BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 14| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ 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, CONTINUED SB 14 Page 2 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: CONTINUED SB 14 Page 3 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. CONTINUED SB 14 Page 4 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 CONTINUED SB 14 Page 5 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 . CONTINUED SB 14 Page 6 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. CONTINUED SB 14 Page 7 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 CONTINUED SB 14 Page 8 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 CONTINUED SB 14 Page 9 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 CONTINUED SB 14 Page 10 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 CONTINUED SB 14 Page 11 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 **** END **** CONTINUED