Commission's 25 Year Anniversary Report 1962-87

CHAIRMAN’S MESSAGE As Chairman of the Commission on California State Government Organization and Econ› omy for the past 12 years, and as a member of the Commission for nearly 20 years, I am proud to introduce the commemorative report celebrating the Commission’s 25th anniversary. During its existence, the Commission has become a strong and effective voice with the Legislature and the Governor in bringing about needed changes in state government operations. In the past five years alone, the Commission has sponsored and/or supported more than 50 pieces of legislation that have directly implemented Commis› sion recommendations. In addition, numerous Commission recommen› dations have been acted upon administratively by state agencies. The Commission has demonstrated a strong concern for saving state dollars by improving the business operations of state agencies. All told, the Commission’s recommendations in the past 25 years have resulted in actual cost savings and cost avoidance of well over a billion dollars. In addition to being a watchdog over state funds, the Commission has served as an oversight body to ensure that those who do not have a strong voice in state government, such as the elderly, children, or the indigent, are effectively served by government programs established on their behalf. The Commission has never been afraid to tackle tough problems or to roll up its sleeves and work through difficult issues. Moreover, I believe that the Commission - CHARTER OF THE COMMISSION The Commission was created by the Legislature to provide assistance to the Governor and the Legislature in promoting economy, efficiency, and improved service in the various departments, agencies and instrumen- talities of the Executive Branch of state government. In carrying out its responsibilities, the Commission has the authority to recommend any of the following: • Adopting methods and procedures for reducing expen- ditures to ensure the efficient provision of services, activi- ties and functions; • Eliminating duplication and overlap of services, activities and functions; • Eliminating time-consuming or wasteful practices; • Consolidating services, activities and functions of a similar nature; • Abolishing services, activities and functions not necessary to the efficient conduct of government; • Eliminating unnecessary state departments and agencies; • Creating necessary new state departments and agencies; • Reorganizing or transferring responsibilities within exist- ing state departments and agencies; • Defining or redefining the duties and responsibilities of state officers; and • Revising, adopting, or eliminating funding provisions. In addition to these powers, the Commission is required to review and make recommendations regarding any reorganization plan submitted by the Governor prior to review by the Legislature. The Commission is empowered to subpoena attendance of witnesses and the production of books, records, papers, accounts, reports and documents necessary to complete its studies. Moreover, the law states that the Commission shall have the full and complete coop- eration of all state agencies and be granted access to all state records except where expressly prohibited by other statutes. I FOUNDER'S STATEMENT It gives me tremen- dous pleasure and a heartfelt sense of pride to have the opportunity to help the Little Hoover Commission commemorate 25 years of service to - the State of California. As the author of the legislation that originally created the Commission, I have served as a member of the Commission since its inception. This has provided me the chance to assist in the growth and evolution of the Commission and to witness the significant impact that it has had on state government. Throughout the Commission's existence, its members have served the State of California with a commitment that has been highly commendable and above reproach. The Commission has diligently remained true to its original purpose of providing nonpartisan assis- tance to the Governor and the Legislature to help improve the performance of state government. As I stated at the initial meeting of the Commission in 1962, the Commission was not created to point a finger at anyone or any agency. Rather, it was created to stimulate greater efficiency and economy while seeking to improve the provision of governmental ser- vices. It has done just that. In its relatively short history, the Commission has saved the taxpayers of California millions upon millions of dollars and at the same time championed better services. I would like to commend everyone who has served on or assisted this Commission in the past 25 years. In answering the call of this Commission, you have f.urthered the best interests of the State of California. Sincerely, SENATOR MILTON MARKS - COMMISSION ON CALIFORNIA STATE ~GOVERNMENT ORGANIZATION AND ECONOMY Members of the Commission Nathan Shapell Chairman Haig G. Mardikian Vice Chairman Senator Alfred E. Alquist Senator Milton Marks Assemblywoman Gwen Moore Assemblyman Phillip Wyman Mary Anne Chalker Albert Gertsen M. Lester Oshea George Paras Abraham Spiegel Barbara Stone Richard R. Terzian --former Commission Chairmen Eugene C. Lee Harold Furst Casper Weinberger D. W. Holmes Herbert Jackson Manning J. Post Commission Staff Robert T. O'Neill Executive Director Jeannine English Assistant Executive Director Michael Cannon -- Lillian DeYoung Carol Elwell Debbie Fonseca Former Executive Directors Les H. Halcomb, Jr. Richard C. Mahan Commission Staff: Robert T. O'Neill, Executive Director Jeannine English, Assistant Executive Director Michael Cannon Commission Staff,. lillian DeYoynQ' Carol Elwell . Debbie Fonseca ROLE AND FUNCTION OF THE COMMISSION The Little Hoover Commission occupies a unique vantage point in state government which allows it to complete a full range of activities to identify and seek needed changes in the Executive Branch. As an independent watchdog agency, the Commission has the authority to: • Identify the studies it wishes to pursue; • Design and conduct the reviews; • Formulate study recommendations for the Governor and the Legislature; and • Sponsor or support legislation to implement Commission recommendations. The Commission generally holds a public hearing once a month regarding a particular study it is performing. In addition, the Chairman of the Commission appoints Subcommittees of Commission- ers to oversee, direct, and control the work in major study areas. These study Subcommittees are responsible for reporting back to the full Commission on their findings. In turn, the Commission considers and acts upon the recommendations of the Subcommittees. There are three primary means in which ideas for conduct- ing studies are brought to the attention of the Commission. These include: • The Governor or members of the Legislature request that the Commission conduct a study on a particular topic; • Individual Commissioners identify potential problems in state government operations that they believe warrant investigation; or • Members of the general public notify the Commission of problems in state government activities. At the beginning of each fiscal year, the Commission's staff prepares a study work plan for the upcoming year that is reviewed and updated on at least a quarterly basis. This work plan serves as the blueprint for the work performed by the Commission each year. Once the Commission has completed a study, it issues a report to the Governor and the Legislature. Since the Commission only has the power to make recommendations, it must lobby for the imple- mentation of its recommendations with the Governor's Administration and the Legislature. Moreover, after a report is issued, the Commission conducts follow-up work on its recommendations at six-month and one-year intervals to ensure that the recommendations are being acted upon. If not, the Commission may hold follow-up hearings to determine why its recommendations are not being carried out. HIGHLIGHTS OF COMMISSION STUDIES The Little Hoover Commission has issued 85 __ reports on state government activities during its 25 years of service. The following section provides examples of some of the reviews that the Commission has performed. Each of the members of the Commission are involved in all studies that the Commission conducts. CASH MANAGEMENT The major revenue col- lection and taxation agencies in the State of California, including the Board of Equalization, the Franchise Tax Board, the Employment Development Department, and several other departments collect more than $40 billion each year in receipts from businesses and individual taxpayers. The Commission released a report in April 1986 on its review of the organization and operation of the State of California's major revenue and tax collection functions and cash management activities. The study revealed that: - • Major opportunities exist to generate millions of dollars in additional interest earnings from improved cashiering operations in state departments; • The use of old equipment by certain departments was resulting in slower processing of state receipts and lost interest earnings; and • The State fails to deposit receipts in the bank in a timely manner due to poor processing practices and facility layouts. The report presented a total of 35 recommendations to the various departments involved in the State's revenue and tax collection activities. More than half of these recommendations have already been adopted by the departments involved and the feasibility of the remain- ing recommendations is being studied by a joint task force comprised of representatives from the departments. Already, through the pur- chase and use of improved equipment, the realignment of facilities, and the implementation of better workload management techniques, the State is generating considerable additional interest through more timely deposit of funds. Abraham Spiegel 'Albert Gersten I EDUCATION The Commission has demonstrated a continuing concern regarding the operation, financing, and perform- ance of the State's kindergarten through grade 12 (K-12) public school system. Beginning in 1973 and extending to the Commission's most recent study that was released in November 1987, the Commis- sion has issued a total of 10 reports on problems in the K-12 public school system. Among the reports issued by the Commission relating to K-12 education, have been the following: • A study of the school building program and a review of the utilization of K-12 public school facilities; • A review of the operations of the Los Angeles Unified School District and the San Juan Unified School District; • A study on the role of the State Department of Educa- tion in California's K-12 public school system; and • A review of the use of Lottery funds in the State's K-12 public school system. In the past few years, the Commission has given consider- able attention to the need for additional financial accountability and improved financial management in the public school system. As a result of its involvement in this issue, the Commission has sponsored or sup- ported various legislative measures that have been enacted in law. Specifically, these measures include: - • Senate Bill 1379 (Alquist), Chapter 268, Statutes of 1984, which transferred the responsibility for developing the K-12 education audit guide from the Department of Finance to the State Controller's Office; • Assembly Bill 1366 (Hughes), Chapter 741, Statutes of 1985, which provided a basic reporting mechanism to ensure that control agencies had access to financial information needed to monitor local educational agen- cies; and • Assembly Bill 1926 (Bader), Chapter 990, Statutes of 1987, which established financial accountability requirements for local educational agencies that receive emergency apportionments, or "bailouts," from the Legislature. The overriding purpose of the Commission in each of these studies has been to ensure that the funds that are being spent in K-12 education, which now total approximately $20 billion annually, are properly accounted for and well spent. -. , AsseiN>,~Ywoman Gwen Moore LOTTERY OPERATIONS The California State Lottery was established with the approval of Proposition 37 by the voters in November 1984. Due to its early sales success, the Lottery grew rapidly into a nearly $2 billion a year operation with an authorized staff of more than 1,000 positions. The Commission released a report in January 1987 on the organization, operation and performance of the Lottery. The Commis- sion concluded that the Lottery had accomplished a great deal in a relatively short time and should be commended for the hard work of its staff. However, the Commission also found that the meteoric sales and growth of the Lottery had placed tremendous demands on Lottery staff and its business operations. Specifically, the Commission's report stated that the Lottery had failed to establish certain business systems and controls necessary in an enterprise of its size. Moreover, in the absence of such controls, there was not full assurance that the Lottery was operating efficiently and that funding for education was being maximized. In response to the report, the Commission sponsored two pieces of legislation which were recently signed into law by the Gover- nor. Senate Bill 116 (Dills), Chapter 426, Statutes of 1987, requires com- petitive bidding on major Lottery procurement contracts. It also mandates that the Lottery determine if needed goods and services are available through the Department of General Services' existing con- tracts. Assembly Bill 1101 (Hill), Chapter 475, Statutes of 1987, requires the Lottery to include specific information in its financial reports to state control agencies and the general public and specifies deadlines for making such reports. MEDI-CAL The Commission began a series of hearings and reports on the State's Medi-Cal program in 1977. Since that time, the Commission has examined a variety of issues that have an impact on the cost and quality of the health care provided in the Medi- Cal program. In June 1982, the Legislature imple- mented major Medi-Cal reforms designed to control the rapidly increas- ing costs of providing Medi-Cal health care benefits. These measures included recommendations that had been made in prior Commission studies, including: • Establishing a Medi-Cal "Czar" to act as a special negotiator to con- tract for health care; • Adopting competitive bidding for services to Medi-Cal recipients; • Placing restrictions on Medi-Cal eligibility; and • Increasing administrative reviews of Medi-Cal claims and service utilization. In May 1987, the Commission issued a follow-up report on the impact of the Medi-Cal reforms. The Commission found that the reforms have resulted in more than $1.1 billion in in-patient hos- pital care cost savings for the State in the past five years. However, the report also showed that the reforms may have contributed to an increase in the illegal transfer or "dumping" of Medi-Cal patients. Accordingly, the Commission supported AB 214 (Margolin), Chapter 1225, Statutes of 1987 which strength- ened laws against patient "dumping." -- NURSING HOMES The Commission initiated a series of public hearings in 1982 on the conditions and quality of care ...... in California's nursing homes. The Commission was shocked at the deplorable conditions and inadequate care that many of the 105,000 nursing home residents were receiving in some of the nearly 1,200 nursing homes in the State. As a result of these public hearings, on-site visits conducted by the Commission at substandard nursing home facilities, the Commis- sion's report, and the intense outcry from seniors and consumer groups, the Legislature enacted a package of 13 reform measures sponsored by the Commission. Collectively, these legislative measures were referred to as the Nursing Home Patients Protection Act of 1985. These reforms significantly strengthened the enforcement of quality of care requirements in California's nursing homes. Due to the extent of the nursing home problems and the large number of reforms enacted, the Commission held follow-up hear- ings in January 1986 and February 1987 to monitor the implementation of the reforms and gauge their impact. The Commission's follow-up work identified a number of additional problems which needed to be addressed. A report was issued on these problems in May 1987. Accordingly, the Commission sponsored or supported eight pieces of - legislation that were recently signed into law by the Governor. These include: • AB 258 (Wyman), Chapter 1226, Statutes of 1987, which required the Department of Health Services to develop theft and loss protection and recovery policies for facilities; • AB 688 (Isenberg), Chapter 1141, Statutes of 1987, which required facilities that voluntarily decertify from the Medi-Cal program to continue to care for all patients in the facility at the time of decertification; • AB 1834 (Connelly), Chapter 816, Statutes of 1987, which provided information to the Board of Examiners of Nurs- ing Home Administrators on administrators demonstrat- ing a pattern of poor performance; • AB 2047 (Katz), Chapter 1235, Statutes of 1987, which required facilities to reimburse or replace articles lost or stolen from patients if facilities do not have reasonable safeguards against theft and loss; • SB 73 (Lockyer), Chapter 1125, Statutes of 1987, which mandated expeditious resolution of certain types of cit- ations issued to facilities; M. lester Oshea • SB 1330 (McCorquodale), Chapter 625, Statutes of 1987, which specified the contents, terms and conditions for nursing home admission agreements. The Commission's continued involvement in the oversight and monitoring of nursing home conditions and the quality of care being provided to patients is a good example of how the Commission promotes cost-effective services and looks out for individuals who may not have a large voice in state government activities. PROPERTY MANAGEMENT The State of Cali- fornia utilizes more than 65 million square feet of space spread throughout more than 10,000 buildings, excluding the operations of the State university systems. In addition, the State of California owns more than six million acres of land. Simply put, the State of California is one of the largest property managers and owners in the nation with prop- erty holdings worth billions of dollars. The Commission's study of California state government's management of real property, which was issued in March 1986, was modeled after the work of President Reagan's Special Commission on Government Efficiency that was chaired by Mr. Peter Grace, Chairman of the Board of the W.R. Grace Corporation. The study of the State's property management practices showed that: • State property management is accountable to no one agency and is out of control; • At least 15 different departments own and manage vary- ing amounts and types of property; • The Commission identified $224 million worth of prop- erty that could be disposed of without affecting State operations or plans; • The State could increase revenues and cut costs by $5 million to $41 million by using property management alternatives in use by the private sector; and • There is no central inventory of state property holdings and the existing inventories are inaccurate and fail to maintain critical data. The Commission sponsored three pieces of legislation that were enacted by the Legislature and signed into law by the Governor in response to the property management study. AB 3932 (Areias), Chapter 907, Statutes of 1986, and AB 142 (Areias), Chapter 638, Statutes of 1987, required the preparation and maintenance of an inventory of the State's real property holdings. AB 3972 (Areias), Chapter 444, Statutes of 1986 established a state property management demonstration proj- ect to identify more effective means of managing state property. Richard R. Terzian Mary Anne Chalker TRANSPORTATION The Commission, has issued several major reports on the California Department of Transportation since 1966. Currently, the Department is responsible for operating more than 15,000 miles of state high- ways. To do this, the Department has a staff of more than 15,000 employees and spends more than $2.8 billion annually. Over the past two decades, the adoption of recommendations made by the Commission has resulted in hundreds of millions of dollars of savings to the State through the following: · Identification, lease and sale of air rights owned by the Department of Transportation; · Inventory, valuation and disposal of surplus properties owned by the Department of Transportation; · Abolishment of three transporta- tion boards; and · Establishment of a more effective highway planning and develop- ment process. Presently, the Commission is conduct- ing a major study of the Department's efforts to meet the State's current and long-term needs for new highways. Because California's transportation sys- tem is its economic lifeblood, the Com- mission is striving to ensure that the State's transportation infrastructure is improved so that our economy can con- tinue to prosper. UNDERGROUND ECONOMY At the request of Governor George Oeukmejian, the Commission initiated a compre- hensive study of the underground economy in California and the enforcement problems that state departments encounter in dealing with unreported "cash-pay" transactions. :rhe Commission issued a report in August 1985 on this topic. The Commission's study indicated that up to $40 billion in otherwise legal business transactions occur in California each year without a single dime of taxes being paid. Overall, experts estimate that the State loses more than $2 billion annually in income taxes alone because our taxation and enforcement system is unable to catch these tax cheaters. The report also revealed that the effect of the under- ground economy is not limited to lost taxes to the State. In addition, the participants in the underground economy also fraudulently file for welfare payments, receive Medi-Cal program health care benefits, and avoid payments to unemployment insurance, disability, and social security programs. In May 1986, the Governor's Multi-Agency Task Force on the Underground Economy was created by Executive Order 0-51-86 to address the problems cited in the Commission's report. Subsequently, the Commission sponsored AB 3060 (Hannigan), Chapter 1361, Statutes of 1986, which codified the responsibilities of the task force to investi- gate blatant, willful, and repeated tax and cash-pay violations. I Senator Alfred E. Alquist LISTING OF COMMISSION REPORTS Title --. 1. Findings and Recommendations Concerning Reorganization of the Executive Branch of California State Government 2. Findings and Recommendations Concerning Organization for Central Staff Services 3. Findings and Recommendations Concerning Automotive Fleet Management 4. Proposals Relating to Inheritance Tax Administration 5. Need for Revenue Unification 6. Management Manpower Requirements 7. Engineering Costs in the Division of Highways 8. The Use of Boards and Commissions in the Resources Agency 9. Program Budgeting 10. Statement of the Commission's 1967 legislative Interests 11. The California State Highway Commission and its Relationship to the State Transportation Agency, the Department of Public Works, and Division of Highways 12. An Examination of the Department of Professional and Vocational Standards 13. Report on California Statutory Salaries of Executive Branch of Government 14. A Study of the Department of Industrial Relations 15. A Study of the Need for Materials Management System 16. A Pilot Study of California State Employee Workmen's Compensation and other Work-Related Disability Benefits 17. Report on local California Fairs Receiving State Financial Support 18. Study of Salaries of Executive and Administrative Positions in California State Government 19. Preliminary Findings of Subcommittee on California Division of Highways Excess Right of Way 20. A Study of the School Building Aid Program 21. The Internal Auditing Program in the Executive Branch of California State Government 22. Administration of the HUD-701 Comprehensive Planning Assistance Grant Program by the State of California 23. A Study of the California State Public Utilities Commission 24. A Review of California's Vehicle Emission Control Program 25. A Study of the Administration of State Health Programs 26. Supplemental Report on licensing and Certification, Department of Health 27. Supplemental Report on State Hospitals, Department of Health 28. Should Social Security Coverage Be Continued for California State Employees? 29. A Study of the California Department of Transportation 30. A Study of the California Department of Motor Vehicles 31. Supplemental Report on Medi-Cal Program, Department of Health 32. Supplemental Report on Development Disabilities Program Department of Health 33. A Study of the Utilization of Public School Facilities 34. An Analysis of Community Hospital Medi-Cal Audits 35. Comments and Recommendations Regarding Professional and Business licensing 36. The Status of Health Planning in California-A Supplementary Report 37. Administration of the Medi-Cal Progrom-Secondary Supplementary Report 38. The Tax Appeals System in California - 39. Administration of the Mental Health and Developmental Disabilities Programs 40. Personnel Management in State Service 41. Medi-Cal Reform letter 42. 1979 Summary of Activities 43. Health Care Delivery System Reform letter Date December 1962 March 1963 June 1963 December 1964 December 1964 February 1965 April 1965 April 1965 February 1966 December 1966 December 1966 September 1977 December 1968 December 1969 May 1970 May 1970 May 1971 January 1972 January 1972 June 1973 March 1974 August 1974 December 1974 January 1975 January 1976 March 1977 April 1977 April 1977 May 1977 May 1977 September 1977 December 1977 July 1978 July 1978 January 1979 February 1979 February 1979 May 1979 August 1979 August 1979 September 1979 March 1980 May 1980 George Paras 44. Additional Funding for the Los Angeles Unified School District 45. A Report on the Los Angeles Unified School District 46. Century Freeway Letter 47. Report on the San Juon Unified School District 48. A Report on the Role of the State Department of Education in Californio's K-12 Public Education System 49. Horse Racing in California: Revenue and Regulation 50. Century Freeway Letter 51. Office of Special Health Care Negotiations 52. Review of Cost Sovings Associated with Conversion of Guodalupe College into a Women's Prison 53. Review of the Department of Transportation's Highway Planning and Development Process 54. California's K-12 Education Funding 55. The Bureaucrocy of Care-Continuing Policy Issues for Nursing Home Services and Regulation 56. Los Angeles County Contracting Out 57. Community Residential Care in California-Community Care as a Long Term Care Service 58. State Employee Air Travel 59. A Study of the Organization and Coordination of Electric Energy Planning and Electric Utility Regulation in California 60. 1982-83 Annual Report-A Summary of Activities ond Status of Recommendations 61. A Review of the Organization and Management of the State "Superfund" Program for Cleaning Up Hazardous Waste Sites 62. Review of State-Owned and Land Parcel in Contra Costa County 63. Follow-Up Report on Conditions in Community Residential Care Facilities in California 64. Control of Pesticide Residues in Food Products-A Review of the California Program of Pesticide Regulation 65. A Review of the Organization and Management of State Telecommunications 66. A Review of Selected Taxing and Enforcing Agencies' Programs to Control the Underground Economy 67. Review of Impact Fees Imposed on Developers by Local Government 68. Review of Government Competition with Private Enterprise 69. Inadequate Financial Accountability in California's Community College System 70. California State Government Management of Real Property 71. Review of the Organization and Operation of the State and California's Major Revenue and Tax Collection Functions and Cash Management Activities 72. Biennial Report-February 1984-86: A Summary of Activities and Status of Recommendations 73. A Review of Use of Lottery Funds in the State's K-12 Public School System 74. A Report on the Liability Insurance Crisis in the State of California 75. A Report on the Lack of Financial Accountability and Responsibility in the State's K-12 Public School System 76. A Review of the State Controller's Office Move to the Capitol Bank of Commerce Building 77. A Review of the Organization, Operation and Performance of the California State Lottery 78. The Children's Services Delivery System in California Preliminary Report-Phase I 79. Accessibility of the Disabled Population to Substance Abuse Treatment 80. New and Continuing Impediments to Improving the Quality of Life and the Quality of Care in California's Nursing Homes 81. Follow-up Letter Report on the Impact of the 1982 Medi-Cal Reforms 82. Crime on University of California Campuses 83. A Review of the Organization and Administration of California's Overseas Trade and Investment Offices 84. The Children's Services Delivery System in California-Final Report 85. Financial Management and Accountability in the State's K-12 Public School System November 1980 June 1981 August 1981 , January 1982 June 1982 July 1982 December 1982 ., , March 1983 March 1983 June 1983 June 1983 August 1983 November 1983 December 1983 February 1984 February 1984 March 1984 July 1984 July 1984 February 1985 March 1985 April 1985 August 1985 December 1985 January 1986 February 1986 March 1986 April 1986 Barbara Stone May 1986 June 1986 July 1986 December 1986 December 1986 January 1987 March 1987 May 1987 May 1987 May 1987 June 1987 July 1987 - October 1987 November 1987