Analysis of the 2005-06 Budget Bill Legislative Analyst's Office February 2005

Secretary of State (0890)

The Secretary of State (SOS), a constitutionally established office, has statutory responsibility for managing the filing of financial statements and corporate-related documents for the public record. The Secretary, as the chief elections officer, also administers and enforces election law and campaign disclosure requirements. In addition, the SOS appoints notaries public, registers auctioneers, and manages the state's archives.

The budget proposes total expenditures of $76.4 million for the SOS in 2005-06. The two primary ongoing sources of funding are the General Fund ($30.3 million) and the Business Fees Fund ($33.3 million). In addition, the current-year budget contains over $265 million in federal funds for the implementation of the Help America Vote Act of 2002 (HAVA). Below, we discuss the implementation of HAVA and the proposed suspension of all election-related mandates.

Federal Election Reform

Background

Federal Election Reform. In October 2002, Congress passed and the President signed HAVA. As the state's chief elections officer, the SOS is charged with administering the state's compliance with HAVA. The past two federal budgets have provided California with a total of about $350 million to implement HAVA requirements.

HAVA Requirements. The HAVA makes a number of specific requirements for states and counties related to election procedures. Among the requirements of HAVA are:

• Replacement of Punch-Card Machines. Counties must replace their punch-card voting machines in favor of more modern technology.
• Statewide Voter Registration Database. The state must have in place by January 1, 2006, a computerized statewide database of voter registrations. The database must be accessible to county election officials. In addition, the database must coordinate with three state agencies—the Department of Motor Vehicles (registrations from drivers' license applications), the Department of Health Services (death records), and the Department of Corrections (felons' voting status).
• Disabled Access. All precincts must have at least one voting machine that is accessible to the disabled beginning with the June 2006 primary election.
• Voter Identification. Beginning in 2004, first-time voters who register by mail have to provide identification at some point in the voting process (either when registering or voting).
• Other Requirements. The HAVA also imposed new requirements relating to the handling of voters whose eligibility cannot immediately be determined (provisional ballots), voting by members of the military and overseas citizens, the handling of complaints, and the education of voters and poll workers. Generally, these requirements came into effect in 2004.

Federal Funding

California's Share of Funding. To help states implement the HAVA requirements, the 2002-03 and 2003-04 federal budgets allocated states about $3 billion in funds. Of this amount, California is scheduled to receive over $350 million. Figure 1 summarizes the status of California's funds, which is discussed in more detail below.

Spending Flexibility. In two cases, the federal government has provided funding for specific activities—the replacement of voting machines and disabled access. For the vast majority of the funds, however, the federal law does not mandate how much money should go to implementing each particular HAVA requirement. Rather, each state is responsible for meeting all of the requirements of federal law and may choose how to allocate the funds. While some of HAVA's requirements are fairly specific, others are much more broad. For instance, the law's requirement to educate voters on election procedures could be implemented in a wide range of ways—from providing additional information in the state voters' guide to conducting a statewide media campaign. Consequently, the state has a great deal of discretion in determining what activities should receive the highest funding priority. Federal law generally does not place restrictions on the state as to when the HAVA funds must be spent, although the law is focused on the implementation of requirements in time for elections in 2006 or earlier.

2003-04 Funding

Of the HAVA funds received by the state, $81 million was authorized for expenditure by SOS in 2003-04 through a Section 28.00 request. Of these funds, $57 million was designated for counties to replace inadequate voting machines. The remaining $24 million was designated for SOS administrative costs ($1.7 million) and other activities, including voter and poll worker education ($22.2 million).

Of the $81 million authorized, the SOS reports that $57 million was actually spent. This spending is described in more detail below. The unspent funds are available for reappropriation in the current or later years. In December 2004, the Bureau of State Audits (BSA) released an audit concerning the department's administration of the HAVA funds. (The SOS reports it is still reconciling the expenditure amounts shown in the audit with its own records.)

Replacement of County Voting Machines. Regarding the funds allocated to the replacement of county voting machines, federal law specifies how the funds are to be distributed. Each precinct which used a punch-card voting system in the November 2000 election is eligible for an equal allocation of the state's $57 million. Almost 18,000 California precincts in 30 counties meet these criteria—resulting in an allocation of about $3,200 per precinct. Thus far, 16 of the counties have received their allocations (totaling $51.1 million). The SOS reports that a number of counties chose to delay their applications due to uncertainties regarding which voting machines will be certified for use. Under federal law, all counties must replace their punch-card voting machines in time for the June 2006 election.

Other 2003-04 Expenditures. In addition to the payments to counties, the SOS directly spent $5.8 million of the 2003-04 authorized amount. The SOS reports that the funds were spent on consulting services, SOS employee salaries, the printing and mailing of permanent absentee voter materials, and other administrative expenses.

2004-05 Funding

Spending Plan Required. The 2004-05 budget appropriated $264 million for HAVA activities. Prior to the expenditure of these 2004-05 funds, however, SOS is required to provide the Legislature with a spending plan for review. The 30-day review period is similar to those for Control Section 28.00 and other midyear budget requests. Prior to legislative review, the Department of Finance (DOF) must approve the plan. The spending plan must include:

• A detailed description and schedule of proposed expenditures and activities.
• Information regarding any proposed hiring of state employees or the use of consulting contracts.
• A timeline for meeting the federal HAVA requirements.
• An estimate of any costs to meet the federal requirements which exceed the appropriated funds.

The SOS has yet to have a spending plan approved by DOF.

November Election Expenditures. In early September 2004, the Legislature—through the Joint Legislative Budget Committee—approved a SOS request for $15.2 million in expenditures (from the $264 million appropriation). Although the SOS did not provide much of the budget'srequired information, the request was approved because the administration believed the activities were essential for the November 2004 election. The approved spending was largely for payments to counties. As described below, the SOS now estimates that $14.8 million will actually be spent on these activities.

• County Grants ($9.9 Million). These funds were allocated to 45 counties which applied to the SOS for grants. They were used for (1) voter education on voting systems, permanent absentee balloting, and new voting requirements under HAVA and (2) training poll workers on HAVA requirements and the use of voting systems. Funds will be paid on a reimbursement basis. The SOS reports that it is currently reviewing requests for reimbursement from a number of counties.
• County Security Measures ($4.6 Million). On August 30, 2004, the SOS placed a number of new security requirements on counties using touch screen voting machines for the November 2004 election. For example, counties were required to make paper ballots available to those voters who prefer to use them and to provide the SOS with a technical security plan prior to the election. The SOS committed to counties that the state would cover any costs to comply with these new requirements. The SOS estimates that the costs will not exceed $4.6 million and is currently reviewing reimbursement claims from counties.
• Touch Screen Voting Machine Review ($690,000). The SOS conducted "parallel monitoring" of a sample of touch screen voting equipment in ten counties on election day to ensure the equipment was working properly ($290,000). In addition, the SOS received approval to review the computer source code used to run the equipment prior to the election ($400,000). These funds, however, were unspent after the department was unsuccessful in securing a vendor to perform the review prior to the election.

Replacement of County Voting Machines. At the time this analysis was prepared, authorization was pending to provide two additional counties with $3.5 million to replace their voting machines, leaving 12 counties who have yet to complete their applications.

Administrative Costs. In addition to the funds subject to the spending plan requirements, the Legislature approved a 2004-05 budget request to use $1.7 million in HAVA funds for administrative costs.

2005-06 Funding

Only Administrative Costs Budgeted. The Governor's budget proposes the continuation of $1.7 million for SOS administrative costs in 2005-06. The SOS expects these funds will be used to pay some or all of the salaries of 14 existing staff for HAVA-related activities—such as administering contracts, developing the required database, issuing regulations, and coordinating services for overseas and military voters. In addition, $570,000 would be used for management and information technology consulting contract costs (the largest of which is described in more detail below). Finally, the SOS has budgeted $445,000 of the total for unidentified contingencies. The budget does not include an appropriation for any additional HAVA spending, pending the determination of current-year spending and the balance of funds available.

Other Funds

Disability Grants. As shown in Figure 1, $2.4 million in HAVA grants have been earmarked to improve election accessibility and participation by disabled voters. The funds have yet to be authorized for expenditure.

Interest Earnings. Unlike for most federal programs, the state is able to keep interest earned while the HAVA funds are in state accounts. This interest must be spent on HAVA-related activities. The SOS reports that roughly $2.5 million in interest has been earned thus far. These funds are available for expenditure in 2005-06 or later years.

Recent Developments

Audits. As noted above, in December 2004, BSA completed an audit of the department's administration of HAVA funds, including testing a sample of HAVA expenditures made in 2003-04. The audit found that the SOS' insufficient planning and poor management practices hampered its efforts to implement HAVA and its disregard of controls and poor oversight of staff and consultants led to questionable uses of HAVA funds. The SOS also improperly used a Department of General Services exemption to avoid competitive bidding for many contracts paid with HAVA funds, and it failed to disburse HAVA funds to counties for the replacement of outdated voting machines within time frames outlined in its grant applications and county agreements. The SOS reports that a number of administrative changes have been implemented in an effort to address these problems. On January 27, 2005, the federal Elections Assistance Commission also ordered an audit of the state's use of its HAVA funds.

Consulting Contract Signed. In December 2004, the SOS signed a contract with a consulting firm, MGT of America, to provide assistance to the SOS in managing the HAVA program. Over the next 20 months, the $800,000 contract will provide:

• An assessment of the SOS' internal financial controls and multiple audits of expenditures.
• The development of performance measures and timetables for tasks to be completed.
• The creation of a HAVA document archive.
• Assessments of HAVA vendors.

Spending Plan. On December 2, 2004, the SOS submitted a spending plan to DOF for review. On January 4, 2005, DOF notified the SOS that it would not approve the plan due to a variety of concerns. At the time this analysis was prepared, the SOS had not yet submitted a revised plan to DOF. Consequently, the Legislature has not received a spending plan in accordance with the requirements of the 2004-05 budget. Other than the administrative and November 2004 election funds, the SOS does not currently have authority to expend HAVA funds.

Voter Database. One of the concerns cited by DOF in its review of the SOS' spending plan was that the SOS' timeline for implementation of the statewide voter registration database would not meet the federal requirement that the system be operational by January 1, 2006. The SOS' plan was to develop a new state database that would also require significant modifications of county election systems. This plan envisioned a more state-based approach than the existing county-based Calvoter database. The SOS estimated that this new system would cost $50 million to develop and $10 million annually to maintain.

The SOS has changed course and now believes that the best approach to meeting the federal timeline is to upgrade the existing Calvoter database. While the SOS is still determining the costs and timeline of its new approach, the costs should be dramatically lower than the original proposal. Based on its initial assessment, the SOS believes that the upgrades can be completed by the end of calendar year 2005—in time to meet federal requirements.

Even with this revised approach, the SOS believes that—on a longer term basis—the state will need to invest in a new database similar to its original proposal. Among the long-term concerns with the Calvoter system are:

• The state does not own the source code of the Calvoter system—making modifications and upgrades more costly.
• Even with upgrades, the Calvoter system may not have the capacity to handle the necessary data and updates.
• The county-based approach of the Calvoter system inherently limits the state from validating the accuracy of updates.

Budget-Year Spending Will Depend on Current-Year Actions

We withhold recommendation on the Help America Vote Act (HAVA) spending in the budget year, pending the receipt of a proposal from the administration. To assist the Legislature in implementing HAVA, we offer a number of key considerations.

As noted in Figure 1, the state has about $275 million in expected HAVA funds available for election-reform priorities. (Of this amount, the state is awaiting the receipt of $169 million from the federal government.) The implementation of HAVA represents a significant opportunity for the Legislature to upgrade the state's election systems and improve the administration of election laws. The funds available for appropriation in 2005-06 will depend on what level of funding is approved in the current year through a spending plan. We expect that the administration will propose an update to the SOS' budget once those decisions are made. We therefore withhold recommendation on the HAVA budget pending the receipt of a proposal in the spring. As the Legislature approaches decisions regarding spending priorities for the HAVA funds, we offer a number of key considerations below.

Review Administrative Budget in Context of Overall Spending Proposal. As noted above, the budget currently contains only the proposed $1.7 million in administrative expenditures. As the administration puts forward a spending proposal for additional SOS staff and expenditures, it will be important for the Legislature to review these administrative funds in the context of the overall spending proposal. At this point, it is difficult to evaluate the administrative needs of the department without knowing what activities it will be administering. In addition, we would expect the administration to reduce the request by $445,000 for contingencies unless additional workload is identified.

Statewide Database Requires State Priority. At a statewide level, the most pressing HAVA deadline is the requirement to have a functional voter registration database operational by January 1, 2006. As noted above, the SOS has recently switched its approach to meet this requirement. Once the SOS develops a more formal and detailed strategy for meeting this deadline, the Legislature can help to ensure that the approach offers a realistic timeline for both meeting federal requirements and ensuring an accurate database.

Furthermore, the Legislature will need to consider the merits, risks, and costs of pursuing a new statewide database over the longer term. By waiting to develop such a system until next year or later, the state should be able to build upon the experiences of other states which are currently developing such systems. Even so, developing a state-based system and successfully integrating 58 counties would be a significant undertaking. Such an undertaking would require a sizable commitment of HAVA funds—reducing the funds available for other priorities. In addition, the state will not be able to rely on HAVA funds to provide an ongoing funding source for the maintenance and operation costs of a new state system (which would likely be higher than the existing Calvoter system).

Consider Block Grant Subventions to Counties. In addition to the database, the SOS has a number of other key responsibilities in preparing for the next election—certifying voting devices for county use for instance. Likewise, as the day-to-day managers of elections, counties will be facing a series of responsibilities—such as upgrading voting equipment and educating pollworkers and voters on its use. One of the key purposes of HAVA funds is to assist counties in performing these duties. To date, these types of funds have been provided to counties on a reimbursement basis. On this basis, counties must file receipts and documentation prior to receiving grant funds. The SOS must verify the receipts and authorize payments on an item-by-item basis. Moreover, the recent BSA audit noted numerous delays by the SOS in distributing funds to counties. Consequently, as it approaches providing future HAVA funds to counties, the Legislature may wish to consider providing counties HAVA funds on a block grant basis. The key components of such an approach would be:

• County Responsibility. In accepting funds, counties would accept responsibility for meeting specific HAVA responsibilities. Counties could file an annual report detailing how the funds were used to meet these responsibilities. 
• County Flexibility. The most expensive county costs will be for (1) providing a machine in each polling place for disabled access and (2) upgrading machines to provide paper records for auditing (pursuant to Chapter 814, Statutes of 2004 [SB 1438, Johnson]). We would expect most counties to focus HAVA dollars on these costs, but other possible uses could include pollworker training and public education. Under such an approach, counties could choose their highest priority for funds.
• Allocation Based on Formula. To ensure quick allocations of funds, the Controller could disburse the funds through a formula. For instance, a formula could be similar to the Proposition 41 voting modernization bond formula (which is weighted by number of voters and polling places).

Suspension of Election Mandates

Many Election Requirements Are Reimbursable State Mandates

Background. A number of the state's requirements of county election officials related to election procedures have been determined to be reimbursable state mandates. In recent budgets, most of these mandates have been "deferred"—meaning that the requirements have remained in effect and the state is still accruing liabilities for counties' compliance with the mandates, but no reimbursements to counties have been made. In addition, over the past year, the Commission on State Mandates (CSM) has determined that there are two additional election-related reimbursable mandates—related to presidential primaries and tabulating absentee ballot results by precinct.

Under the provisions of Proposition 1A passed by the voters in November 2004, the state is no longer able to defer the costs of mandates. Instead, for each mandate the state is either obligated to provide full funding in the budget or "suspend" its requirements during 2005-06. For each of the seven election-related mandates, the Governor's budget proposes to suspend their operation in the budget year. Below, we describe the seven election-related mandates and make recommendations on whether they should be funded, suspended, or repealed. (Chapter 1124, Statutes of 2002 [AB 3000, Committee on Budget], requires the Legislative Analyst's Office to review each mandate included in the CSM's annual report of newly identified mandates. Our recommendations below regarding the two new mandates are in fulfillment of Chapter 1124's requirements.)

Election-Related Mandates. As summarized in Figure 2, the seven election-related mandates are:

• Voter Registration Procedures (Chapter 704, Statutes of 1975 [AB 822, Keysor]). This mandate reimburses counties for the net costs associated with a number of changes made to voter registration procedures in 1975.
• Absentee Ballots (Chapter 77, Statutes of 1978 [AB 1699, Lehman]). This mandate specifies that all voters are eligible to receive an absentee ballot. Under prior law, only those voters who met certain conditions (illness, disability, absence from precinct, etc.) were eligible to vote by absentee ballot.
• Handicapped Voter Access Information (Chapter 494, Statutes of 1979 [AB 745, Moore]). This mandate requires that disabled voters have access to all polling locations. Subsequent to the mandate's passage, federal law has imposed more extensive requirements in this area. With the requirements of federal law in place, this mandate has been suspended in recent years.
• Permanent Absentee Ballots (Chapter 1422, Statutes of 1982 [AB 350, Agnos]). This mandate requires counties to allow disabled voters to request status as a permanent absentee voter, so that they do not need to apply for an absentee ballot for each election. Chapter 922, Statutes of 2001 (AB 1520, Shelley), extends this requirement to all absentee voters. In September 2003, a county filed with the CSM to begin the process of determining whether Chapter 922 is a reimbursable state mandate. (Legislative analyses at the time of Chapter 922's passage assumed the requirements would be a state reimbursable mandate.) 
• Brendon Maguire Act (Chapter 391, Statutes of 1988 [AB 2582, Duplissea]). This mandate specifies the election procedures when a candidate dies within three months of the general election. In those rare instances when the provisions of Chapter 391 apply, the state is responsible for reimbursing local governments for the costs of a special election.
• Presidential Primaries (Chapter 18, Statutes of 1999 [SB 100, Burton]). Chapter 18 placed new reporting requirements on county election officials for the March 2000 statewide primary election. At that time, Proposition 198's open primary system was in effect—allowing voters from any party to vote in a party's primary. The by-laws of the major political parties, however, only allow registered party voters to determine delegates to their national conventions. In order to allow for the determination of party delegates consistent with these by-laws, Chapter 18 requires counties to report primary election results by voters' party affiliations. Since the passage of Chapter 18, Proposition 198's system was found unconstitutional by the U.S. Supreme Court. Consequently, the requirements of Chapter 18 will not mandate any reporting activities for future primary elections. The mandate's $1.5 million in costs to date are one-time in nature.
• Absentee Ballots—Tabulation by Precinct (Chapter 697, Statutes of 1999 [AB 1530, Longville]). Chapter 697 placed new reporting requirements on county election officials for the November 2000 statewide election. In order to assist the Legislature in making redistricting decisions, counties were required to report absentee voting returns by precinct. Typically, counties have been able to report absentee voting as a lump-sum total. Chapter 697 added this requirement for the November 2000 election only. In addition, under Chapter 697, counties are now required to maintain precinct information for each absentee voter on an ongoing basis. Of the $216,000 in reported costs to date, about $7,000 is estimated to be an annual ongoing expense (for counties to maintain their absentee voter precinct information).

Governor Proposes to Suspend All Election Mandates

Proposed Suspensions Would Save $16.5 Million. As noted above, the Governor proposes to suspend all seven of these election-related mandates. (The administration inadvertently failed to include the suspension of three of the mandates in the January 10 version of the budget bill but plans to propose the technical corrections to suspend them.) Based on recent claims by local governments, these suspensions would likely reduce the state's General Fund costs by $16.5 million in 2005-06. As shown in Figure 2, the accrued liabilities from past-year claims from these mandates is nearly $41 million. Under the Governor's proposal (embodied in ACA 4x [Keene]), these accrued liabilities would be paid back over 15 years.

Counties Would Have Option to Maintain Procedures. Other than the potential savings, the administration has not provided the Legislature any policy rationale for the suspension of the mandates. By suspending the mandates, the requirements under state law become optional for local governments. In the context of these mandates, that means, for instance, that each county could decide whether to offer absentee ballots to voters who did not meet the pre-1978 criteria of being disabled or ill. Without a stated policy rationale, it is unknown whether the administration, through the suspensions, hopes to encourage election-related changes—such as a move away from uniform state laws to a more county-based system or a reduction in the use of absentee ballots.

Recommend Two Mandates for Repeal

We recommend that the Legislature repeal the handicapped voter access information and presidential primaries mandates. Repealing both mandates would not affect election procedures.

As noted above, federal law now generally provides greater protections and rights for disabled voters than that of the handicapped voter access information mandate. For this reason, the mandate has been long suspended. We therefore can find no policy reason why it is necessary to maintain the mandate's provisions in state law. Likewise, since Proposition 198 is no longer in effect, the provisions of the presidential primaries mandate no longer place any meaningful requirements on counties. Consequently, we recommend that the Legislature repeal both of these mandates.

Fund Two Mandates With Minimal State Costs

We recommend that the Legislature fully fund the Brendon Maguire Act and the absentee ballot—tabulation by precinct mandates. Absent changes in state law, the mandates can be implemented at minimal expense. (Increase Item 0890-295-0001 by $8,000 and make conforming changes in Provision 1.)

In most years, since candidate deaths immediately prior to elections are rare, the provisions of the Brendon Maguire Act would not be triggered and the state would not incur any costs. If the Legislature wishes to change its policy regarding the death of candidates, providing a new statutory framework would be more appropriate than a year-to-year suspension of the mandate. Regarding the tabulation of absentee ballots, almost all of the mandate's costs were one-time in nature. Funding the continuation of the mandate would incur only minimal additional costs since counties are simply maintaining existing lists. Suspending the mandate and then reinstating it in future years, however, could be relatively much more expensive—since counties again could incur substantial one-time costs if they chose to abandon their lists during the suspension. Fully funding these two mandates would be consistent with prior legislative policy. We therefore recommend that the Legislature fund the mandates. This recommendation would require a total appropriation of $8,000—$1,000 for the Brendon Maguire Act (since no costs are expected) and $7,000 for the tabulation mandate.

Reform Three Mandates

In order to maintain statewide uniformity in election procedures, we recommend rejecting the Governor's proposal to suspend three mandates. Instead, we recommend funding the mandates under a new reimbursement methodology. The State Controller should convene a working group to develop a simpler reimbursement system.

The remaining three mandates—voter registration procedures, absentee ballots, and permanent absentee ballots—are the state's most expensive elections-related mandates.

Statewide Uniformity Valuable. The administration's proposal would allow county-by-county variation in many aspects of administering elections. California's election system is structured to allow some variation—such as by allowing the use of different voting machines across the state. We believe, however, that the basic procedures in administering elections should be uniform. Changes in administrative procedures—such as who is eligible for an absentee ballot—could significantly affect voter turnout across counties.

Suspensions Could Cause Confusion Regarding Election Procedures. Moreover, because these mandates are intertwined with many basic procedures of the state's election process, suspending them would be more complicated than for a typical mandate. Under the administration's proposal, voters and counties would be left with a confusing array of laws with no clear indication as to what is required under state law. For instance, Chapter 704 implemented a broad range of registration procedural changes—some of which increased costs and others lowered costs. How could counties determine which procedures are assumed to increase costs and, therefore, are optional?

Recommend Rejecting Suspension. In order to maintain a basic level of uniformity and avoid confusion over election procedures, we recommend that the Legislature reject the administration's proposal to suspend the mandates. Instead, we recommend that the Legislature fully fund these mandates.As discussed below, however, we believe the methodology to provide counties with reimbursements needs to be reformed.

Problems Identified With Claims. We recently reviewed a sample of recent local government claims for the absentee ballot mandate. Our review found:

• Wide Variation in Costs. On a per-ballot basis, claims reflected a tremendous variation in the amount sought for reimbursement. Some jurisdictions' claimed costs per ballot were 30 times more expensive than other jurisdictions. For 2002-03, for example, the claims varied from a low of 65 cents to a high of $21.91 per absentee ballot.
• High Overhead Charges. Local governments are eligible to claim overhead charges on salary and benefit expenses. Governments are able to claim a 10 percent overhead automatically but can submit claims for higher amounts with appropriate documentation. Our review found extremely high levels of requested overhead charges—with many jurisdictions claiming overhead rates well over 100 percent and one exceeding 197 percent. We are not aware of any factors that would justify such high charges.
• Some Costs Appear Disallowable. Our review also indicates that some jurisdictions appear to be claiming costs that are not allowable under the mandate. For instance, a number of jurisdictions cited expenses related to permanent absentee ballots. A portion of these costs may be claimable under the separate permanent absentee ballot mandate for disabled voters. We were not able to determine if jurisdictions are simply misfiling the claims or double billing for certain expenses. However, the remainder of these costs are likely related to nondisabled voters. Since Chapter 922 (the law allowing nondisabled voters to obtain permanent absentee ballot status) has not yet been determined to be a reimbursable state mandate, these costs should have been excluded from claims.

Need New Process. The current mandate reimbursement process for these three mandates involves extensive paperwork and filings—even when minimal amounts are sought in reimbursements. In addition, the interaction of various state requirements makes it difficult to properly claim the appropriate amounts of reimbursements. Consequently, we believe that the state should develop a simpler and more straight-forward approach to providing local governments with a reasonable allocation of funds to perform their state-mandated election duties.

Recommend Working Group to Determine Reasonable Reimbursement Methodology. To develop a reasonable payment methodology, we recommend that the State Controller's Office convene a working group. Such a group should include staff from the SOS, DOF, CSM, county election officials, and the Legislature. The group should develop a simpler methodology that accounts for the interaction of all three mandates. Such a methodology could develop a reimbursement per voter to eliminate the need for extensive paperwork. (Such an approach was used to develop the original reimbursement method for the voter registration mandate.) Finally, the group should provide an estimate of the necessary amount to fund these costs. Under the existing process, the mandates would cost the state $16.5 million in 2005-06. With a more straight forward reimbursement methodology that reduces the problems with existing claims, we would expect the cost to be considerably less. The group should present a revised methodology to the Legislature in the spring—in time to be included in legislation as part of the budget package in place of the existing reimbursement methodology.