BILL ANALYSIS �
Bill No: SB
1074
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Lou Correa, Chair
2013-2014 Regular Session
Staff Analysis
SB 1074 Author: Knight
As Introduced: February 19, 2014
Hearing Date: April 22, 2014
Consultant: Paul Donahue
SUBJECT
State government: State funds
DESCRIPTION
Makes it a misdemeanor, punishable by up to one year in a
county jail, or a $10,000 fine, or both, for a state
employee to transfer or use state money outside of the
State Treasury System, except as authorized pursuant to a
valid appropriation or to the reversion requirements set
forth in statute.
EXISTING LAW
1)Creates the State Treasury System to deposit state money
held by state agencies prior to expenditure.
2)Specifies that all money in the possession of, or
collected by, any state agency or department constitutes
state money, as defined, and is subject to provisions
governing its deposit and handling in trust accounts.
3)Provides that if state money withdrawn from the Treasury
pursuant to a valid act of appropriation is subsequently
returned, in whole or part, the Controller shall credit
it back to the special or general appropriation from
which it was drawn, and it is then available for the
purpose for which it was appropriated.
SB 1074 (Knight) continued
PageB
BACKGROUND
1)Author's statement : "For years, the state Department of
Forestry and Fire Protection (Cal Fire) deposited moneys
from wild land fire cost recovery into the Wildland Fire
Fund, and through an agreement with an outside non-profit
organization, circumvented state laws designating the
money collected in this fashion as 'state money,' which
is required to be held in trust accounts monitored by the
State Treasury and Controller.
"During an audit requested by the Joint Legislative Audit
Committee, Cal Fire stated that the funds were not 'state
money' because they were possessed and collected by the
outside non-profit organization. Although the State
Auditor in her report (2013-107) strongly disagreed with
the Cal Fire interpretation that the funds were not
'state money,' to date, it is unknown if any Cal Fire
employees that were responsible for the misappropriation
of funds were punished for their actions.
"SB 1074 makes sure there are consequences to bad actions
by employees doing what they know is wrong. When SB 1074
is enacted, state agencies, such as Cal Fire will be held
accountable when they choose to set up future accounts in
a private fund rather than turning over money to the
general fund or requesting a new account through the
Department of Finance. Following the recent scandal by
the state Department of Parks and Recreation, where they
knowingly hid $20 million while still closing many parks,
proves that this measure is needed to clean up more than
one agency in this state as soon as possible.
"Good governance is something that all elected officials
should strive for. SB 1074 is good public policy that
makes California's government more efficient."
2)Financial issues at Department of Parks & Recreation : In
July 2012, newspapers first reported that officials at
the Department of Parks and Recreation (DPR) had
maintained a secret surplus in the State Parks &
Recreation Fund, which at the time amounted to $20
million. <1> Although the surplus amount varied over
time, there was no specific evidence that the money had
-------------------------
<1> The Legislature ultimately approved a plan to spend the
$20 million surplus on state park operations.
SB 1074 (Knight) continued
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been spent illegally. Yet, high-ranking State Parks
officials kept quiet about the surplus even as DPR moved
to close 70 parks, for the first time in history, to
achieve state budget savings. The surplus would have been
enough to avoid these budget cuts. A later investigation
by the California State Auditor revealed that DPR
officials maintained the hidden cash surplus for as long
as 20 years. The report<2> tracked a surplus going back
to 1993 in the State Parks and Recreation Fund, which is
the primary fund that collects and disburses revenue
generated by the 278 state parks.
According to the Auditor, the surplus existed because DPR
officials routinely reported different fund totals to the
State Controller's Office and the Department of Finance -
in violation of state accounting rules. As in other
investigations completed by the Department of Finance
(DOF), the Controller's Office and the Attorney General's
office, the Auditor was unable to explain how the surplus
accumulated in the first place.
The DOF on numerous occasions between 1999 and 2003
warned DPR that it was reporting improper fund balances,
according to the audit. Those warnings were ignored, and
then mysteriously stopped coming from finance officials
in subsequent years. In 2012, after the hidden funds were
revealed, DOF imposed a new rule stating that department
heads are now required to certify - under penalty of
perjury - that the accounting information they report is
accurate.<3>
3)Support : The Howard Jarvis Taxpayers Association
explains that the rational for this bill stems from a
2012 scandal within the State Parks and Recreation
Department, in which $20 million dollars was
intentionally misappropriated. Making matters worse,
according to HJTA, was that this came at a time when
dozens of parks were threatened with closure, and the
system as a whole faced a maintenance backlog in the
hundreds of millions of dollars. Supporters state that,
in order to restore faith and trust in the government we
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<2> https://www.auditor.ca.gov/pdfs/reports/2012-121.1.pdf
<3>
http://www.sacbee.com/2013/02/15/5192590/california-state-pa
rks-had-hidden.html
SB 1074 (Knight) continued
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support with our tax dollars, creating this nominal
criminal penalty seems abundantly appropriate.
SUPPORT:
Howard Jarvis Taxpayers Association
OPPOSE:
None on file
FISCAL COMMITTEE: Senate Appropriations Committee
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