BILL ANALYSIS                                                                                                                                                                                                    Ó


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                                    THIRD READING

          Bill No:  SB 335
          Author:   Yee (D)
          Amended:  5/28/13
          Vote:     21

          AYES:  Wright, Calderon, Cannella, Correa, De León, Galgiani,  
            Hernandez, Lieu, Padilla
          NOES:  Nielsen, Berryhill

           SENATE APPROPRIATIONS COMMITTEE  :  5-2, 5/23/13
          AYES:  De León, Hill, Lara, Padilla, Steinberg
          NOES:  Walters, Gaines

           SUBJECT  :    Governor's Budget:  services contracts

           SOURCE  :     Author

           DIGEST  :    This bill requires the Governor to submit to the  
          Legislature an annual report regarding current contracts for  
          services in the amount of $5,001 or more, upon full  
          implementation of the Financial Information System for  
          California (FI$Cal) Project.

           ANALYSIS  :    

          Existing law:

          1.Requires the Governor to submit to the Legislature within the  
            first 10 days of each calendar year, a proposed budget for the  


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            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.

          2.Requires the Department of General Services 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.

          This bill:

          1.Requires the Governor to submit to the Legislature an annual  
            report regarding current contracts for services in the amount  
            of $5,001 or more, upon full implementation of the FI$Cal  
            Project.  Requires that the report contain all of the  
            following:  (1) a description of the contract and services  
            being purchased; (2) the name of the agency contracting for  
            the services; (3) the name of the contractor and any  
            subcontractors; (4) the effective and expiration dates of the  
            contract; (5) the annual amounts paid under the contract, by  
            funding source, to the contractor in past fiscal years and in  
            the current fiscal year; (6) the annual amount, by funding  
            source, proposed to be paid to the contractor under the  
            Governor's Budget; (7) the amount by funding source, projected  
            to be paid to the contractor in the fiscal years covered by  
            the contract beyond the fiscal year addressed in the  
            Governor's budget during which the contract will be in effect;  
            (8) the total projected cost of the contract, by funding  
            source, for all fiscal years during which the contract will be  
            in effect; and (9) whether the contract was a sole  

          2.Requires the report to provide the total cost of contracting  
            for services for each fund and agency or comparable budget  

          3.Provides that the report be made available to the public by  
            posting it on the FI$Cal Project's Internet Web site in a  
            format that allows for searching and sorting by the categories  
            listed above.

          According to the author's office, currently, lawmakers and the  



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          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.

          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, 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 this bill remedies the  
          current information gap by requiring a service contract  
          expenditure report, as outlined above. 

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

          According to the Senate Appropriations Committee:

           Unknown contract costs, estimated in the hundreds of  
            thousands, to build requirements into the FI$Cal Project to  
            ensure the system has capacity to report specified information  
            on contracting (General/Special Funds).

           Likely minor costs to various state agencies to compile and  



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            report specified information to the Governor's Office,  
            assuming the FI$Cal Project has the built in capacity to  
            report contracting information upon implementation  
            (General/Special Funds).

           Unknown costs to the Department of Finance (DOF) to develop  
            and establish new accounting rules governing the reporting of  
            service contract information (General).

           One-time costs of approximately $50,000 to the Department of  
            General Services (DGS) to develop and publish revisions to the  
            State Contracting Manual (General).

           Ongoing costs to DGS of $100,000 to $200,000 annually to  
            provide training and assistance to buyers and  
            budgeting/accounting personnel for state agencies (General).

           SUPPORT  :   (Verified  5/28/13)


           ARGUMENTS IN SUPPORT  :    The proponent stresses 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.  They argue that this bill  
          simply requires the Administration to provide relevant and  
          usable information on spending decisions involving services  

          Further, they 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 and Engineering contracts (cost $2.4  
          billion); 2,345 Information Technology (IT) contracts (cost $4.1  
          billion); and 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.  They 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 this bill  
          is absolutely essential.



                                                                     SB 335

          MW:ej  5/28/13   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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