BILL ANALYSIS                                                                                                                                                                                                    






                                                       Bill No:  SB  
          335
          
                 SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
                       Senator Roderick D. Wright, Chair
                           2013-2014 Regular Session
                                 Staff Analysis



          SB 335  Author:  Yee
          As Introduced:  February 19, 2013
          Hearing Date:  April 9, 2013
          Consultant:  Art Terzakis


                                     SUBJECT  
                     Governor's Budget: services contracts

                                   DESCRIPTION
           
          SB 335 requires the Governor to prepare and submit to the  
          Legislature, along with the Governor's Budget, a report  
          that contains certain information regarding current and  
          proposed contracts for services in the amount of $5,001 or  
          more. Specifically, this measure requires that the report:   


          1.Contain the name of the agency contracting for the  
            services, the name of the contractor and any  
            subcontractors, a description of the contract and  
            services being purchased, the effective date and  
            expiration date of the contract, and whether the contract  
            was a sole source procurement.

          2.Include: (a) the annual amounts paid under the contract,  
            by funding source, to the contractor in past fiscal years  
            and in the current fiscal year; (b) the annual amount, by  
            funding source, proposed to be paid to the contractor  
            under the Governor's Budget; (c) the amount by funding  
            source, projected to be paid to the contractor in the  
            fiscal years covered by the contract beyond the fiscal  
            years during which the contract will be in effect; (d)   
            the total projected cost of the contract, by funding  
            source, for all fiscal years during which the contract  
            will be in effect; and (e) the total cost of contracting  




          SB 335 (Yee) continued                                   
          Page 2
          


            for services for each fund and agency or comparable  
            budget category.

          3.Be made available to the public by posting it on the  
            State's Internet website in a format that allows for  
            searching and sorting by the categories listed above. 

                                   EXISTING LAW

           Existing law requires the Governor to submit to the  
          Legislature within the first 10 days of each calendar year,  
          a proposed budget for the next fiscal year as specified.   
          The Governor's proposed budget must contain itemized  
          statements for recommended state expenditures and estimated  
          state revenue income, as specified.

          Existing law requires the Department of General Services  
          (DGS) to publish, or cause to be published, the California  
          State Contracts Register, describing contracts proposed by  
          the state, for construction or alteration of state-owned  
          real property.  

                                    BACKGROUND
           
           Purpose of the bill:   According to the author's office,  
          currently, lawmakers and the public cannot easily access  
          information to determine how much the state spends on  
          contracting out services or what services are received for  
          the money spent.  The author's office contends that such  
          information is lumped together with "Other Operating  
          Expenses" in the annual budget report.  Information on  
          state employees (position and salary), however, is clearly  
          outlined under "Salary and Wage Supplement." The  
          contracting of services is often promoted as a way to cut  
          costs, especially during fiscally strained times, yet  
          public officials and taxpayers rarely know how much is  
          being spent on contracts, and thus, unable to determine if  
          such contracted services are being provided at a lower cost  
          to the state. 

          The author's office states that when budget dollars remain  
          scarce and insufficient to meet California's pressing  
          needs, it becomes vital that information on all spending,  
          including spending on service contracts, be made  
          transparent.





          SB 335 (Yee) continued                                   
          Page 3
          


          The author's office notes that the State Contracting and  
          Procurement and Registration System (SCPRS) already  
          collects contract information, as the Governor pointed out  
          in his veto message of AB 172 (Eng) of 2011.  However, the  
          author's office believes that the SCPRS suffers significant  
          shortcomings which make it inadequate to inform  
          decision-makers.  Specific examples include: (1)  
          expenditure data cannot be computed by fiscal year; (2) the  
          names of agencies and contractor names are not recorded  
          uniformly throughout the database, making calculations of  
          contract spending by agency or vendor impossible; and, (3)  
          key data such as contact identification numbers are often  
          missing. 

          The author's office emphasizes that SB 335 would remedy the  
          current information gap by requiring a service contract  
          expenditure report, as outlined above, for every executive  
          budget proposal. 

           Arguments in Support:  Proponents stress the importance of  
          gaining control over spending on service contracts,  
          temporary employees and consultants - such contracts to  
          outsource work totals in the billions of dollars.   
          Proponents argue that this measure simply requires the  
          Administration to provide relevant and usable information  
          on spending decisions involving services contracts.   

          Proponents claim that in 2009, the State of California had  
          13,600 personal service and consultant contracts in effect  
          that cost the state $34.7 billion ($28.7 million a day).   
          This breaks down to 748 Architectural & Engineering  
          contracts (cost $2.4 billion); 2,345 Information Technology  
          (IT) contracts (cost $4.1 billion); 10,507 non-IT contracts  
          (cost $28.2 billion).  Proponents estimate that California  
          could save millions annually by utilizing state workers to  
          cut unnecessary and wasteful outsourcing.  Proponents  
          believe the public has the right to hold state officials  
          responsible for how the state spends taxpayer dollars and  
          that access to the information outlined in SB 335 is  
          absolutely essential.

           Comments:   Over the past 10 years numerous identical and  
          similar bills have been introduced in the Legislature.  The  
          fate of those bills is summarized below. 

                            PRIOR/RELATED LEGISLATION




          SB 335 (Yee) continued                                   
          Page 4
          


           
           SB 252 (Vargas) 2011-12 Session.   Among other things, would  
          have required the Department of General Services to compile  
          and publish reports detailing all privatization contracts  
          let by state agencies.  (This measure was eventually gutted  
          to become a state employee collective bargaining bill and  
          died in the Assembly policy committee.)
          
           AB 172 (Eng) 2011-12 Session.   Would have required the  
          California Technology Agency (CTA), to create and maintain  
          the Reporting Transparency in Government Internet Web Site  
          listing details provided by state agencies on every audit  
          of their operations finalized from January 2009 through  
          December 2011.  Also, would have required the posting of  
          detailed and specific information on contracts awarded by  
          the state on or after March 31, 2010, valued at $5,000 or  
          greater. (Vetoed - Governor's message stated there's no  
          need for a new law in light of the fact that information  
          regarding state contracts and audits can already be found  
          at specified state sites.)
          
           AB 756 (Eng) 2009-10 Session.  Would have required every  
          state agency to provide a link to a centrally located and  
          accessible state-run Internet website that includes a  
          listing of personal services and consulting services  
          contracts that it entered into during the fiscal year.  
          (Vetoed - Governor's message stated "this legislation would  
          be duplicative of current reporting practices and increases  
          workload and costs to departments at a time when the state  
          continues to experience a significant budget shortfall.  My  
          Administration is currently implementing many of the  
          provisions of this legislation within the existing  
          appropriation of the Department of General Services to  
          increase transparency.")
          
           SB 786 (Oropeza) 2007-08 Session.   Would have required the  
          Governor to submit with the budget a report that contains  
          specified information regarding current and proposed  
          contracts for services in the amount of $5,001 or more.  
          (Held in Senate Appropriations)
           
          SB 1331 (Oropeza) 2007-08 Session.   Identical to SB 786  
          (Oropeza) of 2007.  (Held in Senate Rules Committee)  
           
           SB 1494 (McClintock) 2007-08 Session.   Would have required  
          each state department and agency to develop and operate a  




          SB 335 (Yee) continued                                   
          Page 5
          


          Web site accessible by the public that includes specified  
          information relating to expenditures of state funds (in  
          excess of $1,000), defined to include, among other things,  
          grants, contracts, subcontracts, purchase orders, and tax  
          refunds, rebates, and credits.  (Held in Senate  
          Appropriations)

           AB 983 (Ma) 2007-08 Session  .  Would have required the  
          Governor to prepare and submit to the Legislature, along  
          with the Governor's Budget, a report containing specified  
          information regarding current and proposed contracts for  
          services in the amount of $5,001 or more.  (Held in Senate  
          Appropriations)
           
          AB 2603 (Eng) 2007-08 Session.   Would have required each  
          state agency to prepare an annual report for the DOF  
          listing "information technology" personal services and  
          consulting services contracts, entered into by the agency  
          in the previous fiscal year.  (Held in Senate  
          Appropriations)  

          AB 239 (J. Horton) 2005-06 Session.   Would have required  
          the Governor to submit to the Legislature, along with the  
          state budget, information regarding current and proposed  
          service contracts. (Vetoed) 
          
           SB 1638 (Romero) 2003-04 Session  .  Would have required the  
          Governor to submit to the Legislature, along with the state  
          budget, information regarding current and proposed service  
          contracts.  (Held in Senate Appropriations)
          
           SUPPORT:   As of April 5, 2013:

          American Federation of State, County and Municipal  
          Employees (AFSCME)

           OPPOSE:   None on file as of April 5, 2013. 

           FISCAL COMMITTEE:   Senate Appropriations Committee

                                   **********









          SB 335 (Yee) continued                                   
          Page 6