BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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                                      VETO


          Bill No:  SB 14
          Author:   Wolk (D), et al.
          Amended:  8/25/11
          Vote:     21

           
           SENATE GOVERNANCE & FINANCE COMMITTEE  :  8-0, 03/30/11
          AYES:  Wolk, Huff, DeSaulnier, Hancock, Hernandez, Kehoe, 
            La Malfa, Liu
          NO VOTE RECORDED:  Fuller

           SENATE BUDGET & FISCAL REVIEW COMMITTEE  :  16-0, 05/12/11
          AYES:  Leno, Huff, Alquist, Anderson, DeSaulnier, Emmerson, 
            Evans, Fuller, Hancock, La Malfa, Liu, Lowenthal, Rubio, 
            Simitian, Wolk, Wright

           SENATE FLOOR  :  38-0, 05/27/11
          AYES:  Alquist, Anderson, Berryhill, Blakeslee, Calderon, 
            Cannella, Corbett, Correa, De León, DeSaulnier, Dutton, 
            Evans, Fuller, Gaines, Hancock, Harman, Hernandez, Huff, 
            Kehoe, La Malfa, Leno, Lieu, Liu, Lowenthal, Negrete 
            McLeod, Padilla, Pavley, Price, Rubio, Runner, Steinberg, 
            Strickland, Vargas, Walters, Wolk, Wright, Wyland, Yee
          NO VOTE RECORDED:  Emmerson, Simitian

           ASSEMBLY FLOOR  :  79-0, 08/30/11 - See last page for vote

           SENATE FLOOR  :  38-0, 9/1/11
          AYES:  Anderson, Berryhill, Blakeslee, Cannella, Corbett, 
            Correa, De León, DeSaulnier, Dutton, Emmerson, Evans, 
            Fuller, Gaines, Hancock, Harman, Hernandez, Huff, Kehoe, 
            La Malfa, Leno, Lieu, Liu, Lowenthal, Negrete McLeod, 
            Padilla, Pavley, Price, Rubio, Runner, Simitian, 
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            Steinberg, Strickland, Vargas, Walters, Wolk, Wright, 
            Wyland, Yee
          NO VOTE RECORDED:  Alquist, Calderon


           SUBJECT  :    State Budget

           SOURCE  :     California Forward


           DIGEST  :    This bill provides a statutory framework for the 
          implementation of performance- based budgeting and for a 
          systematic program performance review by the Legislature.

           Assembly Amendments  recast the bill with the same intent as 
          when it left the Senate, and add co-authors.

           ANALYSIS  :    The California Constitution requires the 
          Governor to submit to the Legislature, within the first 10 
          days of the calendar year, a budget for the ensuing fiscal 
          year.  The Governor's budget must include itemized 
          statements for recommended expenditures and estimated 
          revenues.  

          The State Department of Finance prescribes and manages the 
          development of a state budget and oversees state agencies' 
          financial practices.  The Department ensures that budget 
          information reflects state agencies' activities and costs 
          and displays information on expenditures and objectives.  
          The Department helps state agencies use sound management 
          approaches. 

          This bill:

          1.Requires the establishment of performance-based budgeting 
            for all state departments and agencies.  Statewide the 
            implementation of performance-based budgeting would occur 
            concurrently with the new start of the new budget process 
            that will be developed as part of the Financial 
            Information System for California accounting system 
            project. As part of the Governor's budget submission, 
            each department would be required to provide the 
            following information in the budget: 


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             A.   The mission and goals of each agency; 
             B.   The activities and programs of the agency; 
             C.   Performance measures that reflect the desired 
               outcomes of the agency and a targeted performance 
               level of the following year; 
             D.   Prior-year performance data; and, 
             E.   A description of the impacts to current 
               beneficiaries of a program proposed for modification 
               or elimination. 

          1.Requires the Department of Finance (DOF) to develop an 
            implementation plan, by August 1, 2012, that articulates 
            how the state will achieve full statewide implementation 
            of performance-based budgeting. 

          2.Implements the new performance-based budgeting 
            requirements subject to appropriation in the budget, but 
            requires the DOF to begin performance-based budgeting in 
            the 2013-14 budget process with programs and departments 
            identified in the implementation plan. 

           Legislative Intent  .  This bill states that the legislative 
          intent in enacting this measure is to provide a system of 
          analysis that supports a results-oriented framework for the 
          delivery of public services and the operation of state 
          departments and programs.  That framework should prioritize 
          understanding the results of programs and funding that are 
          subject to a transfer of authority and responsibility from 
          state government to county governments.

          The Legislature makes the following findings and 
          declarations:

            1.  State government must focus on the outcomes of public 
              policy decisions and public programs to ensure 
              opportunities are available for all Californians to 
              achieve a high quality of life.

            2.  The Legislature must ensure that policymakers, public 
              program administrators, and rank-and-file state workers 
              have access to relevant and timely information so that 
              they can make informed decisions in the design and 
              delivery of public programs.


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            3.  The focus of that information must be on the goals of 
              those public programs and the performance of the public 
              agencies in administering those programs.

            4.  Goal and performance information should be widely 
              available, relevant, and timely for informing budget, 
              policy, and oversight decisions.

            5.  In order to identify performance measurements 
              relevant to budget, policy, and oversight 
              decisionmaking, public agencies must consult with the 
              public, rank-and-file state workers, supervisors, and 
              other officials responsible for the delivery of public 
              programs.

            6.  Performance measurements, including information on 
              outcomes and other metrics relevant to improving those 
              outcomes, should be designed to ensure that limited 
              public resources are well spent.

            7.  Establishing goal, performance, and outcome 
              information for public programs should be part of a 
              systematic review of the effectiveness and efficiency 
              of those programs.

            8.  Goal, performance, and outcome information should be 
              made widely available to the public.

            9.  Goal, performance, and outcome information should be 
              used in the annual budget and policy-making process to 
              inform fiscal and policy decisions and by the 
              Legislature to enhance oversight of public programs and 
              to ensure results-based accountability.

            10. As a component of legislative oversight, goal, 
              performance, and outcome information should be used to 
              identify programs that require fundamental reforms to 
              improve outcomes and programs subject to elimination 
              because they are ineffective.

           Background

          Historic Budget Reform Efforts  .  There have been numerous 
          proposals to reform the budget process over the past 

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          several decades.  Historical reform efforts include, but 
          are not limited to, the following:

                 Pilot projects on performance budgeting in four 
               State departments starting in 1993 by then Governor 
               Pete Wilson.
                 Recommendations by the California Constitution 
               Revision Commission that convened from 1994 to 1996 at 
               the direction of statute and made various 
               recommendations regarding the State budget process and 
               alignment of programs between State and local 
               governments.
                 Recommendations by the California Citizens Budget 
               Commission in 1998 that proposed statutory and 
               constitutional changes to the budget process. 
                 Recommendations in the Governor's 2004 California 
               Performance Review regarding the State budget process, 
               including a recommendation to adopt a biennial budget 
               and a performance-based budgeting system.

           Recent Reform Efforts  .  The bipartisan  California Forward 
          organization has sponsored recent efforts regarding 
          government reform.   California Forward  is an organization 
          that was created by California Common Cause, the Center for 
          Governmental Studies, the New California Network, and the 
          Commonwealth Club of California's Voices for Reform Project 
          in March 2008.  The organization's main goal is to 
          contribute to improving the quality of life for all 
          Californians by creating a more responsive, representative, 
          and cost-effective government.  This organization is funded 
          by the following foundations:  the California Endowment, 
          the Evelyn and Walter Haas Jr. Fund, the William and Flora 
          Hewlett Foundation, the James Irvine Foundation, and the 
          David and Lucile Packard Foundation.  

          In 2008,  California Forward  started a process of 
          consultation and engagement with the public and community 
          leaders regarding a government reform agenda.  They have 
          made hundreds of presentations, consulted with hundreds of 
          community leaders, conducted focus groups and public 
          opinion research in the development of a reform agenda that 
          includes budget process reform and local government reform. 
           Performance-based budgeting and program performance review 
          are just two of the reforms proposed by  California Forward  .

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           California Forward's  efforts culminated with a 
          comprehensive constitutional amendment in 2010 (SCA 19, 
          DeSaulnier) that contained various changes to the state 
          budget and legislative process.  Specifically, these 
          amendments would have implemented a pay as you go system 
          for the majority of legislation, the Governor's budget, and 
          initiatives.  This measure would have significantly limited 
          how one-time revenues could be expended.  This measure 
          required the Legislature to review state programs once 
          every ten years.  This measure would have also lowered the 
          vote threshold for the budget and increased the vote 
          threshold for fees when they are being used to fund a 
          program, service, or activity that was previously funded by 
          revenue from a tax.  This measure would also have reduced 
          legislator pay if the budget was not passed by June 25 and 
          provided the Governor with mid-year cut authority if the 
          Legislature does not act prior to the 45th day of a fiscal 
          emergency.  This measure was not passed by the Legislature 
          in 2010.

          Two initiatives passed by the voters in November 2010, 
          including Proposition 25 and Proposition 26 enacted pieces 
          of the  California Forward  agenda.  Proposition 25 lowered 
          the vote threshold for the budget to a majority vote and 
          reduced legislator's pay if the budget was not passed by 
          the constitutional deadline.  Proposition 26 also passed by 
          the voters increased the vote threshold for some fees, 
          including those that are being raised to fund a program 
          that was previously funded by revenue from a tax.
           
          Comments
           
          The purpose of this bill is to create in statute a 
          systematic legislative review of the performance of state 
          government reviews.  Presently, there are reviews of pieces 
          of state government that occur in the Budget Subcommittee 
          process and policy committees.  However, these reviews are 
          usually related to a specific incident or a specific budget 
          issue and do not review all programs from a policy 
          perspective or in any systematic manner.  This bill could 
          help the Legislature develop a system that would collect 
          longitudinal performance data systematically for more 
          effective input into the budget and legislative process.

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          This bill also establishes a performance-based budgeting 
          system to be used by all state departments in the 
          development of a budget and in the subsequent review of the 
          budget by the Legislature.  This bill assumes that 
          performance outcomes are not being used in a widespread 
          manner by managers in state government or by the control 
          agencies or Legislature in evaluating and prioritizing 
          expenditures in the annual budget process.  Performance 
          data has been collected by some programs and departments 
          and is used to inform management decisions and budgetary 
          decisions.  However, at present, there is not a systematic 
          approach across state government to collect relevant 
          performance data and use it to make management decisions 
          and inform budgetary decisions.  This bill attempts to put 
          a system in place to make performance data a regular part 
          of government operations.

          Departments across state government currently collect 
          performance data on programs, contracts, and other aspects 
          of their operations.  While this data is not necessarily 
          collected systematically across state government, this data 
          is often used to inform budgetary decisions.  For example, 
          the Franchise Tax Board is constantly evaluating audit 
          techniques and other tax enforcement efforts to determine 
          the most cost effective way of investing limited audit 
          resources.  Some departments literally have dozens and 
          dozens of performance metrics; however, it is not always 
          clear whether they are being used to inform budget 
          decisions or other management decisions.  Ultimately, using 
          data to inform management decisions and budget decisions 
          needs to be an ingrained part of the culture of the 
          administration and legislative review.  Practically 
          speaking, performance data, while important, is often just 
          one of the inputs used to make decisions and without 
          leadership and commitment at every level of government to 
          rely on data to inform decisions, data will not, in itself, 
          change the outcomes of the decision makers.

          In the Legislative Analyst's review of the state's 
          performance-based budgeting pilots of the early 1990s the 
          Analyst found that performance-based budgeting was more 
          successful when there was a collaboration with the 
          executive and legislative branches in developing metrics 

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          and reporting procedures.  Clearly, widespread buy-in into 
          a system of performance metrics would result in a more 
          successful integration of data into a decision-making 
          process.  However, what happens if there are divergent 
          views on the fundamental goals of a program or department?  
          These debates, while not a reason to forgo performance 
          data, are a real hurdle to the successful integration of 
          data into the management and legislative process.  For 
          example, numerous expert panels and actual data have shown 
          that the residential restrictions placed on sex offenders 
          in California have had no and possibly negative impacts on 
          public safety.  Nevertheless, proposals to change this law 
          have not been forthcoming.  

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes   
          Local:  No

          According to the Assembly Budget Committee, small 
          absorbable costs for DOF to provide the plan for 
          implementation.  Additional costs will depend upon the 
          extent to which DOF believes it can leverage existing 
          resources and the Fi$Cal project to develop 
          performance-based budgeting, and would be subject to 
          appropriation in the budget. 

           SUPPORT  :   (Verified  8/30/11)

          California Forward (source) 
          AARP
          American Association of University Women, California
          American Council of Engineering Companies of California
          American Federation of State, County and Municipal 
          Employees 
          Bay Area Council
          Brocade, Inc.
          Business Council of San Joaquin County
          California Alliance of Child and Family Services
          California Association of Bed & Breakfast Inns
          California Association of Nonprofits
          California Chamber of Commerce
          California Chapter of the American Fence Association
          California Church IMPACT
          California Construction and Industrial Materials 
          Association

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          California Fence Contractors' Association
          California Grocers Association
          California Hotel & Lodging Association
          California Independent Oil Marketers Association
          California Manufacturing & Technology Association
          California Partnership for the San Joaquin Valley
          California Retailers Association
          California Senior Advocates League
          California State Student Association
          Cal Tax
          Consumer Specialty Products Association
          Contra Costa Council
          Contra Costa Transportation Authority
          County of San Mateo
          Engineering Contractors' Association
          Flasher Barricade Association
          Fresno Business Council
          Greater Fresno Area Chamber of Commerce 
          Half Moon Bay Coastside Chamber of Commerce
          Herbalife International of America, Inc.
          Huntington Beach Chamber of Commerce
          Kern County Taxpayers Association
          Los Angeles Area Chamber of Commerce
          Marin Builders' Association
          MetricStream, Inc.
          MoSys, Inc.
          Proofpoint Systems, Inc.
          San Francisco Chamber of Commerce
          San Gabriel Valley Economic Partnership
          San Mateo County Economic Development Association (SAMCEDA)
          Santa Clara and San Benito Counties Building and 
          Construction Trades                                    
          Council
          Santa Cruz County Medical Society
          Saving California Communities
          SEIU 1000
          Silicon Valley Leadership Group
          State Building and Construction Trades Council of 
          California
          TechAmerica
          USANA Health Sciences, Inc.
          Valley Industry & Commerce Association 
          WELL Network


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           GOVERNOR'S VETO MESSAGE:
           
               "I am returning Senate Bill 14 without my signature.

               This bill is another siren song of budget reform.  It 
               inflicts a 'one size fits all' budget planning process 
               on every state agency and function -- even functions 
               that aren't actually managed by the state so long as 
               they receive any 'benefit' from it.  The politically 
               expedient course would be to sign this bill and bask 
               in the pretense that it is some panacea for our budget 
               woes.  But the hard truth is that this bill will 
               mandate thousands of hours of work -- at the cost of 
               tens of millions of dollars -- with little chance of 
               actual improvement.  What California needs is a common 
               sense approach to its budgeting, something we have 
               been doing for the last year and will continue to do.  
               Instead of requiring each and every department, no 
               matter how big or small or important or not, to 
               develop and track 'performance metrics,' 'target 
               performance levels' and 'desired outcomes,' shouldn't 
               we first examine whether some of these programs or 
               departments should exist at all?  And while some 
               programs will clearly benefit from the performance 
               based budgeting approach outlined in this bill, for 
               others it will be a costly waste of time.  The ideas 
               we offered to take an approach based on common sense 
               and flexibility were unfortunately rejected.  I will 
               issue an Executive Order in the upcoming weeks that 
               combines the good ideas contained in this bill with 
               the practical, tailored approach that I believe will 
               make an actual difference in the way we budget and run 
               our government."

           ASSEMBLY FLOOR  :  79-0, 8/30/11
          AYES:  Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, 
            Bill Berryhill, Block, Blumenfield, Bonilla, Bradford, 
            Brownley, Buchanan, Butler, Charles Calderon, Campos, 
            Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson, 
            Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani, 
            Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Grove, 
            Hagman, Halderman, Hall, Harkey, Hayashi, Roger 

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            Hernández, Hill, Huber, Hueso, Huffman, Jeffries, Jones, 
            Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mansoor, 
            Mendoza, Miller, Mitchell, Monning, Morrell, Nestande, 
            Nielsen, Norby, Olsen, Pan, Perea, V. Manuel Pérez, 
            Portantino, Silva, Skinner, Smyth, Solorio, Swanson, 
            Torres, Valadao, Wagner, Wieckowski, Williams, Yamada, 
            John A. Pérez
          NO VOTE RECORDED:  Gorell


          AGB:RJG:nl  1/4/12   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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