BILL ANALYSIS Ó
SB 543
Page 1
SENATE THIRD READING
SB
543 (Wolk)
As Amended August 1, 2016
Majority vote
SENATE VOTE: 34-4
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Veterans |8-0 |Irwin, Chávez, | |
|Affairs | |Achadjian, Alejo, | |
| | |Brown, Daly, Frazier, | |
| | |Salas | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Appropriations |14-4 |Gonzalez, Bloom, |Bigelow, Jones, |
| | |Bonilla, Bonta, |Obernolte, Wagner |
| | |Calderon, Daly, | |
| | |Eggman, Eduardo | |
| | |Garcia, Holden, | |
| | |Quirk, Santiago, | |
| | |Weber, Wood, Chau | |
| | | | |
| | | | |
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SB 543
Page 2
SUMMARY: 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 for and restrictions on the budgeting and
spending of moneys in the Fund. Specifically, this bill:
1)Creates the MWR Fund, a continuously appropriated fund, in the
State Treasury.
2)Requires the administrator of a veterans' home to deposit all
moneys maintained by the administrator in an existing Morale,
Welfare, and Recreation Fund into the statewide MWR Fund.
3)Requires the administrator of each home to establish a Morale,
Welfare, and Recreation Operating Fund (MWRO Fund) to
administer quality of life activities for the general welfare
of the residents and receive funds from the MWR Fund, as
specified, and to establish an MWR Advisory Committee, as
specified.
4)The bill would require the department, in consultation with
the MWR Advisory Committee, the Veterans' Home Allied Council,
and Council or the resident council of each home, to adopt
regulations related to, among other things, administering the
MWR Fund and the MWRO Funds, Funds and the process by which
the homes submit and receive budget allocations.
5)The bill would authorize the use of funds in the MWR Fund to
provide for the general welfare of the residents of a home, as
specified, and would specify restrictions on the use of those
funds.
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6)The bill would require the department to annually determine
the total amount for disbursement from the MWR Fund, and for
that disbursement to be allocated proportionally to each
home's relative share of the total population of the entire
veterans' home system.
7)The bill would authorize additional allocations to any
veterans' home if it is appropriate on the basis of factors
including, but not limited to, the home's unique age, size,
population, and historical significance.
8)The bill would authorize the administrator of a home to enter
into an agreement with the Veterans' Home Allied Council to
operate facilities and activities that are related to
authorized expenditures from the MWR Fund, as specified.
9)The bill would require the department to prepare annual
reports regarding moneys deposited into the MWR Fund and
expenditure of those funds, as specified, and to submit the
report on or before December 31 of each year to specified
entities.
10)The bill would require the department to maintain a $3
million reserve in the MWR Fund and would authorize the
department to invest moneys in the MWR Fund in the Surplus
Money Investment Fund. Fund or by contracting with a
third-party investment broker consistent with laws and
regulations regarding selecting prudent, approved investment
types.
EXISTING LAW:
1)Authorizes MWR funds to be used for, but not be limited to,
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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.
c) Prohibits MWR funds from being used for: i) medical or
any related treatment; ii) maintenance of the home's
physical plant; or iii) any function, operation, or
activity not directly related to the morale, welfare, or
recreation of the veterans.
d) 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).
e) Requires that residents, upon admission to the home and
monthly thereafter, be informed about these provisions to
recover unreimbursed costs of care.
f) 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.
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2)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.
3)Although Military and Veterans Code Section (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.
FISCAL EFFECT:
According to the Assembly Appropriations Committee, the fiscal
impact is:
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1)Redirection of approximately $11 million from the veterans
homes to the newly created, and continuously-appropriated, MWR
Fund (Special Fund).
2)First-year costs of approximately $113,000 for implementation
and $107,000 on going, which include one position.
COMMENTS:
This bill fixes many of the challenges posed by the current MWR
structure, challenges set forth in greater detail below. The
current MWR structure, with substantially the same architecture,
has been in place since 1999 when there were only two homes,
Yountville and Barstow. The veteran home system in California
has since grown to eight homes. At least two unsuccessful
similar bills previously have attempted to address the necessary
changes to the MWR structure. The content of this bill has been
discussed extensively both in the context of the bill before the
Committee and in the context of previous bills on this topic.
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.
The Morale Welfare and Recreation (MWR) fund was established in
1999 by SB 281 (Chesbro), Chapter 902. The Legislature intended
to provide veteran home administrators with an additional
funding tool to provide for the general welfare of residents
beyond their medical and housing needs. Each home maintains an
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individual MWR fund. Monies are deposited into individual funds
through a variety of means including proceeds generated from the
Veterans' Home Exchange, revenue from prisoner-of-war special
license plates, funds from golf course green fees and range ball
fees, accrued interest in the account, the recovered cost of
care collected from residents' estates, and any donations from
the public.
Over time a wide disparity in MWR fund balances has developed.
According to the 2016-17 MWR budgets, the Homes had the
following balances:
Barstow $1,951,956
Chula Vista $2,289,524
Fresno $107,294
Lancaster $161,689
Redding $90,910
West LA $69,450
Ventura $112,992
Yountville $6,290,926
Total $11,074,741
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Home administrators, at the direction of the Secretary of the
Department of Veteran Affairs (CalVet), have discretion over how
monies within the fund are spent.
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
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
California Environmental Quality Act (CEQA) review. Under the
contract executed by the administrator, the home would receive
10% 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 a second contract leasing the
on-site 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. MWR funds were used to cover all
start-up costs for the venture and any monthly expenses not
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covered by sales for the first year of the contract. Only 25%
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
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.
As stated above, this bill is not the first attempt to fix the
MWR system's challenges and general anachronism. Particularly
since the release of the Audit discussed above, it is fair to
say that both the members of the homes and CalVet have found
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themselves in an untenable situation, the members among other
issues, are concerned that the MWR system has become more
opaque, and slower, and they express concerns about the effect
of changes to a system which is at least the familiar "devil
they know." CalVet in an effort to be responsive to the issues
raised in the Audit and as part of an overall attempt to make
the Homes function as a system, has been more cautious and
managed the MWR funds more carefully; in some instances
resulting in longer times for decisions as to expenditures and
plans.
This bill would fix most if not all of the major MWR issues that
critically need to be addressed. This bill:
1)Fixes the definition of Veterans Home of California, which
currently only includes Yountville and Barstow.
2)Strikes a balance between CalVet oversight and control of MWR
funds and the importance of home member input, consultation,
and local control of MWR programming.
3)Increases transparency and clarifies the rules and processes
applicable to MWR.
4)Fixes the arguable inequity of MWR fund balances, but provides
authority for the Secretary to meet the special circumstances
or unique needs of each Home.
5)Requires uniform accounting procedures to be used for MWR
funds and reporting thereon at every Home.
6)Clarifies the permissible purposes for which MWR funds may be
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used, but retains and conforms to the Legislative intent on
this point.
7)Addresses general anachronism and logistical concerns not
anticipated by the original language creating the MWR funds.
Analysis Prepared by:
John Spangler / V.A. / (916) 319-3550 FN:
0003814