BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 543| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- UNFINISHED BUSINESS Bill No: SB 543 Author: Wolk (D) Amended: 8/1/16 Vote: 21 SENATE VETERANS AFFAIRS COMMITTEE: 5-0, 4/28/15 AYES: Nielsen, Hueso, Allen, Nguyen, Roth SENATE APPROPRIATIONS COMMITTEE: 6-0, 5/28/15 AYES: Lara, Beall, Hill, Leyva, Mendoza, Nielsen NO VOTE RECORDED: Bates SENATE FLOOR: 34-4, 6/1/15 AYES: Allen, Beall, Berryhill, Block, Cannella, De León, Gaines, Galgiani, Glazer, Hall, Hancock, Hernandez, Hertzberg, Hill, Hueso, Huff, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Moorlach, Nguyen, Nielsen, Pan, Pavley, Roth, Stone, Wieckowski, Wolk NOES: Anderson, Fuller, Morrell, Vidak NO VOTE RECORDED: Bates, Runner ASSEMBLY FLOOR: 54-23, 8/18/16 - See last page for vote SUBJECT: Veterans: Veterans Home of California SOURCE: Author DIGEST: This bill creates a centralized, state-level Morale, Welfare, and Recreation Fund (MWR Fund) for the Veterans Home of California (VHC) system of state veterans homes. This bill consolidates within this MWR Fund all existing and future MWR moneys generated by individual homes, and establishes procedures for and places restrictions on the budgeting and expenditure of moneys in the MWR Fund. SB 543 Page 2 Assembly Amendments modify the guidance to the Department of Veterans Affairs (CalVet) in how it distributes moneys from the MWR Fund to the eight home campuses; require each home campus administrator to maintain a local Morale, Welfare, and Recreation Operating Fund (MWRO) to receive distributions from the state MWR Fund; require each home campus to establish an MWR Advisory Committee to provide ongoing guidance for MWR Fund processes; and further clarify what constitutes appropriate use of MWR moneys. ANALYSIS: Existing law: 1) Provides for establishment of the VHC system, administered by CalVet, at various sites for aged and/or disabled veterans and their nonveteran spouses, who meet certain eligibility requirements. 2) Provides for eight home campuses within the system: Barstow, Chula Vista, Fresno, Lancaster, Redding, Ventura, West Los Angeles, and Yountville. 3) Requires that the administrator of each local home 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 residents. This bill: 1) Creates a centralized MWR Fund as a continuously appropriated fund within the State Treasury. 2) Requires the administrator of each local home to deposit all moneys maintained in an existing local MWR account into the centralized MWR Fund. 3) Requires the administrator of each local home to establish an MWRO Fund to administer quality of life activities for the SB 543 Page 3 general welfare of the residents and receive funds from the centralized MWR Fund, as specified, and to establish an MWR Advisory Committee, as specified. 4) Requires CalVet, in consultation with the MWR Advisory Committee, the Veterans' Home Allied Council or resident council of each local home campus, to adopt regulations related to, among other things, administering the centralized MWR Fund and local MWRO Funds, and the process by which the campuses submit budget requests and receive allocations. 5) Authorizes the use of MWR funds to provide for the general welfare of the residents, as specified, and specifies restrictions on the use of those funds. 6) Requires CalVet to annually determine the total amount for disbursement from the MWR Fund, and for that disbursement to be allocated proportionally to each campus' relative share of the total population of the entire VHC system. 7) Authorizes additional allocations to any campus if it is appropriate on the basis of factors including, but not limited to, the campus' unique age, size, population, and historical significance. 8) Authorizes the administrator of a home to enter into an agreement with a local allied council to operate facilities and activities that are related to authorized expenditures from the MWR Fund, as specified. 9) Requires CalVet 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)Requires CalVet to maintain a $3 million reserve in the MWR Fund. 11)Authorizes CalVet to invest MWR Fund moneys in the Surplus Money Investment Fund - or to contract with a third-party investment broker consistent with laws and regulations regarding selecting prudent, approved investment types. SB 543 Page 4 Background Morale, Welfare and Recreation Funds. Under existing law, MWR funds may be used for, but not be limited to, the following purposes: 1)Operating the local 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. 2)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. Existing law prohibits MWR funds from being used for: medical or any related treatment; maintenance of the home's physical plant; or any function, operation, or activity not directly related to the morale, welfare, or recreation of the veterans. Existing law 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). Existing law requires that residents, upon admission to the home and monthly thereafter, be informed about these provisions to recover unreimbursed costs of care. Existing law provides that the recovered funds are not returned to the State General Fund, but, instead, are deposited into the MWR Fund account for the local home at which the veteran resided at death. The existing local MWR funds obtain funding from several sources, including: 1)The estates of deceased residents, who die without heirs or owing money to the home for the cost of their care. SB 543 Page 5 2)Revenues from the issuance of prisoner-of-war license plates. 3)Other donations. 4)Interest earned from investments made with MWR Fund moneys. 5)Revenues from businesses operated using the MWR Fund. Over time, a wide disparity in MWR fund balances has developed among the campuses. Per the 2016-17 MWR budgets, the balances were: 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 Recent Controversy and Audit. In October 2013 the California State Auditor released an investigative report, which revealed that over a two-year period from January 2010 to December 2011, the Yountville Veterans Home administrator entered into and executed two contracts using MWR funds without consulting CalVet executive office officials, appropriate legal counsel, or residents of the home. The highly publicized report highlighted controversial deficiencies in the contract process, including that the funds were used for inappropriate purposes. Although the administrator is authorized to use MWR funds with the approval of the CalVet Secretary, home administrators historically have been granted sole authority over decision making regarding the use of fund moneys. Furthermore, each contract was executed with little or no legal oversight, which presumably would have discovered that both contracts violated state law and required review by the Department of General Services. Finally, residents of the Yountville home were unaware of the two contracts being executed involving their local MWR funds. Comments SB 543 Page 6 SB 543 is not a perfect compromise that pleases all concerns of all parties. A fair description is that the measure represents the author's effort to harmonize competing perspectives and strike a balance between ensuring proper oversight and accountability of these funds, on one hand, and preserving significant local decision making authority regarding their expenditure, on the other. During 2015-16, CalVet and the author sponsored several video conference calls to discuss the evolution of this bill. The calls included representatives from the allied/resident councils of all eight home campuses, the Governor's office, and staff from the Senate and Assembly veterans affairs committees. In addition, CalVet staff visited homes on-site to discuss the bill with local residents. Prior/Related Legislation AB 1580 (Yamada, 2014) would have instituted review measures and controls on the expenditure of local MWR funds for proposed expenditures of moneys of more than $5,000; and for proposed contracts of more than $25,000 per year or more than $100,000 total. (Died, inactive file, Senate Third Reading.) FISCAL EFFECT: Appropriation: Yes Fiscal Com.:YesLocal: No According to the Assembly Appropriations Committee: 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. SUPPORT: (Verified8/19/16) Allied Council, Yountville Veterans Home SB 543 Page 7 OPPOSITION: (Verified8/19/16) None received ASSEMBLY FLOOR: 54-23, 8/18/16 AYES: Achadjian, Alejo, Arambula, Atkins, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gipson, Gomez, Gonzalez, Gordon, Gray, Holden, Irwin, Jones-Sawyer, Kim, Lackey, Levine, Lopez, Low, McCarty, Medina, Mullin, O'Donnell, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Williams, Wood, Rendon NOES: Travis Allen, Baker, Bigelow, Brough, Dahle, Beth Gaines, Gallagher, Gatto, Grove, Hadley, Harper, Jones, Maienschein, Mathis, Mayes, Melendez, Nazarian, Obernolte, Patterson, Steinorth, Wagner, Waldron, Wilk NO VOTE RECORDED: Roger Hernández, Linder, Olsen Prepared by:Wade Cooper Teasdale / V.A. / (916) 651-1503 8/19/16 19:54:05 **** END ****