Legislative Analyst's Office

Analysis of the 2001-02 Budget Bill


Department of Financial Institutions (2150)

The Department of Financial Institutions (DFI) licenses and regulates several different types of entities to protect the funds entrusted by the public to these institutions. These entities include domestic banks, California branches of foreign banks, credit unions, issuers of money orders and travelers checks, and transmitters of money abroad. The DFI is supported by revenues from fees and assessments charged to regulated entities. Most of these fees are deposited in the Financial Institutions Fund and the Credit Union Fund.

The budget proposes $19 million in expenditures and 204 personnel-years (PYs) for 2001-02. This equals estimated current-year expenditures, but represents a reduction of 10 PYs. The budget proposal reflects a variety of increases and decreases in spending resulting in the same level of expenditures in both years. The reduction in PYs is due to an increase in assumed salary savings based on past experience for this department.

Request to Relocate Sacramento Office Is Premature

We recommend that the Legislature delete $412,000 for increased rent expenses associated with the proposed relocation of the Department of Financial Institutions' Sacramento office because the department's request is premature. (Reduce Item 2150-001-0240 by $24,000, Item 2150-001-0298 by $315,000, and Item 2150-001-0299 by $73,000.)

The budget proposes $412,000 for increased rent expenses to relocate the department's Sacramento office. According to DFI, the department needs additional office space to accommodate positions the department proposes to move from its San Francisco office. In addition, pursuant to the 2000-01 Budget Act, DFI took over a small program from the State Treasurer effective January 1, 2001, thus adding five positions to the Sacramento office.

Currently, the department has 6,165 square feet of office space in Sacramento for 39 positions. The department proposes to acquire 14,673 square feet and transfer 26 positions from San Francisco, for a total of 65 positions. The department asserts that moving these positions will alleviate problems hiring and retaining staff due to the high cost of living in the Bay Area. However, DFI proposes moving these positions only as they become vacant or existing staff express a desire to relocate. Even after the 26 positions are relocated, 54 positions would remain in San Francisco—the commissioner; some executive, policy, and legal staff; and the majority of Northern California examiner staff.

We do not want to discourage DFI's attempt to consolidate staff in Sacramento. In fact, we believe moving the entire department to Sacramento merits consideration given (1) the department's difficulty filling positions in its San Francisco office due to the high cost of living in the Bay Area and (2) the high cost of office space in the Bay Area (notwithstanding DFI's current lease, at a very favorable rate, that does not expire until 2008).

We believe, however, that the proposal at hand is premature. It is not cost-effective to lease space in Sacramento that will remain vacant for some time. As noted above, DFI proposes to increase the number of Sacramento-based staff from 39 to 65, acquiring sufficient space to accommodate all 65 positions. However, positions are proposed to be moved to Sacramento only when they become vacant or when existing staff desire to relocate. Thus, DFI does not know how soon additional office space would be occupied.

In addition, while the department has not yet located new office space in Sacramento, it is looking in the downtown area. Office space in areas outside of downtown, such as Natomas or the Highway 50 corridor, would likely be less expensive.

Given these concerns, we recommend that the Legislature not approve this augmentation for increased rent expenses to acquire additional office space. Time is not at issue right now since DFI's current lease in Sacramento does not expire until December 31, 2002. A proposal for a new Sacramento office that includes a more definite time frame for relocating positions and alternative locations outside the downtown area would merit the Legislature's consideration.


Return to General Government Table of Contents, 2001-02 Budget Analysis