LAO 2005 Budget Analysis: Transportation

Analysis of the 2005-06 Budget Bill

Legislative Analyst's Office
February 2005

California Highway Patrol (2720)

The California Highway Patrol's (CHP) core mission is to ensure safety and enforce traffic laws on state highways and county roads in unincorporated areas. The department also promotes traffic safety by inspecting commercial vehicles, as well as inspecting and certifying school buses, ambulances, and other specialized vehicles. The CHP carries out a variety of other mandated tasks related to law enforcement, including investigating vehicular theft and providing backup to local law enforcement in criminal matters. In addition, the department provides protective services and security for state employees and property. Since September 11, 2001, CHP has played a major role in the state's enhanced antiterror activities.

The CHP's overall level of staffing is about 10,300. The department is comprised of uniformed (sworn) and nonuniformed (nonsworn) personnel, with uniformed personnel accounting for approximately 7,200 positions, or 70 percent of total staff. Roughly two-thirds (4,700) of CHP's overall uniformed personnel are assigned to patrol duties on roadways throughout the state. The CHP's remaining uniformed personnel (2,500) perform various nonpatrol functions for the department.

The budget proposes $1.4 billion in support for CHP in 2005-06, about $44 million (3 percent) above estimated current-year expenditures. This increase is primarily to fund costs of the current memorandum of understanding with officers.

Most of CHP's budget is funded from the Motor Vehicle Account (MVA), which derives its revenues primarily from vehicle registration and driver license fees. For 2005-06, MVA funds would make up 90 percent of CHP support costs.

Workers' Compensation and Industrial Disability Retirement

CHP Identifies Plan to Reduce Workers' Compensation And Industrial Disability Retirement

The California Highway Patrol's workers' compensation costs have been rising, and they account for an increasing proportion of the department's annual payroll. The rate of uniformed staff retiring on industrial disabilities is higher than statewide public safety personnel as a group in the Public Employees' Retirement System. The department has identified various measures to contain workers' compensation costs and reduce fraud in industrial disability retirements.

CHP Pays for Workers' Compensation Costs. Workers' compensation laws require employers to pay for the cost of treating job-related injuries sustained by employees. The CHP pays all the costs associated with treating injuries sustained by its employees while performing their job duties. The department's workers' compensation costs are made up of several components, including:

In 2003-04, CHP spent $68 million on workers' compensation costs. Medical costs accounted for the largest portion of this expenditure, about 44 percent ($30 million) of the department's total workers' compensation outlay. Payments for temporary and permanent disability and vocational rehabilitation accounted for another 28 percent ($19 million) of total costs, followed by 4800.5 time benefits and administrative costs.

Injured Uniformed Staff Eligible for Industrial Disability Retirement. Uniformed personnel who can no longer perform the duties of their job due to work-related injuries are eligible for an industrial disability retirement (IDR). Typically, IDR is preceded by an employee having received workers' compensation benefits. Similar to other retirement costs, IDRs are paid from the Public Employees' Retirement Fund, which is supported by employer and employee contributions. Unlike regular service retirements, IDR retirees do not pay state or federal income taxes on half of their annual pension amount.

Workers' Compensation Costs Increasing; IDR Incidence for Uniformed Staff High. Recent stories in the press have highlighted CHP's relatively high workers' compensation costs and incidence of IDRs by uniformed personnel and identified multiple instances of alleged fraud and abuse. Our review of CHP data shows that the department's workers' compensation costs have been rising significantly. As Figure 1 shows, these costs grew from $36 million in 1995-96 to $68 million in 2003-04, an increase of 89 percent. Moreover, workers' compensation costs as a percent of the department's annual payroll has increased. In 1995-96, workers' compensation costs accounted for about 7.7 percent of CHP's payroll. In 2003-04, it made up almost 10 percent of the department's payroll—the highest rate in state government. For 2005-06, the budget requests $65 million to fund workers' compensation costs for CHP.

The department also has a high incidence of uniformed staff retiring on industrial disability. In recent years, roughly two-thirds of uniformed employees who retire each year receive an IDR, with chiefs accounting for the highest IDR rate in the department (about 80 percent). The CHP's average annual percentage of IDRs is higher than the Public Employees' Retirement System (PERS) public safety group as a whole. Specifically, 67 percent of CHP's uniformed retirees have taken an IDR as compared with 49 percent of local police and firefighters and 37 percent of state peace officers and firefighters over the same period.

Department Conducts Review. In response to the news stories, the department conducted a study of workers' compensation and IDR, which included an audit of every IDR taken by uniformed staff between January 2000 and June 2004 as well as a sample of workers' compensation claims. In November 2004, the department released a report entitled Workers' Compensation and Disability Retirement within the CHP. Among the major findings were the following:

Department Outlines Plan of Action. Based on these findings, the report enumerated a number of measures to reduce workers' compensation and IDR abuse and fraud, as well as overall costs associated with these benefits. Figure 2 summarizes CHP's "action plan."

Figure 2

California Highway Patrol (CHP)
Key Actions to Address Workers’ Compensation
And Industrial Disability Retirement (IDR) Problems

Key Steps Taken or in Progress

·   Form an 11-officer internal fraud unit (all uniformed personnel) to review injury claims and improve CHP’s antifraud processes.

·   Audit State Compensation Insurance Fund (SCIF) to ensure proper billing of the department.

·   Provide additional training to supervisors on the proper procedures for handling injury claims.

·   Evaluate the pros and cons of advocating changes to current law regarding IDRs.

Major Changes Under Review for Possible Implementation

·   Establish in-house legal counsel to provide technical expertise on matters such as workers’ compensation and retirement.

·   Modify CHP’s workers’ compensation and IDR databases to more accurately track and review cases.

·   Contract out with a private company to administer workers’ compensation claims, rather than with SCIF, or administer claims in-house.

·   Conduct departmentwide training and awareness programs that promote workplace safety and honesty in filing workers’ compensation claims.

·   Assign uniformed staff on 4800.5 time (and in the process of filing for an IDR) to limited duty status, and transition uniformed personnel classified as “permanently injured” to vacant nonuniformed positions.

The department indicates that it will absorb costs related to those corrective actions requiring additional staff and funds (such as the antifraud unit and modifications to the workers' compensation/IDR databases) rather than request a budget augmentation. Our review finds that such redirections of resources are reasonable and will not have a significant adverse effect on service levels.

Scope of the Problem Should Be Further Investigated

We think that the California Highway Patrol's report and subsequent actions are reasonable first steps in addressing issues related to workers' compensation and industrial disability retirement (IDR). However, our review identified some areas of concern that warrant further investigation by the department. We recommend that the Legislature adopt supplemental report language directing the department to examine the reasons for the disparity in IDR rates between chiefs and lower-ranking uniformed personnel.

Report Does Not Adequately Explain Particularly High IDR Rate Among Chiefs. Within CHP, the incidence of injury claims and IDR is high particularly among senior-ranking uniformed personnel (assistant chiefs and above). In fact, the frequency with which CHP executives claim injuries toward the end of their career and retire with an IDR is known in the department as "chief's disease."

The CHP report confirms that chiefs do receive IDRs at a higher rate than other uniformed personnel. For example, the report finds that since 2000, just over 80 percent of assistant chiefs and three-fourths of deputy chiefs retired with an IDR, as opposed to about 60 percent of rank-and-file officers. The report suggests, though, that this difference can be explained by the fact that, on average, chiefs are several years older and have longer careers than their subordinates, thereby increasing the likelihood of suffering a disability. Specifically, the report points out that deputy chiefs receiving an IDR between 2000 and 2004 were more than six years older and had about nine more years of service than officers retiring with an IDR.

Our review of CHP's data, however, shows that differences in age and years of service do not adequately explain the IDR rate disparity between chiefs and other, lower ranks of the CHP. For example, since 2000, 81 percent of retiring assistant chiefs received an IDR, compared with about 56 percent of lower-ranking lieutenants. Yet, the average age at retirement for chiefs and lieutenants receiving an IDR is almost exactly the same—about 56 years old. The average years of service before taking an IDR is similar, as well, with both chiefs and lieutenants serving an average of over 30 years at the time of retirement.

Given this information, we believe that further investigation is warranted to better identify the reasons for the difference in IDR rates between chiefs and lower-ranking uniformed personnel. Understanding the reasons would enable CHP to better devise actions that could effectively reduce the high incidence of IDR in high-ranking executives of the department. Accordingly, we recommend that the Legislature adopt the follow ing supplemental report language directing the department to examine this issue further.

The California Highway Patrol shall (1) investigate the reasons for the difference in industrial disability retirement (IDR) rates between high-ranking uniformed personnel (including chiefs, deputy and assistant chiefs) and lower-ranking personnel, and (2) report its findings to the Joint Legislative Budget Committee and the policy and fiscal committees of the Legislature by December 1, 2005. The investigation shall not be limited to age and length of service of the two groups of personnel, but shall also include other factors such as physical fitness and the nature of workers' compensation claims leading to IDR. The report shall identify corrective actions, as appropriate, targeted to reducing the high incidence of IDR among high-ranking personnel.

Extent of Fraud Within CHP Is Lower Than Previously Reported. As noted earlier, CHP's audit of all 603 IDRs granted since 2000 identified 35 cases (5.8 percent) as potentially fraudulent. The report indicated that 15 of these cases warrant further investigation by CHP, which could lead to criminal prosecution. Due to certain legal and privacy issues, the report explained that CHP had to forward the remaining 20 cases to PERS for investigation.

Since the report's release, however, CHP has indicated to our office that the number of possibly fraudulent cases is considerably less than 35. This is because most of the 35 cases are duplicates, meaning that the 15 names under investigation by CHP are largely the same as the 20 names referred to PERS. In addition, of the 15 cases identified as requiring further review, five have already been found by CHP investigators to contain no evidence of fraud. The department expects to complete its review of the remaining ten cases by May 1, 2005. At the conclusion of this review, CHP indicates that cases will either be closed on the grounds of insufficient evidence of fraud or, if enough evidence of fraud exists, investigated further by the department, a process that could take up to an additional 18 months.

The CHP's recent clarification about the number of possibly fraudulent IDR cases identified in its audit raises a question regarding the extent to which workers' compensation and IDR fraud is a significant problem within the department. Even assuming, for example, that all ten remaining cases under review by CHP are eventually found to be fraudulent, the incidence of criminal activity by retired uniformed personnel since 2000 will have totaled under 2 percent of all IDR cases.

Given this apparent low incidence of fraud, we think that it is important for CHP not only to focus on fraud reduction and prevention, but also to target its actions to reduce overall workers' compensation claims and IDR rates.

Set Performance Goals to Measure Effectiveness of Actions

We recommend the Legislature adopt supplemental report language directing the California Highway Patrol to establish and report on its goals and performance measures in order to assess the effectiveness of its actions to reduce costs and claims associated with workers' compensation claims and industrial disability retirement.

In addition to taking steps to address the workers' compensation and IDR issues, as identified in CHP's action plan, we think it is important for CHP to also establish specific performance goals and measures so that it can better assess the effectiveness of its efforts. For example, besides setting goals for workers' compensation costs in each budget year, CHP might establish annual targets for reducing the number of workers' compensation and IDR claims filed by employees. The department might also set targets for increasing the percentage of all claims that are handled by supervisors in compliance with internal policies and procedures. These pre-established performance targets can later be compared with actual outcomes—as well as results from prior years—to measure CHP's level of improvement and overall success at containing costs. In addition, by requiring the department to report regularly on its efforts and results, the Legislature would be in a better position to hold the department accountable for its performance.

To help set reasonable goals and measures, CHP should examine the performance and policies of other public safety agencies throughout the state and country (such as other highway patrol departments). Such an examination could provide CHP with some "benchmarks" as well as identify "best practices" in addressing workers' compensation and IDR issues.

Accordingly, we recommend that the Legislature adopt supplemental report language directing CHP to establish goals and performance measures to gauge the effectiveness of actions to reduce workers' compensation claims and the incidence of IDR, as follows.

The California Highway Patrol shall report by December 1, 2005 on the goals and performance measures it will use to assess the success of its efforts to reduce workers' compensation and industrial disability retirement claims and costs. In establishing these goals and performance measures, the department shall examine the performance and policies of other public safety agencies in California and other states. Findings of this examination shall be included in the December report.

State Can Improve Road Patrol Services Through Efficiencies

In our January 2005 report California Highway Patrol: Enhancing Road Patrol Service Through Efficiencies, we find that workload increases for the California Highway Patrol have outpaced growth in road patrol (traffic) officers and have limited the department's ability to conduct proactive patrols. We recommend a number of actions to enhance the department's patrol services, including (1) steps to reduce officer paperwork, (2) pilot testing the use of nonsworn staff for nonenforcement road patrol duties, and (3) redirecting certain uniformed staff to road patrol duties.

"Vicious Circle" Not Likely to Abate Without Action. Since 1993, the number of road patrol officers increased by 12 percent (500 officers), but the number of accidents grew by 30 percent (52,000 accidents). The significant workload increases in the road patrol program have created a vicious circle for CHP. In particular, the upsurge in the number of traffic accidents in CHP's jurisdiction has resulted in road patrol (traffic) officers spending increasing amounts of their work hours responding to accidents rather than conducting proactive patrols and providing enforcement and other safety-related services to the motoring public. Absent corrective actions, it is unlikely that CHP's ability to promote traffic safety will improve.

Operational Changes to Address Increasing Workload

Our review finds that there are a number of measures which could be adopted to improve the efficiency of CHP in order to enhance proactive patrol. These include: (1) reducing workload by modifying the department's accident-reporting policy; (2) streamlining the department's record-keeping processes; (3) pilot testing the use of nonuniformed staff for certain road patrol duties; and (4) backfilling vacant nonpatrol officer positions with nonuniformed personnel. Most of our recommendations provide the Legislature the opportunity to increase road patrol service within existing levels of funding for the department.

Recommend Modifying Accident-Reporting Policy for Noninjury Accidents. Current departmental policy requires road patrol officers to complete a written report on every traffic accident to which they respond, including property-damage-only accidents. In 2003, road patrol officers spent a combined 325,000 hours—the equivalent of 185 personnel-years (full-time officer positions)—writing reports on 150,000 property-damage-only accidents. Yet, state law does not require CHP or any other law enforcement agency to take reports on property-damage-only accidents. In fact, many local law enforcement agencies, including the Cities of Los Angeles and Sacramento, usually instruct parties to a property-damage-only accident to exchange pertinent information, notify the Department of Motor Vehicles (DMV), and contact their insurance companies for further investigation and resolution of the matter. By contrast, the only circumstance in which CHP officers are not required to take a property-damage-only accident report is if the parties voluntarily insist on exchanging information.

We recommend the enactment of legislation that directs CHP to modify its accident-reporting policy in a way that reduces officers' workload without compromising public safety. For example, a new policy might allow officers that respond to a property-damage-only accident to offer the parties assistance with exchanging information—rather than the current default policy of taking a formal collision report. In so doing, the equivalent of up to 185 personnel-years could be freed up for proactive patrol.

Streamline Time and Record-Keeping Processes for Road Patrol Officers. The CHP's time and record-keeping procedures require road patrol officers to spend too much of their time completing paperwork. By improving the system of recording, tallying, and reporting officers' attendance and activities, CHP could reduce the amount of time officers spend on administrative matters, thereby increasing patrol time. In fact, we estimate that a 20 percent reduction in time spent annually on paperwork would amount to the equivalent of adding about 100 road patrol officers.

Accordingly, we recommend the enactment of legislation directing CHP to streamline various record-keeping procedures, including implementing the following:

The procurement of software for record-keeping purposes would involve one-time costs to CHP, which likely would be offset by a reduction in costs to key-enter data from the shift logs. While transcription services for officer reports would involve ongoing administrative costs, it would free up officer time for more road patrol service.

Recommend Pilot Project on Using Nonsworn Staff for Nonenforcement Road Patrol Duties. Under current law, all CHP uniformed road patrol officers are sworn law enforcement personnel, meaning that they possess "police powers" of, among other things, search, seizure and arrest. Road patrol officers must have these powers to issue traffic citations to motorists, search a suspicious vehicle for illegal contraband, and arrest motorists for offenses such as driving under the influence of alcohol or drugs. However, our review finds that road patrol officers spend over 700,000 hours annually (the equivalent of over 400 personnel-years) on service-related activities such as directing traffic and removing debris from the roadways—duties other law enforcement agencies throughout the state and country assign nonsworn "community service officers" or "safety services patrollers" to perform.

In order to evaluate the workability of using nonsworn staff for nonenforcement road patrol duties at CHP, we recommend the enactment of legislation that directs the department to pilot test safety services patrollers in select areas for a period of time, such as two years, and to report to the Legislature on the pros and cons of implementing the project statewide.

If the pilot is successful, phased-in implementation of the program statewide would produce a net increase in the number of CHP staff (uniformed and nonuniformed) patrolling state roadways for about the same cost. This is because the average cost for a CHP officer is about one-fourth higher than that of a nonuniformed CHP position. Thus, for example, cost savings from hiring 400 safety service patrollers to replace the equivalent in vacant road patrol officer positions could be used to hire 100 additional officers—thereby increasing total personnel coverage in CHP's jurisdiction.

Backfill Certain Vacant Nonpatrol Officer Positions With Nonuniformed Staff. Our review also finds that CHP assigns a number of officers to various nonpatrol functions which could be performed more cost effectively by nonuniformed staff. To make more efficient use of CHP resources, we recommend that the Legislature enact legislation directing the department to study the feasibility of backfilling certain vacated officer positions with nonuniformed personnel. Cost savings generated from this action could be used to hire additional road patrol officers where justified by workload. For example, for every 100 vacant officer positions that are filled with nonuniformed staff, the department could free up enough funds to hire an additional 25 road patrol officers. Nonuniformed staff could be assigned for activities such as:

(Please see our January 2005 report, entitled California Highway Patrol: Enhancing Road Patrol Service Through Efficiencies.)  

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