Legislative Analyst's Office
Analysis of the 2003-04 Budget Bill
The Secretary for Business, Transportation and Housing oversees the following 14 departments that develop and maintain the state's transportation infrastructure, promote traffic safety, promote housing availability in the state, and regulate state-licensed financial institutions as well as managed health care:
Business and Regulatory Agencies
The budget requests $87.7 million for the Secretary's operations in 2003-04. This amount includes $84.6 million for the support of a Traffic Safety Program as the result of a budget-year proposal to consolidate the Office of Traffic Safety (OTS) into the Office of the Secretary. Excluding the new program, support for the Secretary would be $3.1 million in 2003-04, or $347,000 (about 13 percent), higher than the current-year level. Almost all of the increase is due to higher pro-rata charges that are allocated to the agency for support of general government functions including the State Controller's Office, Department of Finance, and personnel administration. The Secretary's support would include $1.3 million from the Motor Vehicle Account (MVA) and $1.7 million in reimbursements from the agency's constituent departments.
For the Traffic Safety Program, the budget proposes funding to be at the same level as the current year ($84.6 million). Most of the funding will come from federal funds ($84.3 million). The state will provide $344,000 from the MVA as state matching funds.
The budget proposes minimal savings of one contract staff resulting from the consolidation of the Office of Traffic Safety into the Business, Transportation and Housing Agency. Based on our review, we conclude that greater efficiency in terms of staff savings could be attained. We recommend that the agency identify any additional savings that could be realized from the consolidation and report the information to the Legislature prior to budget hearings. We further recommend a reduction of $39,000 from the Motor Vehicle Account because the amount of state matching fund is overbudgeted. (Reduce Item 0520-0001-0044 by $39,000.)
Since 1967, the OTS has functioned as a separate office under the Business, Transportation and Housing (BTH) Agency. The office's primary responsibility is to allocate federal grant funds to state and local entities to promote traffic safety. Federal law requires the state to provide matching funds to cover a portion of the administrative costs of the program. Currently, the MVA provides about 29 percent of these costs.
The office is supported by 33 staff positions, with a director under contract from the California Highway Patrol. In the current year, total program expenditures are estimated at $84.6 million. Of this amount, $79 million will be awarded as grants. The remaining funds will provide for staff support and operating expenses.
For 2003-04, the budget propose to consolidate the office into the BTH Agency, with funding at the same level as the current year.
Current Program Effectiveness Not a Problem; Budget Identifies Minimal Savings From Consolidation. Discussions with OTS and the BTH Agency indicate that the purpose of the consolidation is not to address any problems related to program effectiveness or efficiency. In this regard, our review found that the grant program has been well administered.
The budget's consolidation proposal identifies relatively small savings—elimination of only one contract position and redirection of the freed-up funds of $135,000 to grants. Our review shows that only $96,000 (the federally funded portion of the savings) should be redirected. Because proposed administrative costs for the Traffic Safety Program in 2003-04 would be lower, the amount of state matching funds required would be less. Accordingly, we recommend a reduction of $39,000 from the MVA.
Savings From Consolidation Potentially Larger. Based on our review, we believe there could be additional savings resulting from the consolidation. For instance, savings might be achieved by consolidating certain administrative functions that both entities now carry out separately. We think that such areas of savings ought be reviewed in order to maximize cost efficiencies from the consolidation. Accordingly, we recommend that the agency identify any additional areas of savings and report to the Legislature prior to budget hearings. Based on this information, the Legislature can determine whether the consolidation should proceed, and adjust the agency's 2003-04 funding level correspondingly.
The agency has expanded its staffing level by "borrowing" positions approved for various departments under the agency. We recommend that the agency provide workload justification for each of the 13 borrowed positions. Any borrowed positions that are not justified should be returned to the loaning departments or eliminated.
The agency is authorized 22 staff positions. The actual staffing level is, however, significantly larger, at 35 positions. The agency has over the years "borrowed" a number of positions from various constituent departments. Specifically, in 1998-99, the agency had eight borrowed positions. Currently, there are 13.
No Justification for Staff Expansion Provided. Current law allows departments to loan positions to one another for short durations under certain circumstances. As the BTH Agency oversees programs and departments covering a broad range of policy areas, it is reasonable for the agency to be able to borrow, on a short-term basis, positions from constituent departments in order to enhance its staff capability to deal with particular program and policy areas as they arise. However, our review shows that the number of borrowed positions in the agency has consistently been significant, at around 13, for the past several years. This, in effect, has enabled the agency to increase its staffing by almost 60 percent without any workload justification or review by the Legislature.
Accordingly, we recommend that the agency submit workload justification for each of the 13 borrowed positions prior to budget hearings. Any positions not justified should be returned to the loaning departments or eliminated since the loaning departments have been handling their workload without them.