |
| Subtotal | ($13.4) | |
| Conservation Corps
Home weatherization for senior, low-income, and disabled residents |
3340-001-0853 |
$8.0 |
| Energy audits in public schools and water leak inspec- tions of public facilities in Southern California | 1.4 | |
| Energy audits and lighting retrofits in public buildings in the San Francisco area | 0.3 | |
| Subtotal | ($9.7) | |
| Air Resources Board
Five hydrogen fuel cell demonstration buses |
3900-001-0853 |
$5.0 |
| Total | $42.5 | |
In addition, the Legislature has historically considered projects for PVEA funding in legislation separate from the budget bill. As a result, we withhold
recommendation on the proposal for $12.5 million from PVEA funds and one two-year limited-term position pending receipt of information on the future costs
of the proposed projects and the low-emission vehicle analysis and program plan described above, as well as the Legislature's decision on funding PVEA
projects through the budget or separate legislation.
The Agricultural Labor Relations Board (ALRB) protects the rights of agricultural workers to join employee unions, bargain collectively with their employers, and engage in activities through labor organizations of their own choosing. The ALRB is split into two divisions: (1) the General Counsel, whose employees run elections and investigate charges of un-fair labor practices; and (2) the board, which certifies elections and adjudicates and mediates unfair labor practices. The Governor's budget proposes total expenditures of $4.8 million from the General Fund and 50 positions for support of the ALRB in 2000-01. This represents a $274,000 (6 percent) increase in estimated expenditures and an additional 2.5 positions compared to the current year.
We recommend the Legislature delete the request for 2.5 positions and $160,000 from the General Fund because the board has not substantiated the need for additional staff or an increased travel and training budget. (Reduce Item 8300-001-0001 by $160,000.)
The Governor's budget includes funding for 2.5 positions and $160,000 to increase support for various functions of the board. The ALRB proposes to reestablish a regional office in either Santa Maria or Oxnard, establish a Division of Administration to provide business services, and augment its travel and training budgets.
Regional Office. The budget includes a request for $55,000 from the General Fund and 1.5 positions to reestablish an office which serves the south central coastal region, either in Santa Maria or Oxnard. The board currently operates offices in Salinas, Visalia, and El Centro to serve regional needs. The ALRB has not provided any workload data to substantiate the need to open this office, nor has the ALRB shown that the existing offices cannot continue to adequately serve the south central coastal region. Furthermore, the ALRB currently has two vacant field examiner positions out of nine authorized. It is unclear why these authorized positions could not be filled at either (or both) Salinas or Visalia if additional workload in the region warrants additional staff.
Division of Administration. The department has requested $55,000 from the General Fund and one position to augment the administrative staff. The ALRB currently has an Administrative Services program with four staff: one Chief of Administration, one Accounting Officer, one Personnel Officer, and one Program Services Officer. The board has not documented a need for additional business support functions, or why the existing number of staff is inadequate.
Increased Operating Expenses. The ALRB has requested $25,000 for increased travel and training. The board has not documented any deficiencies in the current operating budget. Furthermore, according to the Governor's budget, the board has consistently ended the year with an overall budget savings (ranging from $300,000 to $600,000 from 1996-97 through 1998-99).
Consequently, we recommend that the Legislature delete $160,000 and 2.5 personnel-years from Item 8300-0001-001.
The mission of the Department of Industrial Relations is to protect the workforce of California, improve working conditions, and advance opportunities for profitable employment. These responsibilities are carried out through three major programs: the adjudication of workers' compensation disputes; the prevention of industrial injuries and deaths; and the enforcement of laws relating to wages, hours, and working conditions. In addition, the department regulates self-insured workers' compensation insurance plans, provides workers' compensation payments to injured workers of uninsured employers and other special categories of employees, offers conciliation services in labor disputes, and conducts and disseminates labor force research.
The Governor's budget proposes expenditures totaling $255 million for the department in 2000-01. This is 5 percent more than estimated expenditures for the current year. The request includes $166 million from the General Fund, 2 percent less than 1999-00 estimated expenditures.
We recommend the Legislature delete a total of $664,000 from various funds (including $565,000 from the General Fund) because the department incorrectly budgeted retirement contributions for the positions requested. (Reduce Item 8350-001-0001 by $565,000, Item 8350-001-0222 by $13,000, Item 8350-001-0514 by $9,000, and Item 8350-001-0890 by $3,000. Increase Item 8350-001-0223 by $3,000.)
The budget includes funding for 165 new positions and 16 positions which have been redirected from within the department. The retirement benefits for the positions requested were not budgeted using the appropriate state contribution rate. The retirement contributions were calculated using around 10 percent of the annual salaries. The state's contribution, however, is around 1.5 percent for most employees. Consequently, the department included $664,000 more than is necessary for the state's retirement contributions. We recommend the Legislature reduce the department's budget to correct for this over-budgeting.
We withhold recommendation on $1.2 million from the General Fund to convert 15 limited-term positions to permanent status in the Targeted Industries Partnership Program. It is not clear if these positions will be needed in addition to the 43 positions and $3.1 million requested for garment industry wage enforcement called for under Chapter 554, Statutes of 1999 (AB 663, Steinberg).
Convert Existing Limited-Term Positions. The Governor's budget includes a request to convert 51.5 existing limited-term positions to permanent positions, at a General Fund cost of $4,342,000. Thirty-four of the positions are for the Targeted Industries Partnership Program (TIPP) and 15 of these are related to investigations of the garment industry.
Establish New Garment Industry Regulations. The Governor's budget also includes a request for 43 positions (20 on a three-year limited-term basis) at a cost of $3,062,000 to establish and administer new regulations to enforce labor laws in the garment industry consistent with Chapter 554, Statutes of 1999 (AB 663, Steinberg). Under the legislation, the department is to investigate and resolve wage cases where a formal complaint is filed and otherwise enforce the laws affecting the garment industry. In the past, this latter type of enforcement in the garment industry has been a function of the TIPP program.
Funding for New Program. In accordance with Chapter 554, the garment industry program is to be self-funded through regulatory fees. Typically, regulatory fees are deposited into a separate special fund which is then used to pay the costs of the regulatory activities. This ensures that the programs are self-sustaining, and not subsidized by the General Fund. The Governor's budget, however, proposes to fund the program through the General Fund with the fees collected reimbursing the General Fund.
Recommendations. The need to continue 15 limited-term positions in the TIPP program related to the garment industry is not clear. The garment industry inspections conducted by TIPP in the past have targeted employers who violate the state's wage and labor laws. The provisions of Chapter 554, however, specifically authorize the department to monitor and regulate the garment industry to ensure compliance with state wage and labor laws. It is not clear whether any or all of the 15 TIPP positions will be needed as a result of the additional staff requested pursuant to Chapter 554.
Therefore, we withhold recommendation on converting 15 limited-term TIPP positions to permanent (at a General Fund cost of $1,221,000), pending receipt and review of information from the department identifying both the need for a separate TIPP program and the need for additional garment industry regulatory staff beyond the 43 new positions related to Chapter 554. Further, we recommend that the Legislature establish a special fund for the regulatory fees and fund any positions related to the garment industry from the special fund rather than the General Fund. This action would be consistent with the way other regulatory programs are funded and would be consistent with the requirement in Chapter 554 that the fees recover the costs to administer the law.
We recommend the Legislature delete the $1,853,000 augmentation from the General Fund ($1,318,000), special fund ($328,000), and federal funds ($207,000) requested to cover the cost of rent and related increases for various offices because we find no analytical basis to provide an adjustment for the department that has been denied to virtually all other state agencies.
The budget proposes a total of $1.9 million for increased costs for space rented by the department at various locations. The department currently occupies office space in state-owned buildings--including sites in San Francisco, Oakland, Los Angeles, and San Bernardino. The Department of General Services is responsible for these buildings and charges rent to the occupants. The department rents privately owned space in Long Beach.
The department has requested the following increases related to building rental costs:
Our review found that only the department and four other agencies-- the Departments of Justice and Fair Employment and Housing, the State Library, and the State Treasurer's Office--received budget augmentations for rental increases in state buildings. Presumably, all other state departments will absorb the rent increases.
We can find no analytical basis for granting an augmentation to pay for rent increases for these five departments when other departments and agencies are not provided such funds. We note that the administration's own budgeting guidelines indicate that departments will not receive funding for such price increases. Thus, we recommend that the requested $1,853,000 augmentation be denied.
We discuss this issue in greater detail in our analysis of the Department of Finance's budget in this chapter.
We recommend the Legislature delete the proposed redirection of $660,000 from unidentified programs and 12 new positions for the Information Services program because the department has neither identified the programmatic effect of redirecting $660,000 nor justified the need for 12 new positions.
The department proposes to redirect $660,000 from unidentified programs to establish 12 information technology positions. The department has identified various tasks--such as database management, staff training, technical support, application development, and data administration--that these new staff would undertake instead of the current practice of contracting for this work on an as-needed basis. As mentioned above, the department has not identified where they will obtain the redirected funds. Thus, it is not known what effect this redirection will have on other program areas within the department. Also, the department has not provided any data on the cost of contracting versus hiring in-house staff for this work. Finally, the department has not shown that there is sufficient workload to warrant hiring the proposed 12 permanent staff. Consequently, we recommend the Legislature deny the proposed redirection of $660,000 and 12 new positions.
We recommend the Legislature delete $1,039,000 (General Fund) and eight positions to conduct investigations, perform prevailing wage studies, and issue field reports because the department should accomplish these long-standing responsibilities with existing resources. (Reduce Item 8350-001-0001 by $1,039,000.)
The Governor's budget includes a request for three permanent positions and $439,000 for the Division of Labor Statistics and Research to conduct field investigations and to issue labor market reports. The budget also includes a request for three permanent and two limited two-year positions, and a total of $600,000 to conduct prevailing wage studies in local markets.
The department indicates that staff within the division has been redirected from various research functions to other functions--such as responding to information requests. The department has reported that the current number of staff is inadequate to resume the research functions. However, vacancy information in the division indicates that 9.5 positions, or 22 percent of the authorized positions, are unfilled. These positions should be filled before the department requests additional positions. Further, if the department believes the staffing level is a problem, it should be able to provide data demonstrating the workload of existing staff and the effect a redirection of current staff back to field investigations and labor market reports would have on the current work product.
Based on available information, it is unclear why the division cannot accomplish its long-standing responsibilities within existing resources. Consequently, we recommend the Legislature delete the $1,039,000 and eight positions under this proposal.
We recommend the Legislature establish a separate special fund to deposit the fees collected to cover the cost of administering the new amusement ride regulatory program established under Chapter 585, Statutes of 1999 (AB 850, Torlakson) and fund this $2,149,000 proposal from the special fund rather than the General Fund.
The budget requests $2,149,000 from the General Fund and 26.5 positions to implement the new program established by Chapter 585 to inspect and regulate permanent amusement rides. Chapter 585 authorizes the department to collect all fees necessary to pay for program administration. Because the statute was silent regarding where these fees would be deposited, they would be deposited in the General Fund for the department's activities.
We recommend the Legislature instead establish a separate special fund to receive the fees collected for this program and appropriate these funds to support the
department's costs. This would assure that the program is sustained through fees and not subsidized by the General Fund. This action would be consistent with
other fee-funded regulatory programs.
The California Department of Food and Agriculture promotes and regulates the state's agriculture industry through marketing programs and industry inspections. The department is responsible for developing California's agricultural policies and assuring accurate weights and measures in commerce. The department also provides financial oversight to county, district, and citrus fairs.
The 2000-01 Governor's Budget proposes $223 million ($111 million General Fund) in support of the department for the budget year. This is a nearly 3 percent increase from estimated current-year expenditures.
We recommend the Legislature delete funding to augment the department's export promotion program ($123,000 and two positions) and to participate in a multistate coalition to influence national agricultural policy ($250,000 and two, two-year limited-term positions) because the department currently has resources for these activities. (Reduce Item 8570-001-0001 by $373,000 and four positions.)
Export Promotion Program. The Agricultural Export Program, established in 1985, provides technical assistance and support to California agricultural exporters by coordinating trade missions, participating in trade shows, and providing information to aid California exporters in gaining access to foreign markets. This program is funded through industry fees. In addition, the department works cooperatively with the Trade and Commerce Agency in promoting California agricultural commodities abroad.
The Governor's proposal would provide additional funding ($123,000 General Fund) and two staff to increase the number of trade shows in which the department annually participates and expand the availability of certain export information databases it maintains.
Trade Shows. For the past few years, the department has been decreasing its participation in international food and beverage trade shows, choosing instead to focus on foreign buyer missions--meetings arranged by the department between California agricultural product suppliers and foreign buyers. This shift of resources was a decision made by the department of how to best allocate the resources of its export promotion program. If the department now believes it should concentrate again on the trade shows, the flexibility exists for the department to do so without the need for an augmentation.
Export Information. The department currently maintains several databases of export-related information of interest to agricultural commodity exporters. These include information regarding importing countries pesticide residue limits and a listing of California agricultural exporters.
Activities of the Agricultural Export Program, including trade shows and database information, directly benefit the agricultural industry and are appropriately funded by the industry. Any program growth for these or other purposes in the program should likewise be funded by the industry, not the General Fund.
In addition, the Trade and Commerce Agency currently operates several export promotion programs and coordinates numerous trade events specifically designed to support California products in the global marketplace. There should be no need to provide General Fund support to the Department of Food and Agricultural for these efforts.
Multistate Agricultural Policy Coalition. The Governor's budget includes $250,000 and two positions for a two-year, limited term for the department to coordinate efforts with four other states in order to influence national agricultural policy.
In February 1999, the department, in conjunction with the agriculture departments in four other states--Florida, New Mexico, Texas, and Arizona--established a coalition to influence national agricultural policy in specific areas of concern to the five states. This coalition was established at a meeting of the National Association of State Departments of Agriculture (NASDA) and to date the coalition has been scheduling meetings to coincide with NASDA meetings to save on travel and other costs.
We believe this augmentation should be deleted for two reasons. First, the department currently participates in special groups of like-minded states to influence national agricultural policy. This is a primary function of the department that should be addressed with existing staff. As such, it is not clear why an augmentation is needed. Second, since California's agriculture industry can and does participate in the setting of national agricultural policy, this type of effort should be funded by the agriculture industry--not the General Fund.
We recommend the Legislature approve two of the requested four audit staff to more accurately reflect the audit workload related to county and citrus fairs. (Reduce Item 8570-001-0191 by $210,000 and two limited-term positions.)
The Governor's budget includes $419,000 and four positions (two permanent and two limited term) to perform financial audits of California county and citrus fairs. Chapter 181, Statutes of 1998 (SB 1460, Maddy), authorizes the department to perform these audits if the fair requests one and the department determines an audit is necessary. Funding for those audits is to come from the Fairs and Expositions Fund, which receives revenue from horse race meets in California. If revenue to the fund exceeds expenditures, the balance is transferred to the General Fund. Thus, this augmentation request has the effect of reducing the General Fund balance.
There are 26 county and citrus fairs in California and the department has received a total of ten audit requests under Chapter 181. The department's request would provide sufficient staff and resources to complete audits of all 26 fairs in 2000-01. This amount is not justified since the department is to provide audits only on request. Given that only ten requests have been submitted in over a year, we believe that this is a better indicator of the department's known workload. Consequently, we recommend the Legislature delete $210,000 and two limited-term positions. This level of funding would provide sufficient funding to audit approximately 13 fairs annually.
We recommend that the department provide by October 1, 2000 a comprehensive statewide plan for all plant pest prevention, detection, and eradication programs. This report should include the coordination of state and county programs.
The current-year funding for the department's agricultural plant pest program totals $72.3 million ($61 million General Fund). The program includes screening incoming parcels for contaminated agricultural products, inspecting vehicles entering the state, monitoring pest detection traps, operating the plant pest diagnostic laboratory, administering various pest control programs, and implementing numerous emergency pest eradication programs.
The department submitted various budget-year requests (discussed below), indicating that the requests are " . . . a comprehensive strategy for reducing the growing threat to California from invasive pests." The department, however, does not have a comprehensive plan describing the goals and objectives of the program as a whole or of the individual program elements (such as, specific pest control activities, trapping efforts, and the Medfly Project). Lacking such a plan, it is increasingly difficult for the Legislature to evaluate the need for augmentations or the impact of the total program.
In the following sections, we discuss the issues such a plan should address.
Coordination Between State and Local Programs. An important function of the department is partnering with counties to prevent the introduction and establishment of serious plant pests and diseases.
In total, the state provides over $10 million (General Fund) for direct support of county pest programs. There are reporting requirements on the counties in current law to allow for program evaluation. These requirements include a cost analysis of each county program, a description of each program's activities, and the development of work plans for allocation of the department's local assistance funding. The purposes of these reporting requirements are to ensure that the state's goals and objectives in pest prevention, detection, and eradication are carried forward at the county level. It is not clear how many reports are received by the department and how--or if--this information is used. In addition, the Supple-mental Report of the 1999-00 Budget Act requires the department to submit a report by January 10, 2000 on the operation of the pest programs carried out by the county agricultural commissioners. When this Analysis was prepared, the report had not been submitted.
Pest Control and Pest Eradication Programs. The distinction between a control versus eradication program has important programmatic and budgetary implications. A control program--where the goal is to limit the spread or impact of a pest--is typically funded by the agricultural industry. An eradication program is typically funded by the General Fund. Control programs are somewhat less aggressive and represent an ongoing cost. In comparison, an eradication program is geared towards aggressively containing a pest and removing the population, has large initial costs, but is not long-lasting. The agricultural industry directly benefits from both types of programs. Thus, it is reasonable for the industry to share in both kinds of costs. We believe a comprehensive plan should address the issue of appropriate cost sharing between the state and industry for both types of programs.
Department Should Develop a Comprehensive Plan. The department should review and evaluate the various state and county pest programs and develop a comprehensive and coordinated planning document for these programs. This planning process should begin with an assessment of the state's goals and challenges with regard to pest prevention, detection, and eradication. Once the complete program goals have been determined, the department should then assess each element of the program to, at a minimum, determine:
We recommend the Legislature ask the department to undertake such a review and provide a comprehensive plan by October 1, 2000.
The Governor's budget includes a $4.3 million augmentation from the General Fund for elements of the plant pest prevention detection and eradication program. This augmentation:
We recommend the Legislature delete $630,000 (General Fund) and 11 positions requested to augment the Medfly Preventive Release program and deny the department's request to make the program permanent. The program was approved as a five-year project and will not expire until the end of 2000-01. Consequently, the request for an augmentation and permanent funding is premature. We also recommend the Legislature ask the department to report on the effectiveness of the current program in the upcoming year. (Reduce Item 8570-001-0001 by $630,000.)
The department began efforts to control the impact of the Mediterranean Fruit Fly (Medfly) on California's agricultural industry in 1975. Since 1980 the state has spent over $120 million from the General Fund to support this effort, with a similar amount provided by the federal government. The department has used aerial and ground spraying and sterile medfly releases to fight the pest.
The current program began in 1996 and involves raising sterile Medflies and releasing them throughout a 2,100 square mile area of the Los Angeles Basin. Total program costs are $15 million dollars annually, shared equally between the state and the federal government. The budget proposes to augment this amount by $630,000 and 11 positions in 2000-01. The goal of the program is to release the sterile flies at a rate sufficient to overwhelm any reproductively viable wild flies in the area--thus ensuring no fly reproduction. When the program was approved by the Legislature, the program was to operate for five years (through 2000-01), at which time the program need and effectiveness would be reevaluated.
We believe the department should continue with the final year of the program and we recommend the Legislature require the department to report to the Legislature in the upcoming year on the following:
Therefore, we recommend the Legislature delete the requested augmentation ($630,000 and 11 positions) and ask the department for an evaluation of the program.
We recommend the Legislature delete $1.9 million (General Fund) for continuation of the Agricultural Parcel Inspection Program. The program is not a cost-effective use of the state's pest detection funding. (Reduce Item 8570-001-0001 by $1,860,000.)
The Governor's budget includes $1.9 million and 30 positions to continue the Agricultural Parcels Inspection Program. This program was initiated in the 1996-97 Budget Act when the Legislature approved $895,000 from the General Fund and 14.6 personnel-years for a two-year pilot program. In the 1998-99 Budget Act the Legislature doubled the size of the pilot program and extended it for an additional two years. During the course of the program, the department has submitted two legislatively mandated reports on program activities.
The program was initiated to provide inspection of domestic parcels for agricultural pests. State law restricts what plant materials may be shipped to California and requires that parcels containing plant material be clearly marked. Those marked parcels are inspected at the county level. However, according to the department, significant amounts of plant material enter the state through unmarked--and therefore uninspected-- parcels. These uninspected parcels may contain agricultural pests that, if established, could prove harmful to California's agricultural industry and could be costly to control or eradicate.
The program includes 12 teams--consisting of an agricultural biolo-gist, an agricultural inspector, and a dog trained to detect plant mate-rial--that are deployed in the San Francisco Bay Area, the Los Angeles Basin, and the San Diego area. These teams screen over ten million packages per year. Only a minor number contained what the department considered harmful pests. For example, in calendar year 1999, the program intercepted 128 packages that contained harmful pests (such as, the red imported fire ant, the leafhopper, aphids, and various fruit flies). Since the beginning of the program about 300 packages have been found to contain various harmful pests. The teams, however, only screen a small portion of all packages entering the state--approximately 1 percent to 6 percent, depending on the location. It is difficult to see how inspection of such a small percentage of packages could have any significant impact on preventing pest infestations.
Thus, we believe this program is not a prudent use of the state's pest prevention funding. We believe it is important to focus the state's prevention funding on those programs that provide a greater benefit than this program. Accordingly, we recommend the Legislature delete the $1,860,000 requested for the Agricultural Parcel Inspection Program.
We withhold recommendation on the $1.8 million General Fund requested to increase the department's pest detection and public education programs. The department should provide additional data to indicate how these augmentations benefit the state's detection and education programs.
The Governor's budget includes $1.8 million from the General Fund to increase (1) the department's pest detection (trapping and visual surveys) efforts; and (2) efforts to educate the public about the risks and consequences of mailing, receiving, or importing quarantined agricultural products into California.
Pest Detection. The department is requesting $1.3 million General Fund to purchase and deploy a new type of pest trap. This new trap costs more initially and lasts half as long as the old traps used by the department. We believe the department needs to provide additional data on why it believes the new trap is more cost-effective.
Public Outreach. The department is requesting $500,000 to increase public outreach activities--such as producing and distributing brochures, maintaining a telephone hotline, and maintaining a Web site. It is unclear how this 55 percent increase in the department's public outreach program will measurably benefit the state.
We believe the department should provide additional data to clearly define the cost-effectiveness and benefits from the requested augmentations. We withhold recommendation on the $1.8 million augmentation pending receipt and review of the above information.
We recommend deletion of $328,000 from the General Fund and two positions requested primarily to address potential ground and surface water contamination resulting from animal agriculture production operations because this is the responsibility of the State Water Resources Control Board. (Reduce Item 8570-001-0001 by $328,000.)
The Governor's budget includes $328,000 and two positions for the department to aid other regulatory agencies in developing mitigation plans for large animal production operations to minimize environmental contamination from their enterprises. It appears that this proposal would focus on water quality issues. The State Water Resources Control Board is responsible for inspecting large animal production operations to ensure the operation is in compliance with state and federal water quality laws. Further, the Governor's budget contains a proposal to augment the board's budget for these activities. The responsibility and the resources for managing and limiting the environmental impact of animal agriculture production operations on ground and surface water quality is vested in the board. Thus, the requested augmentation for the department is not necessary or justified and we recom-mend the deletion of $328,000 in proposed funding.
We withhold recommendation on the requested $1.5 million ($377,000 General Fund and $1,117,000 Agriculture Fund) and nine positions requested for various components of the Milk and Dairy Foods program. It is unclear exactly how the requested funding and positions would be used by the department.
The Governor's budget includes $1.5 million and nine staff to:
As we discuss below, the department has not provided sufficient detail to support these requests.
Mandated Milk and Dairy Foods Inspections. The Milk and Dairy Foods Division of the department is responsible for inspecting dairies, milk processing plants, milk product processing plants, and soft-serve dairy (such as ice cream) establishments. The department's inspection workload is increasing because of the growth in dairy production and processing facilities. The department is requesting additional resources to address this increase in mandated workload. The information provided in support of this request, however, is unclear as to the amount of funding and staff the department is requesting for this specific workload.
Inspection of Illegal Dairy Products Manufacturing. In the 1998-99 Budget Act the department received a $150,000 General Fund augmentation and two positions to curb illegal manufacturing of dairy products and to enforce sanctions against violators. The Governor's budget requests another augmentation of an unidentified amount for these efforts.
The department has not provided data to support the need for another augmentation. For example, the department has not provided an estimate of the number of establishments and markets to be inspected, the frequency of necessary inspections, and a discussion of the impacts of varied inspection frequency.
Milk and Dairy Foods Laboratory. The Governor's budget proposes to enter into a contract with the California Veterinary Diagnostic Laboratory System (CVDLS) to replace the functions of the Milk and Dairy Foods Laboratory (laboratory). The laboratory's budget for the current year totals $258,000 from the Agriculture Fund. The department indicates that the laboratory can not continue to operate in its current facility in Sacramento and that contracting with the CVDLS is the most cost-effective alternative.
It is not clear that the department needs to terminate its laboratory activities and contract with the CVDLS. Nor is it clear that this is a cost-effective proposal. For instance, the department currently employs several laboratory personnel. Presumably, the CVDLS would need similar staff levels to perform the same workload. The Governor's budget does not reflect a decrease in the department's staff nor does it include an increase in the CVDLS budget to reflect the contract.
We withhold recommendation on the $1.5 million for the elements of the Milk and Dairy Foods program discussed above pending receipt and review of
additional information.
The Public Utilities Commission (PUC) is responsible for the regulation of privately owned "public utilities," such as gas, electric, telephone, and railroad corporations, as well as certain passenger and household goods carriers. The commission's primary objective is to ensure adequate facilities and services for the public at equitable and reasonable rates. Throughout its various regulatory decisions, the commission also promotes energy and resource conservation.
The budget proposes total expenditures for PUC in 2000-01 of $88.9 million from various special funds ($74.9 million), federal funds ($1 million), and reimbursements ($13.0 million). This is about $1.3 mil-lion, or 1.4 percent, more than estimated current-year expenditures. This increase results from increases of $1.5 million in activities funded by the PUC Utilities and Transportation Reimbursement Accounts and a decrease of $0.3 million in reimbursements. The Governor's budget also proposes an increase of 19.4 personnel-years (PYs) over the current-year level of 825.1 PYs.
We recommend that the Legislature delete $267,000 for maintenance and repairs at the Public Utilities Commission's San Francisco headquarters because the request includes capital outlay projects that have not been justified and an unnecessary infrastructure study. Further, we withhold recommendation on the $460,000 balance of the request pending receipt of information justifying the need for and cost of the remaining projects. (Delete $230,000 from Item 8660-001-0462, $30,000 from Item 8660-001-0461, and $7,000 from Item 8660-001-0412. Corresponding deletion of $267,000 from Item 1760-001-0666.)
The budget proposes expenditures of $727,000 for maintenance and repairs at the PUC headquarters in San Francisco. These repairs were identified in a $1.9 million five-year maintenance plan developed by the Department of General Services (DGS). The PUC has not provided any information on the proposed projects other than the title of each project. However, according to the itemized list of projects in the maintenance plan, the proposed projects include (1) $165,000 for upgrading the building security system and elevators (the security system proposal is a three-year $508,000 project); (2) regular maintenance, such as window water leak repairs; and (3) a $102,000 infrastructure study to be performed by DGS to identify other repairs to bring the building up to current codes.
We recommend deletion of the $165,000 for building upgrades and the $102,000 for the infrastructure study. The security system upgrade, if justified, should be requested as a capital outlay project. The infrastructure study is unnecessary because it is not required, as a matter of course, to continually renovate buildings to comply with code changes. Furthermore, PUC has not identified any issues or concerns that would warrant undertaking this study. Thus, we recommend that the Legislature delete $267,000 from the request. (We recommend a similar reduction to the proposed budget for DGS under Item 1760-001-0666.)
Based on the limited information provided in support of this proposal, it appears that a portion of the remaining $460,000 may include special repairs that should be funded. Consequently, we withhold recommendation on the $460,000 balance of the request pending receipt of information justifying the need for and cost of the remaining projects.