BILL ANALYSIS                                                                                                                                                                                                    Ó




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          |SENATE RULES COMMITTEE            |                        SB 543|
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                                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.








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          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  








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             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.








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          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.








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          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








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          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










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          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


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