LAO 2004-05 Budget Analysis: General Government

Analysis of the 2004-05 Budget Bill

Legislative Analyst's Office
February 2004

Department of Veterans Affairs and Veterans' Homes of California (8950-8966)

The Department of Veterans Affairs (DVA) provides services to California veterans and their dependents, as well as eligible members of the California National Guard. The DVA provides home and farm loans to qualifying veterans using the proceeds from the sale of general obligation and revenue bonds. The department also helps eligible veterans and their dependents obtain federal and state benefits by providing (1) claims representation, (2) subventions to county veterans service offices, and (3) educational assistance. The DVA operates veterans' homes in Yountville, Barstow, and Chula Vista, which provide medical care, rehabilitation services, and residential services.

The budget proposes total expenditures of $294 million in 2004-05. This is $10 million (3 percent) less than estimated current-year expenditures. General Fund expenditures of $61 million are proposed for the budget year, which is $4 million (6 percent) less than the estimated current-year level. Among the budget's proposals are: 

Privatization Proposal Assumes Constitutional Amendment

We withhold recommendation on a $569,000 General Fund reduction and the elimination of 120 positions for the contracting of food and security services at the Yountville home. The proposal assumes passage of a constitutional amendment that would increase the ability of the state to contract for services.

Proposal. The budget proposes a $569,000 reduction in General Fund support and the elimination of 120 positions currently providing food and security services at the Yountville home. Under the budget proposal, the state would instead contract with a private entity to provide these services. Currently, the home spends $6.7 million on these services. Thus, the proposal assumes that contracting out would save 8 percent of current costs.

Implementation Likely Depends on Constitutional Amendment. Both the Barstow and Chula Vista homes already contract out for these types of services. Unlike Yountville, they began using private contracts upon their opening. Seeking to contract out for services is easier under current constitutional provisions when not displacing state workers. Therefore, the department would face a number of hurdles under current law to now contract out for these services at the Yountville home. As discussed in the "Crosscutting Issues" section of this chapter, the administration is proposing a constitutional amendment that would expand the state's ability to contract out for such services. With such an amendment, the proposal would become more viable. Consequently, we withhold our recommendation pending the outcome of the Legislature's deliberations on the constitutional amendment.

Budget-Year Savings at Risk. The department's savings projection depends on beginning to lay off staff in July 2004. The constitutional amendment, however, would not be considered by the voters until the November 2004 ballot at the earliest. Consequently, the savings projection for the budget year is likely overstated at least by about half.

Return to General Government Table of Contents, 2004-05 Budget Analysis