BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 1580|
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THIRD READING
Bill No: AB 1580
Author: Yamada (D)
Amended: 8/21/14 in Senate
Vote: 21
SENATE VETERANS AFFAIRS COMMITTEE : 4-1, 6/24/14
AYES: Hueso, Correa, Lieu, Roth
NOES: Nielsen
NO VOTE RECORDED: Knight, Block
SENATE APPROPRIATIONS COMMITTEE : 5-0, 8/14/14
AYES: De Le�n, Hill, Lara, Padilla, Steinberg
NO VOTE RECORDED: Walters, Gaines
ASSEMBLY FLOOR : 53-18, 5/28/14 - See last page for vote
SUBJECT : Veterans homes: Morale, Welfare, and Recreation
Fund
SOURCE : Author
DIGEST : This bill consolidates the separate Veterans Morale,
Welfare and Recreation Funds (MWR) at each veterans home into a
newly created fund in the State Treasury.
Senate Floor Amendment of 8/21/14 add legislative intent,
clarify terms and conditions, and make minor changes.
ANALYSIS :
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Existing law:
1. Authorizes the creation of an MWR at each veterans home.
Revenue to the MWR is derived from many sources including
proceeds from the California Veterans Homes Fund, the
Veterans Quality of Life tax check-off, operations of a
canteen, revenue derived from the issuance of prisoner-of-war
special license plates, monies collected from gold course
green fees and range ball fees, donations, interest earned on
invested funds, and funds derived from the estates of
deceased members.
2. Authorizes the MWR funds to be used for the following
purposes:
A. Operating the Veterans' Home Exchange store, hobby
shop, motion picture theater, library and band, as well
as any other function that is operated for the morale,
welfare, and recreation of the members of the homes.
B. Paying for newspapers, chapel expenses, welfare and
entertainment expenses, sport activities, celebrations,
and any other activity that is for the moral, welfare,
and recreation of the veterans.
3. Prohibits the use of the MWR funds for the following
purposes:
A. Medical or any related treatment.
B. Maintenance of the home's physical plant.
C. Any function, operation, or activity not directly
related to the morale, welfare, or recreation of the
veterans.
4. Provides that certain portions of the estates of deceased
veteran residents may be recovered by the Department of
Veterans Affairs (CalVet) for obligations owed for costs of
the veterans care that are in excess of the reimbursements
made by the United States Department of Veterans Affairs.
Any recovered funds are deposited in the MWF account at the
home where the veteran had resided.
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5. Requires CalVet to prepare and submit the itemized reports,
containing specified information, from the previous fiscal
year to various entities.
This bill:
1. Creates the Veterans' Morale, Welfare and Recreation Fund in
the State Treasury, and continuously appropriates the monies
in that fund.
2. Requires the individual accounts at each of the eight
veterans homes be consolidated into this newly created fund,
and abolishes those individual funds.
3. Exempts monies deposited into the fund from the pro rata
deduction to the General Fund for supervision or
administration of the state government, or for services to
other state agencies.
4. Requires the CalVet to develop standardized procedures and
regulations for distribution of the monies in the fund which
shall be in accordance with standard state contract and
procurement practices and rules; and to provide residents
with a quarterly report on the expenditures made from the
fund on behalf of each home.
5. Specifies that residents be consulted by CalVet with respect
to developing regulations and guidelines.
6. To access the funds, the administrator of each home, in
consultation with the Veterans' Home Allied Council, must
submit a proposal for expenditures of the funds for the
department secretary to approve.
7. Requires CalVet to maintain a reserve of $2 million in the
fund.
8. Contains legislative intent language.
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
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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.
MWR
Current MWR funds obtain their 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;
2. Donations from taxpayers when filing their state tax returns;
3. Revenues from the issuance of prisonerofwar license plates;
4. Other donations;
5. Interest earned from investments made with MWR fund monies;
and
6. Revenues from businesses operated using the MWR fund.
As of June 30, 2012, the amount of money held in the MWR funds
maintained by six veterans homes (less Fresno and Redding)
totaled more than $8 million. Approximately $5 million was held
in the MWR fund of Yountville, the oldest and largest home
campus.
Although, Military and Veterans Code Section 1047 allows a home
administrator to spend MWR monies 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
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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 $1 per year and involved
the clearing of untouched natural lands without a California
Environmental Quality Agency review. Under the contract
executed by the administrator, the home will 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 the second contract leasing the on-sight tavern, he/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%
of the profits generated from the enterprise were to be
deposited into the MWR Fund after all other expenses were
covered; however there was no guarantee the venture was going to
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 (DGS) was not consulted in its role as the
agency overseeing state leasing requirements. In total,
$652,919 was 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 Secretary
of CalVet, home administrators have historically been granted
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sole authority over decision making regarding the use of the
fund. Further, each contract was executed with little or no
legal oversight, which presumably will have discovered both
contracts violated state law and required review by DGS.
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.
Related legislation
AB 1739 (Allen, Chapter 95, Statutes of 2012) allowed 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.
SB 10 (Evans, Chapter. 265, Statutes of 2011) established 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.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Redirection of approximately $14 million from individual
accounts to the newly created state fund (Special Fund)
Administrative costs of up to $1.1 million annually to the
CalVet (General Fund)
CalVet will need additional staff of between seven and 10 PYs to
develop standardized expenditure procedures for the fund; to
prepare the quarterly report; and for the administration of the
new fund. Total costs will between $790,000 and $1.1 million
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annually depending on the level of staff required.
The combined amount from the individual MWR fund is
approximately $14 million, most of which is held in the MWR fund
at the home in Yountville.
SUPPORT : (Verified 8/21/14)
Veterans Home of California Allied Council
OPPOSITION : (Verified 8/21/14)
Veterans Caucus of the California Democratic Party
ASSEMBLY FLOOR : 53-18, 5/28/14
AYES: Alejo, Ammiano, Bloom, Bocanegra, Bonilla, Bonta,
Bradford, Brown, Ian Calderon, Campos, Chau, Chesbro, Cooley,
Dababneh, Daly, Dickinson, Eggman, Fong, Fox, Garcia, Gatto,
Gomez, Gonzalez, Gordon, Gray, Hall, Roger Hern�ndez, Holden,
Jones-Sawyer, Levine, Lowenthal, Medina, Mullin, Muratsuchi,
Nazarian, Pan, Perea, John A. P�rez, V. Manuel P�rez, Quirk,
Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez, Salas, Skinner,
Stone, Ting, Weber, Wieckowski, Williams, Yamada, Atkins
NOES: Achadjian, Allen, Bigelow, Ch�vez, Conway, Donnelly, Beth
Gaines, Grove, Hagman, Harkey, Jones, Logue, Maienschein,
Mansoor, Nestande, Olsen, Wagner, Wilk
NO VOTE RECORDED: Buchanan, Dahle, Frazier, Gorell, Linder,
Melendez, Patterson, Waldron, Vacancy
AL:d 8/22/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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