BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 1074|
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UNFINISHED BUSINESS
Bill No: SB 1074
Author: Knight (R), et al.
Amended: 6/23/14
Vote: 21
SENATE GOVERNMENTAL ORGANIZATION COMMITTEE : 10-0, 4/22/14
AYES: Correa, Berryhill, Cannella, De León, Galgiani,
Hernandez, Lieu, Padilla, Torres, Vidak
NO VOTE RECORDED: Vacancy
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SENATE FLOOR : 36-0, 5/15/14 (Consent)
AYES: Anderson, Beall, Berryhill, Block, Cannella, Corbett,
Correa, De León, DeSaulnier, Evans, Fuller, Gaines, Galgiani,
Hancock, Hernandez, Hill, Hueso, Huff, Jackson, Knight, Lara,
Leno, Lieu, Liu, Mitchell, Monning, Morrell, Nielsen, Padilla,
Pavley, Roth, Steinberg, Torres, Vidak, Wolk, Wyland
NO VOTE RECORDED: Calderon, Walters, Wright, Yee
ASSEMBLY FLOOR : 77-0, 8/7/14 (Consent) - See last page for vote
SUBJECT : State government: state funds
SOURCE : Author
DIGEST : This bill makes it a misdemeanor, punishable by up to
one year in a county jail, or a $2,500 fine, or both, for a
state employee to knowingly transfer or use state money outside
of the State Treasury System (STS), except as set forth in
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statute.
Assembly Amendments make clarifying changes.
ANALYSIS :
Existing law:
1.Creates the STS to deposit state money held by state agencies
prior to expenditure.
2.Specifies that all money in the possession of, or collected
by, any state agency or department constitutes state money, as
defined, and is subject to provisions governing its deposit
and handling in trust accounts.
3.Provides that if state money withdrawn from the STS pursuant
to a valid act of appropriation is subsequently returned, in
whole or part, the State Controller shall credit it back to
the special or general appropriation from which it was drawn,
and it is then available for the purpose for which it was
appropriated.
This bill makes it a misdemeanor, punishable by up to one year
in a county jail, or a $2,500 fine, or both, for a state
employee to knowingly transfer or use state money outside of the
STS, except as set forth in statute.
Background
Financial issues at Department of Parks and Recreation (DPR) .
In July 2012, newspapers first reported that officials at DPR
had maintained a secret surplus in the State Parks and
Recreation Fund, which at the time amounted to $20 million.
Although the surplus amount varied over time, there was no
specific evidence that the money had been spent illegally. The
surplus would have been enough to avoid budget cuts as DPR moved
to close 70 parks to achieve state budget savings. A later
investigation by the California State Auditor (CSA) revealed
that DPR officials maintained the hidden cash surplus for as
long as 20 years. The report tracked a surplus going back to
1993 in the State Parks and Recreation Fund, which is the
primary fund that collects and disburses revenue generated by
the 278 state parks.
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According to the CSA, the surplus existed because DPR officials
routinely reported different fund totals to the State
Controller's Office (SCO) and the Department of Finance (DOF) -
in violation of state accounting rules. As in other
investigations completed by DOF, the SCO and the Attorney
General's office, the CSA was unable to explain how the surplus
accumulated in the first place.
The DOF, on numerous occasions between 1999 and 2003, warned DPR
that it was reporting improper fund balances, according to the
audit. In 2012, after the hidden funds were revealed, DOF
imposed a new rule stating that department heads are now
required to certify - under penalty of perjury - that the
accounting information they report is accurate.
Comments
According to the author:
For years, the state Department of Forestry and Fire
Protection (Cal Fire) deposited monies from wild land fire
cost recovery into the Wildland Fire Fund, and through an
agreement with an outside non-profit organization,
circumvented state laws designating the money collected in
this fashion as 'state money,' which is required to be held
in trust accounts monitored by the State Treasury and
Controller.
During an audit requested by the Joint Legislative Audit
Committee, Cal Fire stated that the funds were not 'state
money' because they were possessed and collected by the
outside non-profit organization. Although the State
Auditor in her report (2013-107) strongly disagreed with
the Cal Fire interpretation that the funds were not 'state
money,' to date, it is unknown if any Cal Fire employees
that were responsible for the misappropriation of funds
were punished for their actions.
SB 1074 makes sure there are consequences to bad actions by
employees doing what they know is wrong. When SB 1074 is
enacted, state agencies, such as Cal Fire will be held
accountable when they choose to set up future accounts in a
private fund rather than turning over money to the general
fund or requesting a new account through the Department of
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Finance. Following the recent scandal by the state
Department of Parks and Recreation, where they knowingly
hid $20 million while still closing many parks, proves that
this measure is needed to clean up more than one agency in
this state as soon as possible.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee:
Likely minor costs to the courts as there will probably be
very few prosecutions for this new misdemeanor (Trial Court
Trust Fund).
Unknown, likely minor potential penalty revenue gains (various
funds).
No state costs related to the mandate. Any local costs
related to the creation of a new crime are not reimbursable by
the state.
SUPPORT : (Verified 8/7/14)
Howard Jarvis Taxpayers Association
ARGUMENTS IN SUPPORT : The Howard Jarvis Taxpayers Association
(HJTA) explains that the rationale for this bill stems from a
2012 scandal within DPR, in which $20 million was intentionally
misappropriated. Making matters worse, according to HJTA, was
that this came at a time when dozens of parks were threatened
with closure, and the system as a whole faced a maintenance
backlog in the hundreds of millions of dollars. Supporters
state that, in order to restore faith and trust in the
government we support with our tax dollars, creating this
nominal criminal penalty seems abundantly appropriate.
ASSEMBLY FLOOR : 77-0, 8/7/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonta, Bradford, Brown, Buchanan, Ian Calderon,
Campos, Chau, Chávez, Chesbro, Conway, Cooley, Dababneh,
Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Frazier, Beth
Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell, Gray,
Grove, Hagman, Hall, Harkey, Roger Hernández, Holden, Jones,
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Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein,
Mansoor, Medina, Melendez, Mullin, Muratsuchi, Nazarian,
Nestande, Olsen, Pan, Patterson, Perea, John A. Pérez, V.
Manuel Pérez, Quirk, Quirk-Silva, Rendon, Ridley-Thomas,
Rodriguez, Salas, Skinner, Stone, Ting, Wagner, Waldron,
Weber, Wieckowski, Wilk, Williams, Yamada, Atkins
NO VOTE RECORDED: Bonilla, Fox, Vacancy
MW:e 8/8/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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