BILL ANALYSIS Ó
SENATE COMMITTEE ON VETERANS AFFAIRS
Senator Jim Nielsen, Chair
2015 - 2016 Regular
Bill No: SB 543 Hearing Date: 4/28/15
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|Author: |Wolk |
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|Version: |4/15/15 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Wade Teasdale |
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Subject: Veterans: Veterans' Home of California
DESCRIPTION
Summary:
With regard to the Veterans Home of California system, this bill
creates a single system-wide Morale, Welfare, and Recreation
Fund (MWR Fund) that consolidates existing and future MWR moneys
generated by individual veterans home campuses, and establishes
procedures and restrictions on the budgeting and spending of
moneys in the Fund.
Existing law:
1. Provides for establishment and operation of the Veterans Home of
California, within the Department of Veterans Affairs
(CalVet), at various sites for aged and disabled veterans
and their nonveteran spouses, who meet certain eligibility
requirements.
2. Requires that the administrator of each home campus maintain an MWR
Fund that shall be used - at the discretion of the
administrator and subject to the approval of the secretary
- to provide for the general welfare of the veterans.
(More detail on existing MWR law is contained in the
Background section.)
This bill:
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1. Clarifies that the collective term "veterans' homes," as
used in statute, includes the Veterans' Homes of California
located in Chula Vista, Fresno, Lancaster, Redding,
Ventura, and West Los Angeles.
2. Creates a statewide Veterans' Home MWR Fund as a fund in
the State Treasury with continuous appropriations to CalVet
without regard to fiscal year.
3. Requires the administrator of each veterans home to
deposit all moneys, which currently are maintained in a
local campus-specific MWR account, into the new
consolidated MWR Fund.
4. Provides that all future moneys, which are collected as
a result of unreimbursed member costs:
a. Shall be deposited into the consolidated MWR
Fund.
b. Are considered to be state funds.
5. Provides that the consolidated MWR Fund shall include
proceeds from the same sources as the existing local MWR
funds:
a. Proceeds from operation of a canteen at a
home.
b. Revenue derived from issuance of
prisoner-of-war special license plate.
c. Interest earned on invested funds.
d. Funds derived from the estates of deceased
residents.
e. Other sources as may be specified.
6. Requires that green fees and other moneys derived from
the Yountville home's golf course be credited toward the
MWR allocation of the Yountville home.
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7. Requires CalVet to promulgate rules and regulations
related to the MWR Fund, that:
a. Are developed in consultation with the
residents at each home, the Veterans' Home Allied
Council, and the resident council at each campus of
the Veterans' Homes of California.
b. Include, but not be limited to, a yearly
budgeting process for moneys to be expended in each
home.
8. Authorizes CalVet to disburse funds to the homes.
a. Annual disbursements to each home.
b. Provides the CalVet Secretary with
discretionary authority to augment a home's annual MWR
Fund allocation with additional funds for a special
project under the following conditions:
i. The augmentation is no greater
than five percent of the home's annual
disbursement amount.
ii. That home's
administrator submits a proposal that:
1. Shows good cause for the
allocation.
2. Is developed by the
administrator through consultation with the
home's residents, allied council, or
resident council.
9. Authorizes the CalVet Secretary to make an additional
discretionary MWR augmentation to the Yountville veterans
home after making a determination that the augmentation is
appropriate on the basis of the home's unique age, size,
and historical significance.
10. Reaffirms existing law's restrictions on how
MWR funds may be expended.
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11. Requires two annual MWR Fund-related reports,
one on expenditures from the Fund and one on moneys
deposited into the Fund, each of which is to be sent every
August 20th to:
a. Department of Finance.
b. The Senate and Assembly policy committees with
jurisdiction over veterans affairs.
c. The fiscal committees of the Senate and
Assembly.
d. The allied council/resident council of each
veterans home.
12. Requires CalVet to maintain a reserve of two
million dollars in the MWR Fund.
13. Authorizes CalVet to transfer funds from the
MWR Fund into the Surplus Money Investment Fund for
investment purposes and requires that the amount invested
and accrued interest be credited to the MWR Fund for
allocation by CalVet.
14. Authorizes each home administrator to enter
into an agreement with the home's allied council that
authorizes the council to operate specified facilities or
engage in specified activities.
15. Provides for the accounting and management of
voluntary donations as follows:
a. Requires each home to establish an account,
which is separate from the MWR Fund account, for
purpose of receiving donations
b. Requires CalVet to adopt regulations for
managing such accounts, and to do so in consultation
with the home residents.
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BACKGROUND
CalVet's Veterans Homes Division provides rehabilitative,
residential medical care and services in a homelike environment
for all veterans (and eligible veteran spouses) residing in the
State's eight veterans homes, which are located in Barstow,
Chula Vista, Fresno, Lancaster. Redding, Ventura, West Los
Angeles, Redding, and Yountville. As of early 2013, more than
1,700 members resided in these veterans homes.
Morale, Welfare and Recreation Funds
Existing law:
1.Authorizes MWR funds to be used for, but not be limited to,
the following:
a. Operating the Veterans' Home Exchange store, hobby shop,
motion picture theater, library, and band, and any other
function that is operated for the morale, welfare, and
recreation of the veterans;
b. Paying for newspapers, chapel expenses, welfare and
entertainment expenses, sport activities, celebrations, and
any other activity that is for the morale, welfare, and
recreation of the veterans.
2.Prohibits MWR funds from being used for: (1) medical or any
related treatment; (2) maintenance of the home's physical
plant; or (3) any function, operation, or activity not
directly related to the morale, welfare, or recreation of the
veterans.
3.Provides that certain portions of the estates of deceased
veteran residents may be recovered by CalVet for obligations
owed to CalVet, including costs of a veterans care in excess
of the reimbursement for that care made by the United States
Department of Veterans Affairs (VA).
4.Requires that residents, upon admission to the home and
monthly thereafter, be informed about these provisions to
recover unreimbursed costs of care.
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5.Provides that the recovered funds are not returned to the
State General Fund, but, instead, are deposited into the MWR
fund account for the home at which the veteran resided at
death.
The existing local MWR funds obtain funding from several
sources, including:
a. The estates of deceased residents, who die without
heirs or owing money to the home for the cost of their
care;
b. Donations from taxpayers when filing their state tax
returns;
c. Revenues from the issuance of prisonerofwar license
plates;
d. Other donations;
e. Interest earned from investments made with MWR Fund
moneys; and
f. Revenues from businesses operated using the MWR
Fund.
Although MVC § 1047 allows a home administrator to spend MWR
moneys for the benefit of the residents of the home, other state
laws impose requirements on the manner in which this is done,
particularly when it entails leasing stateowned land.
Recent Controversy and Audit
In October 2013 the California State Auditor released an
investigative report (i2011-0837) entitled, Wastefulness,
Failure to Comply With State Contracting Requirements, and
Inexcusable Neglect of Duty. The report revealed that over a
two-year period from January 2010 to December 2011, the
Yountville Veterans Home administrator executed two contracts
using MWR funds without consulting CalVet executive office
officials, appropriate legal counsel, or residents of the Home.
These contracts included a zip line adventure park for use by
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the public and residents of the home and a tavern that did not
comply with state leasing requirements. In the construction of
the adventure park, the contract included provisions which
leased over 200 acres of state land for one dollar per year and
involved the clearing of untouched natural lands without a CEQA
review. Under the contract executed by the administrator, the
home would receive 10 percent of any net income generated from
operating the park after subtracting all operating expenses
including salaries with no revenue guaranteed if revenues did
not exceed expenses. Once the contract was discovered by CalVet
officials, it cost the state $228,612 to extricate itself from
the contract and to dismantle the nearly completed zip line
tour. When the administrator pursued the second contract leasing
the on-sight tavern, she failed to initiate a process to solicit
competitive bids, eventually resulting in a contract by which
the Veterans Home paid an outside management company $75,000 per
year to manage the tavern. Included in the deal, MWR funds were
used to cover all start-up costs for the venture and any monthly
expenses not covered by sales for the first year of the
contract. Only 25 percent of the profits generated from the
enterprise would be deposited into the MWR fund after all other
expenses were covered; however there was no guarantee the
venture would be profitable. In exchange for being permitted to
establish a business on state property, the vendor was paid and
subsidized with state-controlled funds. When the terms of the
contract were discovered and terminated by CalVet officials a
year and a half later, the home had paid the vendor $424,307.
The report discovered both contracts violated state contracting
practices and little or no information had been shared between
the administrator of the home and CalVet headquarters prior to
the execution of the contracts. Further, the Department of
General Services was not consulted in its role as the agency
overseeing state leasing requirements. In total, $652,919 were
wasted in state-managed funds.
The report highlighted several deficiencies in the
administration of MWR funds. Though the administrator is
authorized to use MWR funds with the approval of the CalVet
Secretary, home administrators have historically been granted
sole authority over decision making regarding the use of the
fund. Further, each contract was executed with little or no
legal oversight, which presumably would have discovered both
contracts violated state law and required review by General
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Services. Finally, residents of the home were unaware of the two
contracts being executed involving MWR funds; only discovering
the construction of the adventure park, nominally built for
their benefit, when helicopters were seen flying overhead with
construction material.
COMMENT
Committee Staff Comments
1. Existing MWR Balances : The Committee was unable to
receive an updated report from CalVet regarding the
balances of the existing local MWR funds. However, as of
June 30, 2012, the amount of money held in the MWR funds
maintained by six veterans homes (the new Fresno and
Redding homes were not yet operational) totaled more than
$8 million. Approximately $5 million was held in the MWR
fund of Yountville, the oldest and largest home campus.
2. Special Consideration for Yountville : This bill
establishes a system-wide MWR fund and significantly
cross-levels existing funds and takes the discrete needs of
individual campuses into account when authorizing
disbursements. The bill also attempts to shift the
balancing point somewhat toward the Yountville campus by
recognizing that home's unique characteristics and its
disproportionate financial contribution to the new
consolidated MWR Fund. Committee members may see
justification for that shift, but may want to consider for
themselves where the balancing point should be placed.
3. Suggested Amendments:
a. General Annual Disbursements: This bill authorizes
CalVet to make annual general disbursements to the eight
individual home campuses, but does not specify criteria.
If the author's intent is that these general
disbursements are to be sized in proportion to a campus'
relative resident population, then the bill should be
amended to clarify the criteria.
b. Special Disbursements: The bill provides for the
CalVet Secretary to allocate two other special
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disbursements beyond the regular annual disbursement. One
special augmentation could be made to any home in any
year, for a justified special project, so long as the
total amount would not exceed five percent of that home's
regular annual disbursement. A second potential
augmentation is authorized strictly for the Yountville
home, based on some special need justified by the home's
"unique age, size, and historical significance."
a. The author might consider amending the
bill to require the CalVet Board, which now operates
as an advisory body to the Secretary, to review
proposed special augmentations and to receive
comment from home resident councils and individual
residents before adopting formal advice to be
offered to the Secretary.
c. Annual Reports: The two reports, which are due on
the same day and go to the same recipients, should be
consolidated into a single report.
Related Legislation
1. AB 1580 (Yamada, died on inactive file, Senate Third
Reading, 2014 ) would have instituted review measures and
controls on the expenditure of MWR funds For proposed
expenditures of MWR Fund moneys of more than $5,000; and
proposed contracts of more than $25,000 per year or more
than $100,000 total:
a. The home administrator proposing the expenditure
or contract shall submit the proposal to the CalVet
secretary for approval. The secretary shall consider
the advisory opinion required in (b) below in and any
other relevant information.
b. The proposal shall be reviewed by the CalVet
legal counsel or other similarly qualified reviewer
designated by the secretary. The reviewer shall issue
an advisory opinion to the secretary identifying laws
and regulations governing approval or execution of such
expenditures or contracts.
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c. Prior to execution of a proposed expenditure or
contract:
1) CalVet shall provide written notification
in the form of a draft expenditure proposal to the
home's Allied Council or other body representing the
residents of an affected home. The draft expenditure
proposal shall include, but is not limited to, a
description of the intent of the project that is the
subject of the proposed expenditure or contract,
estimated costs, and an approximate timeline of
execution.
2) The Allied Council or other body
representing residents of the affected home or homes
shall have the opportunity to respond to the draft
expenditure proposal and CalVet shall consider any
responses provided.
d. Upon execution of the expenditure or contract,
CalVet shall provide written notification to the Allied
Council or another representative body affected homes.
The notification shall identify the purpose of the
project, costs, and who is the recipient or recipients
of the moneys distributed from the MWR Fund.
1. AB 1739 (Allen, Chapter 95, Statutes of 2012) allows
the administrator of a state veterans' home to enter into
an agreement with the home's allied council to authorize
the council to operate MWR Fund activities such as a hobby
shop, movie theater, library, band, and to pay for such
things as newspapers, entertainment, sports activities,
celebrations and other activities for the benefit of the
veterans.
2. SB 10 (Evans, Chapter 265, Statutes of 2011)
establishes a Veterans' Home Allied Council for each of
California's Veterans Homes and permits each council to
represent veterans who reside in the veterans' homes in
matters before the Legislature if each council, in the
course of providing that representation, complies with
certain requirements.
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POSITIONS
Sponsor: Author.
Support: Yountville Veterans Home
Oppose: None on file.
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