The 2020-21 Budget: Assessing the Governor's Reorganization Proposals

The 2020-21 Budget: Assessing the Governor’s Reorganization Proposals Summary As part of his budget plan for 2020-21, the Governor proposes six government reorganizations—which we define as the consolidation or transfer of government functions—across several policy areas. In many cases, the Governor proposes consolidating agencies or shifting responsibilities from existing agencies to newly established entities. The proposals would affect a broad array of state departments, offices, and commissions that perform a wide range of functions, including advising the Legislature and Governor, overseeing and implementing programs, collecting data, and licensing and regulating certain activities. In reviewing the Governor’s reorganization proposals, there are many issues for the Legislature to consider in determining whether to approve or reject each proposal. In this brief, we outline a broad framework to consider these issues. Specifically, we recommend that the Legislature consider the following key questions when evaluating the proposals: • Would the Reorganization Make Programs More Effective? A reorganization should result in programs becoming more effective and the public receiving improved government services. • Would the Reorganization Improve Efficiency? A reorganization should result in programs using fewer resources or improving the quality of services provided within existing resources. • Would the New Structure Improve Accountability? A reorganization should result in a government structure where the Legislature and the public can easily identify the person or entity responsible for managing a program. • Is the Reorganization Based Upon a Policy Rationale? A reorganization should be consistent with an underlying policy rationale to address a problem that has been clearly identified. • Does the Reorganization Reflect Legislative Priorities? A reorganization should be consistent with the priorities that the Legislature has set for a program or government function. • Do the Benefits Outweigh the Costs? The benefits of a reorganization should outweigh the costs to implement the reorganization, which can sometimes be significant. • Is the Reorganization Well Planned? A reorganization should be well planned given that it can result in significant complexities—such as the need to reclassify positions and responsibilities. • How Should the Reorganization Be Implemented? Government reorganizations can be implemented in a few different ways, though typically they have been pursued either through the formal executive branch reorganization process laid out in statute or budget trailer legislation. GABRIEL PETEK LEGISLATIVE ANALYST FEBRUARY 7, 2020 analysis full gutter 2020-21 BUDGET INTRODUCTION Across several policy areas, the Governor’s sometimes unforeseen challenges in implementing proposed budget for 2020-21 calls for various government reorganizations. For these reasons, it is changes aimed at reorganizing California’s imperative for the Legislature to have the necessary state government. (In this brief, we define tools to effectively evaluate the Governor’s “reorganization” as the consolidation or transfer of proposals. government functions across different agencies.) In this brief, we (1) describe the process Specifically, the Governor proposes several by which reorganization can be implemented, reorganizations that consolidate agencies or shift (2) provide an overview of the Governor’s responsibilities from existing agencies to newly reorganization proposals, and (3) highlight several established entities. While some reorganizations overarching issues for the Legislature to consider have the potential to achieve cost savings when evaluating the Governor’s proposals. (In the and improve services to the public, other coming weeks, we will provide our specific findings reorganizations could have the opposite effect. and recommendations on the individual proposals In addition, there are often complexities and in separate analyses.) REORGANIZATION PROCESS Government reorganizations can be implemented • Submission of Plan for Statutory Drafting. in a few different ways, though typically they have Before initiating the reorganization process, been pursued either through the formal executive the Governor must provide a copy of the branch reorganization process laid out in statute or reorganization plan to Legislative Counsel budget trailer legislation. Historically, most major for statutory drafting so that it reflects the reorganizations have gone through the formal form and language suitable for enactment in executive reorganization process. Below, we statute and to ensure that the plan clearly and provide information on both processes. specifically expresses its nature and purpose. Executive Branch Reorganization Process. • Submission of Plan for Independent Through Article V, Section 6 of the California Review. At least 30 days before submitting Constitution, the Legislature authorized the a reorganization plan to the Legislature, the Governor to reorganize the functions of Governor must submit the plan to the Little state agencies through the executive branch Hoover Commission—an independent state reorganization process. In establishing this oversight agency tasked with reviewing and process, the Legislature stated that the Governor making recommendations to the Governor should determine if such changes are necessary and Legislature on state operations and any to accomplish one or more broad purposes, such proposed government reorganization plan. as to reduce expenditures, increase efficiency, or • Review by Legislative Committees. eliminate duplications of effort. Since 1968, various Once the Governor submits the plan to the Governors have submitted 37 reorganization plans Legislature, (1) the Little Hoover Commission through this process. The executive reorganization has 30 days to issue a report reviewing the process can be used to transfer, consolidate, or plan and (2) the Legislature has 60 days to eliminate agencies and programs. The process can consider the proposal. Upon receipt, the plan also be used to establish new agencies to perform is referred to policy committees of each house the functions of existing entities. of the Legislature. The committees study and The major steps required in the executive branch report on the plan no later than ten days prior reorganization process include: to the end of the 60-day period. 2 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET • Legislative Action on Plan. Either house budget trailer legislation. For example, in 2019, can reject the proposal by majority vote—but the Governor proposed removing the Division of not until its policy committee has issued a Juvenile Justice from the California Department of report or the report’s deadline has passed. Corrections and Rehabilitation and making it a new The Legislature can only vote to approve or department under the California Health and Human reject the plan, it cannot amend it. If neither Services Agency (CHSSA) after a one-year planning house rejects the reorganization plan during and transition period. This proposal was ultimately the 60-day period, it goes into effect on the implemented through budget trailer legislation 61st day approved as part of the 2019-20 budget package. Reorganizations pursued through budget Budget Trailer Legislation Process. Budget trailer legislation are exempt from the procedures trailer legislation is used to implement specific outlined in statute for the executive reorganization changes to state laws to effectuate the annual state process. Instead, reorganizations pursued through budget. Generally, a separate a piece of budget this process must follow the current rules and trailer legislation is needed for each major area regulations associated with passing budget trailer of budget appropriations, such as transportation, legislation. For example, budget trailer legislation human services, or education. The provisions of (like all bills) must be made available to legislators these bills are usually proposed by the Governor and posted on the Internet for at least 72 hours and negotiated as part of the budget package for before the Legislature can vote on them. In each fiscal year. In recent years, several government addition, budget trailer legislation takes effect reorganizations have been pursued through immediately when signed by the Governor. OVERVIEW OF GOVERNOR’S PROPOSALS As part of his proposed budget plan for 2020-21, Specifically, the Governor proposes to: the Governor proposes six different government • Establish New Department of Early reorganizations. Our understanding is that the Childhood Development. The Governor administration intends to implement the proposed proposes to consolidate various childhood reorganizations through budget trailer legislation development programs and services currently rather than through the formal executive branch administered across multiple agencies (such reorganization process. The Governor’s proposals as the California Department of Education would affect a broad array of state departments, [CDE]) into a new Department of Early offices, and commissions. These entities perform Childhood Development under CHHSA a wide range of functions that include advising beginning in 2021-22. The Governor’s the Legislature and Governor, overseeing and budget includes $6.8 million (General implementing programs, collecting data, and Fund) for CHHSA in 2020-21—increasing licensing and regulating certain activities. (We note to $10.4 million annually beginning in the Governor also proposes new responsibilities 2021-22—to establish a transition team for various agencies, such as increasing the that would oversee the reorganization and responsibilities of the Department of Business administer child care programs under the new Oversight. However, because establishing new governance structure. government functions is generally not considered a • Establish New Department of Better Jobs reorganization, such proposals are not addressed and Higher Wages. The Governor proposes in this brief.) to consolidate employment, training, and data collection services currently provided by several departments and boards within www.lao.ca.gov 3 analysis full gutter 2020-21 BUDGET the Labor and Workforce Development $3 million (General Fund) in 2020-21 for the Agency into a new Department of Better board. Jobs and Higher Wages. The Governor’s • Establish New Center for Data Insights budget includes $2.4 million (General Fund) and Innovation. The Governor proposes in one-time resources in 2020-21 to establish to consolidate the Office of Innovation, the the executive team of the new department. Office of the Patient Advocate, and the • Move Seismic Safety Commission Under Office of Health Information Integrity into the Department. The Governor proposes moving new Center for Data Insight and Innovation the Seismic Safety Commission, which is under CHHSA. The center would integrate currently independent, under the Governor’s data from across CHHSA departments Office of Emergency Services (OES). The and use data analytics and insights to Governor’s budget shifts the resources for the inform program improvements. According commission to OES and provides additional to the administration, the center would be funding. In total, the proposal provides established within existing CHHSA resources $3 million ($949,000 General Fund) in in 2020-21. 2020-21 and $2.7 million ($713,000 General • Establish New Department of Cannabis Fund) in 2021-22 and ongoing for OES to Control. The Governor has stated his operate the commission. intention of consolidating existing licensing • Establish Oversight Board for Department responsibilities administered by the Bureau of Toxic Substances Control (DTSC). The of Cannabis Control, the Department of Food Governor proposes to establish a board that and Agriculture, and the Department of Public would set fees through regulation, hear permit Health into the new Department of Cannabis appeals, and provide strategic guidance Control by July 2021. According to the to DTSC. The Governor’s budget includes administration, it plans to submit a specific proposal to the Legislature this spring. KEY CONSIDERATIONS FOR THE LEGISLATURE In reviewing the Governor’s reorganization Would the Reorganization proposals, there are many issues for the Legislature Make Programs More Effective? to consider in determining whether to approve or reject each proposal. At the time of this analysis, A reorganization should result in programs however, specific details regarding some of becoming more effective and the public receiving the proposals have not been provided by the improved government services. Given that the administration, which can make it difficult for the administration has not provided specific and Legislature to adequately review their merits in a complete details regarding some of the Governor’s timely manner. In order to assist the Legislature, we reorganization proposals, it is difficult at this at developed a broad framework for considering the this time to determine whether the proposals proposals that builds upon our assessment of prior would achieve this goal. It will be important for reorganization plans and best practices identified the administration to indicate how the proposed from other government agencies. Specifically, reorganizations will assist the various departments we identify a series of key questions that we and programs in achieving their intended goals and recommend the Legislature consider using when objectives and what impact they will have on the evaluating the Governor’s reorganization proposals, level of service provided to the public. This would which are summarized in Figure 1 and discussed allow, for example, the Legislature to consider next in more detail. whether there are barriers to the effectiveness 4 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET of child care programs that the creation of the Would the New Structure Improve Department of Early Childhood is Development is Accountability? necessary to address. A reorganization should result in a government Would the Reorganization structure where the Legislature and the public can Improve Efficiency? easily identify the person or entity responsible for managing a program. Clearly establishing who is Reorganization can often eliminate fragmented, responsible for a program would better enable duplicative, and overlapping government functions, the Legislature and the public to hold that person which can create efficiency. Addressing these or entity accountable for meeting clearly defined issues can allow programs to use fewer resources outcome-orientated goals and performance or improve the quality of services provided within standards. For example, the new Department existing resources (including providing a service to of Cannabis Control may have the potential to the public in a more timely manner). For example, improve accountability by creating a single entity it is reasonable to think that the establishment of responsible for licensing the legal cannabis market. the new Department of Cannabis Control would diminish the fragmented nature of the current Is the Reorganization cannabis regulatory responsibilities. This is because Based Upon a Policy Rationale? the current system has three separate agencies A reorganization should be consistent with an responsible for licensing different segments of the underlying policy rationale to address a problem cannabis industry. Establishing one department to that has been clearly identified. For example, handle licensing could improve coordination and the Governor’s proposal to place the Seismic potentially create efficiencies. However, without Safety Commission under OES is based on a detailed plan from the administration, it is not the rationale that it would enhance the state’s possible to tell whether this would be the case overall preparedness efforts by ensuring that the under the Governor’s proposal. commission plays a greater role in the state’s In contrast, reorganization can undermine emergency planning process. It is possible that efficiency. For example, the Governor’s proposal the transfer could achieve this goal as placing the to create a new Department of Early Childhood Development could fragment services in some areas. This Figure 1 is because the reorganization Key Considerations for proposes transferring General Child Care from CDE to the new Evaluating Reorganization Proposals department. As a result, it could 9 fragment General Child Care from Would the Reorganization Make Programs More Effective? CDE’s administration of State 9 Would the Reorganization Improve Efficiency? Preschool. This could result in entities that provide both State 9 Would the New Structure Improve Accountability? Preschool and child care needing 9 to interact with both CDE and the Is the Reorganization Based Upon a Policy Rationale? Department of Early Childhood 9 Development, rather than just CDE Does the Reorganization Reflect Legislative Priorities? as is currently the case. This could 9 Do the Benefits Outweigh the Costs reduce the overall efficiency of the administration of child care services 9 Is the Reorganization Well Planned? by requiring child service entities administer separate contracts with 9 How Should the Reorganization Be Implemented? two separate state departments. www.lao.ca.gov 5 analysis full gutter 2020-21 BUDGET commission within OES means it would be part aware of these costs when making its decisions. of the state’s lead disaster planning and response However, some of the Governor’s proposals do coordination agency. As such, it could mean that not currently provide sufficient information on more of the commission’s recommendations are how much they would likely cost. For example, adopted into the disaster planning process. the Governor’s budget does not include funding for the full cost of the proposed Department Does the Reorganization of Better Jobs and Higher Wages. As currently Reflect Legislative Priorities? proposed, the request only has one-time funding for ongoing salary costs associated with executive A reorganization should be consistent with team positions and for some operating expenses. the priorities that the Legislature has set for a Without additional information on what the ongoing program or government function. For example, cost to operate the new department would be, it is the Legislature has expressed interest in better difficult for the Legislature to assess whether the integrating health and human services programs. cost of creating the new department is outweighed To the extent that the proposed Center for Data by the potential benefits of doing so. Insights and Innovation leads to increased data sharing, research, and analysis across CHHSA Is the Reorganization Well Planned? programs, it could be consistent with the Legislature’s interest in greater coordination of Reorganization can result in significant health and human services overall. complexities—such as the need to shift employees and equipment to new locations, create or A reorganization should also result in affected harmonize information technology systems, programs having the appropriate level of and reclassify positions and responsibilities. independence. The state has hundreds of boards Accordingly, it is important that a reorganization and commissions that serve a variety of roles. be well planned. Given that the administration has In certain cases, these entities were established not provided details on many of its reorganization by the Legislature to operate with some level of proposals, it is unclear at this time whether the independence from the executive branch. For administration is fully prepared to address such example, the Legislature passed Chapter 532 of complexities. In the coming weeks, the Legislature 2006 (SB 1278, Alquist), which reiterated the will want to make sure that the administration Legislature’s perspective that an independent provides a detailed implementation plan for each Seismic Safety Commission plays a critical role in proposal. providing effective policy guidance and leadership on seismic safety issues. The Governor’s proposal How Should the Reorganization to place the Seismic Safety Commission under Be Implemented? OES, however, could reduce the commission’s independence. The Legislature will want to As discussed above, reorganizations have determine whether this change is consistent with its generally been pursued through the executive current priorities for the commission. reorganization process or budget trailer legislation. While it appears that the administration intends Do the Benefits Outweigh the Costs? to implement its reorganization proposals through A reorganization can sometimes result in budget trailer legislation, the Legislature should significant implementation costs, such as from consider whether the executive reorganization expenses related to the integration of data and process is more appropriate. We note that the budget systems, and the relocation of offices. In Legislature has raised concerns about using budget addition, costs can be created when programs trailer legislation for reorganizations in the past. within agencies are removed to become For example, in 2012-13, the Governor’s proposed independent agencies that require their own budget included three agency reorganization administrative staff, such as human resources and proposals that it intended to pursue through budget other support staff. The Legislature should be fully trailer legislation. At the time, questions were 6 LEGISLATIVE ANALYST’S OFFICE analysis full gutter 2020-21 BUDGET raised in the Legislature as to whether it would be Additionally, executive reorganization requires appropriate to reorganize state agencies without that plans put forward by the Governor must going through the process established in statute. (1) provide for the transfer or disposition of any Ultimately, the reorganizations went through the property or records affected by the reorganization; executive reorganization process. (2) ensure that any unexpended appropriations are We note that the executive reorganization transferred in accordance to the legislative intent process is relatively expedient since it can for the funds; and (3) list all statutes that would be be completed in 90 days. In comparison, inconsistent with the reorganization plan and, as a reorganization through budget trailer legislation result, would be suspended. These requirements would have to wait until the passage of the budget would not necessarily apply to budget trailer in June. The executive process also includes a legislation. framework designed to increase the likelihood that For the reasons given above, we recommend a reorganization would be effective and smoothly the Legislature encourage the Governor to submit implemented. For example, as discussed earlier, his proposals through the executive reorganization the executive process requires the Little Hoover process or provide justification for why he is Commission to conduct an independent analysis not doing so. At the time of publication, the to determine a reorganization plan’s impact on administration has not provided a rationale as to state operations, which could help identify potential why the proposed reorganizations should be done consequences of the reorganization. through budget trailer legislation. CONCLUSION The Governor’s budget proposes several reorganizations. As such, it will be important for reorganizations across multiple agencies and the Legislature to keep in mind key considerations programs. Reorganization is a major endeavor when evaluating the proposals, such as whether that should be based on a well-defined purpose the reorganizations would make programs more and plan. As discussed in this brief, there are effective and efficient, are based on a clear policy often complexities in implementing government rationale, and whether they are well planned. www.lao.ca.gov 7 analysis full gutter 2020-21 BUDGET LAO PUBLICATIONS This report was prepared by Frank Jimenez, and reviewed by Drew Soderborg and Anthony Simbol. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814. 8 LEGISLATIVE ANALYST’S OFFICE