State Controller: Audits find more than $3 billion

SACRAMENTO – State Controller John Chiang today announced that since taking office in 2007, his audit findings through State and local investigations now total more than $3 billion, more than any other Controller in recorded State history.

"Unchecked spending is an invitation for misspending," said Chiang.  "My audits offer an inside-look at state and local checkbooks, and show us where fiscal practices need serious improvement. These findings can lead to real taxpayer savings, and every dollar rescued is one that we don’t have to take away from education, public safety, or other essential services."

The Controller's office typically has 200 to 300 different audits under way at any given time during the year. A sampling of investigations initiated by Controller Chiang include:

·       Unlawful spending and illegal property taxes in the City of Bell

·       Misspent and poorly-managed bond funds at LA Community College District

·       Massive losses from uncollected fines at State agencies

·       Inappropriate spending on gifts at the State Lottery

·       No-bid contracts and lax spending controls in the City of Montebello

·       Millions in overpayments to a State healthcare contractor

His office is currently in the process of auditing the City of Hercules, and investigating claims of
pension-spiking at the California State Teachers' Retirement System.

After completing his work in the City of Bell last year, the Controller's office was flooded with requests audits of more than 200 local governments across California. In order to meet those demands and better protect taxpayer dollars at the local level, the Controller introduced legislation to broaden his office's auditing abilities.

While those bills stalled in the last legislation session, the Controller will continue to push to expand his office's ability to protect taxpayer dollars through financial audits.

For more information on the Controller's audit programs, visit his website at www.sco.ca.gov.

State Controller Releases More Payroll and Pension Data for Public Employees

SACRAMENTO – State Controller John Chiang today updated his website showing the salary, pension benefits and other compensation for 674,000 city and county employees in calendar year 2010.
Today's posting includes wages and other forms of compensation worth $38.8 billion.  Four counties and 37 cities did not file in time for this website update
"Holding public officials accountable for how they manage public dollars relies heavily on transparency," said Chiang. "The struggles of the City of Bell remind us that corruption and fiscal mismanagement are often the byproducts of keeping the public in the dark."
The site was originally created by Controller Chiang in late 2010, after he ordered local governments to provide salary and other wage information for their employees to his office.  In October 2010, the Controller collected and posted 2009 wage information for more than 600,000 city and county employees.  He then added 2009 information for the employees from 2,379 special districts.  In June, he added 2010 compensation information for 256,222 employees from the State of California and 123,406 from the California State University System (CSU).
The data postings drew heavy internet traffic, and the site has logged nearly 5.3 million page views since October 2010.
The website covers elected officials as well as public employees.  It includes the following information for each position:

·       Minimum and maximum salary ranges;

·       Actual wages paid;

·       The applicable retirement formula;

·       Any contributions by the employer to the employee’s share of pension costs;

·       Any contributions by the employer to the employee’s deferred compensation plan; and

·       Any employer payments for the employee’s health, vision and dental premium benefits.

In addition, the website shows employees who hold multiple positions within either State government or the CSU system. The Controller continues to update and expand the site to include more public-sector data.  2010 compensation information for special districts, and 2011 information for State and CSU employees will be phased in over the next six months.
In August, the Controller and Community College Chancellor Jack Scott wrote to all 72 districts across the State, requesting they also submit their payroll data by early 2012.
A list of agencies that failed to file payroll records with the State can also be found on this website.  Each non-complying agency could face a penalty of $5,000.  The Controller’s Office will continue to review and post the relevant data from these local governments as it is reported to the State.

September Tax Revenue Shows California $705.5-Million Behind Budget

From State Controller John Chiang

SACRAMENTO – State Controller John Chiang today released his monthly report covering California's cash balance, receipts and disbursements in September, showing revenues came in $301.6 million below projections from the recently passed state budget.  
"For better or worse, the potential for revenue shortfalls is precisely why the Governor and Legislature included trigger cuts in this year's State spending plan," said State Controller John Chiang.  "September's revenues alone do not guarantee that triggers will be pulled. But as the largest revenue month before December, these numbers do not paint a hopeful picture."
After accounting for September revenues, total year-to-date general fund revenues are now behind the budget's estimates by $705.5 million.
The State ended last fiscal year with a cash deficit of $8.2 billion. The combined current year cash deficit stands at $17.6 billion.  Those deficits are being covered with $12.2 billion of internal borrowing (temporary loans from special funds) and $5.4 billion of external borrowing.
For more details, read September 2011's financial statement and summary analysis.

Will State Controller Audit Fullerton?

California State Controller John Chiang has issued his report on an audit of  the City of Montebello.

Earlier today Chiang said in a press release "At the expense of local job development, street repair, and schools, Montebello has made it a habit to tap legally-restricted funds to cover its budget and cash shortfalls.  It appears that the City moved money wherever it wanted, whenever it wanted, regardless of the law or the intended purpose of those taxpayer dollars."

With Fullerton using earmarked funds for non-fund related expenditures, it's just a matter of time before the Controller's Office finds their way to our own City Hall.

Fullerton has a couple of municipal codes that specify how the money for certain funds are to be used, such as our Sewer Fund or the Sanitation Fund.

After a cursory review of the City's budget for FY2011-2012, I wrote about these funds and some of the ways in which our tax dollars have been misappropriated.  Read about it HERE.

"Many positive signs" says State Controller

SACRAMENTO – State Controller John Chiang today released his monthly report covering California’s cash balance, receipts and disbursements in June and for the complete 2010-2011 fiscal year
The State ended the fiscal year with $95.5 billion in receipts and $93.8 billion in disbursements.  June revenues alone came in $440.5 million (3.7 percent) above estimates found in the May Revision of the Governor’s proposed 2011-12 budget. 
“The latest report shows many positive signs.  The State is spending less than it took in, we are borrowing less cash, and all three major sources of revenue show signs of growth,” said Chiang.  “But the success of the newly-adopted State budget will depend on continued economic expansion throughout the year.”
Sales taxes were above projections by $21.8 million (0.8 percent) in June, personal income taxes were up $410.5 million (6.8 percent), and corporate taxes were up $156 million (7.2 percent). 
While the Governor signed a new budget on June 30, 2011, revised cash flows for June 2011 and Fiscal Year 2011-12 are not expected until later this month.  But the State Budget did expect $1.2 billion in additional May and June revenues (above those projected in the May Revise estimates) to be carried-over into the new fiscal year.  By June 30, $849 million in additional revenue had materialized.
The State faced an $8.2 billion cash deficit on June 30. That deficit was covered by internal borrowing, or short term loans from special funds.
For more details, read June 2011's financial statement and the summary analysis.

State Controller Releases Salary and Pension Data

SACRAMENTO – State Controller John Chiang today updated his website showing the salary, pension benefits and other compensation for 256,222 State of California employees as well as 123,406 California State University (CSU) employees.
Last October, the Controller collected and posted wage information for more than 600,000 city and county employees. He also added 2,379 special districts’ payroll earlier this year.

The Government Compensation in California website covers elected officials as well as public employees. It includes the following information for each position:


• Minimum and maximum salary ranges;
• Actual wages paid;
• The applicable retirement formula;
• Any contributions by the employer to the employee’s share of pension costs;
• Any contributions by the employer to the employee’s deferred compensation plan; and
• Any employer payments for the employee’s health, vision and dental premium benefits.


In addition, the website shows employees who hold multiple positions within either State government or the CSU system. 
The Controller continues to update the site weekly with new information from local government agencies. A list of agencies that failed to file their payroll records with the State can also be found on this website.  Each non-complying agency could face a penalty of $5,000.

State Controller Finds Budget Did Not Balance On Paper

SACRAMENTO – State Controller John Chiang today announced that his analysis of the State budget vetoed last week shows the spending plan was incomplete and unbalanced. His analysis sought to determine whether the budget met the requirements of Proposition 25 and Proposition 58, which forfeit Legislative pay if a balanced budget is not passed by June 15.

“My office’s careful review of the recently-passed budget found components that were miscalculated, miscounted or unfinished,” said Chiang. “The numbers simply did not add up, and the Legislature will forfeit their pay until a balanced budget is sent to the Governor.”

Proposition 25, titled the “On-Time Budget Act of 2010,” was approved by voters November 2, 2010. The initiative lowered the vote requirement for passing a budget from two-thirds to a simple majority without lowering the two-thirds vote required for tax increases. It also forfeits Legislators’ pay and living expenses incurred from June 16 until “the day that the budget bill is presented to the Governor.”

Nothing in the Constitution or state law gives the State Controller the authority to judge the honesty, legitimacy or viability of a budget. The Controller can only determine whether the expected revenues will equal or exceed planned expenditures in the budget, as required by Article 4, Section 12(g) of the Constitution: “. . .the Legislature may not send to the Governor for consideration, nor may the Governor sign into law, a budget bill that would appropriate from the General Fund, for that fiscal year, a total amount that. . .exceeds General Fund revenues for that fiscal year estimated as of the date of the budget bill's passage. That estimate of General Fund revenues shall be set forth in the budget bill passed by the Legislature.”

“While the vetoed budget contains solutions of questionable achievability and some to which I am personally opposed, current law provides no authority for my office to second-guess them in my enforcement of Proposition 25,”said Chiang. “My job is not to substitute my policy judgment for that of the Legislature and the Governor, rather it is to be the honest-broker of the numbers.”

Using this standard, the Controller’s analysis found that the recently-vetoed budget committed the State to $89.75 billion in spending, but only provided $87.9 billion in revenues, leaving an imbalance of $1.85 billion.

The largest problem involved the guaranteed level of education funding under Proposition 98. The June 15 budget underfunded education by more than $1.3 billion. Underfunding is not possible without suspending Proposition 98, which would require a supermajority (2/3) vote of the Legislature.

The budget also counted on $320 million in hospital fees, $103 million in taxes on managed-care plans, and $300 million in vehicle registration charges. However, the Legislature never passed the bills necessary to collect or spend those funds as part of the State budget.

A summary of the Controller’s analysis of the authorized expenditures versus the estimated revenues can be found on the Controller’s website at www.sco.ca.gov.

Controller Releases More Local Government Payroll Figures

SACRAMENTO – State Controller John Chiang today updated his website showing the salary, pension benefits and other employee compensation for several hundred special districts including Library, Mosquito Abatement, Conservation, Air Quality and Airport agencies.
Last October, the Controller collected and posted wage information for more than 600,000 city and county employees. He then ordered special districts across the State to report the same information, and the first 1,925 districts were loaded between February and April of this year.
Compensation information for employees of special districts is being collected and posted on the website in four phases. The fourth and final phase – launched today – includes almost $457 million in payroll reported by 454 local agencies.
The Controller's government compensation reporting website covers elected officials as well as public employees. It includes the following information for each position:


• Minimum and maximum salary ranges;
• Actual wages paid;
• The applicable retirement formula;
• Any contributions by the employer to the employee’s share of pension costs;
• Any contributions by the employer to the employee’s deferred compensation plan; and
• Any employer payments for the employee’s health, vision and dental premium benefits.


In addition, the website shows employees who hold multiple positions within a single local government. Postings are updated weekly with any new information received.
80 percent of all special districts in the final phase followed the new reporting requirements. A list of agencies that failed to file in time for today’s launch can also be found on this website. Each non-complying agency could face a penalty of $5,000. The Controller anticipates loading similar information for state employees later this month.

Controller Announces No Pay for Legislators Absent Balanced Budget by June 15 Deadline

SACRAMENTO – In response to recent questions regarding the impact of Proposition 25, Controller John Chiang today announced he will permanently withhold Legislators’ salary and per diem beginning on June 16 if they fail to approve a balanced budget in the next two weeks.

"Presenting the Governor with a balanced budget by the Constitutional deadline is the most important, if not most difficult, job of the California Legislature,” Chiang said. “In passing Proposition 25 last November, voters clearly stated they expect their representatives to make the difficult decisions needed to resolve any budget shortfalls by the mandatory deadline, or be penalized. I will enforce the voters’ demand.”

Proposition 25, titled the “On-Time Budget Act of 2010,” was approved by voters November 2, 2010. The initiative lowered the vote requirement for passing a budget from two-thirds to a simple majority. It also required members of the Legislature to forfeit their salary and reimbursement for travel and living expenses incurred from June 16 until “the day that the budget bill is presented to the Governor.” Payments forfeited will not be paid retroactively.


Recently, questions have been raised regarding whether the budget passed by the Legislature had to be balanced, or if the budget bills passed in March would suffice. The Controller’s analysis of these issues concludes Proposition 25 cannot be read in a vacuum, and must take into account the provisions of Proposition 58 (passed by voters on March 2, 2004), the intent language found in Proposition 25, and the voter information and campaign materials upon which the voters relied.

Proposition 58 states, “[T]he Legislature may not send to the Governor for consideration, nor may the Governor sign into law, a budget bill that would appropriate from the General Fund, for that fiscal year, a total amount that ...exceeds General Fund revenues for that fiscal year estimated as of the date of the budget bill’s passage.” Because Propositions 58 and 25 overlap in the same section of the Constitution and address the same topic, they must be read together. A copy of the Controller’s full legal analysis can be found here.

Controller Reaches Settlement with Insurer John Hancock

PR11:017
4/22/2011

Contact: Jacob Roper
916-445-2636

SACRAMENTO – State Controller John Chiang today announced a landmark settlement with insurer John Hancock, paving the way for reforms of wide-spread industry practices that have victimized the purchasers of life insurance policies and annuity contracts for decades. It is the first settlement resulting from an audit of 21 insurance companies that Controller Chiang began nearly three years ago.
“Too many Californians have been victimized by a company they entrusted with their retirement security and the care of their families,” Chiang said. “While John Hancock is the first to be held accountable, it will not be the last. I am prepared to pursue all actions necessary – including litigation – to bring the rest of the industry into compliance.”

The Controller initiated the audit investigation in July of 2008 to determine the insurance industry’s compliance with state unclaimed property laws. Administered by the Controller, the California unclaimed property program generally provides that businesses must send lost or abandoned financial accounts to the State after three years of inactivity in order to safeguard private property from being lost during mergers or bankruptcies, drawn down by service or storage fees, or simply used by private interests.
The audit revealed an industry-wide practice of companies failing to pay death benefits to the beneficiaries of life insurance policies. Instead, companies would draw-down the policies’ cash reserves in order to continue collecting premium payments from the deceased. Once the cash reserves were depleted, the company would cancel the policy. The audits also found that insurers did not routinely cross-check the owners of dormant accounts with government databases listing the deceased. In other cases, the company had direct knowledge of the death of a policy owner, but still did not notify the beneficiaries.
For example, a policy was issued by John Hancock on February 16, 1963, to an individual who subsequently died on April 20, 1999. For the seven years following his death, the company continued to collect premium payments by depleting the policy’s cash reserves until it was finally canceled on January 1, 2009. The policy’s file does not contain any indication of when the last contact with the insured occurred, or that any efforts were made to locate the insurance owner prior to the policy lapsing. More than 11 years after the insured’s death, John Hancock still has not paid the beneficiaries or sent to the State Controller’s Office for safekeeping any benefits due under the policy. The company has written off all liability under the policy.
The Controller’s investigation also exposed similar abuses with the administration of annuity contracts. For example, John Hancock issued a contract on June 7, 1991, to an individual who subsequently died on May 1, 1995. The company’s own files contain notes revealing that the annuitant owner’s mother called the company in August 2002 reporting that her son had died. Additional notations in the file dated June 15, 2005, and October 13, 2005, state that the annuitant had died. Despite these acknowledgments, the file indicates the company continued to send mail to him in 2005, 2006, and 2007 – all of which was returned as undeliverable. Another notation was made to the file on July 14, 2009, acknowledging the owner was deceased, and that the company, for the first time, had attempted to contact a relative. According to the file, on October 26, 2009 – more than 14 years after the annuitant’s death – John Hancock paid the death benefit to the annuitant’s estate.
Today’s ground-breaking settlement requires John Hancock, a subsidiary of Manulife Financial Corporation, to do the following

• Restore the full value of more than 6,400 impacted accounts dating back to 1992;
• Create and adhere to methods for better identifying deceased policy holders and notifying their beneficiaries;
• Fully comply with California’s unclaimed property laws and cooperate with the Controller’s efforts to reunite more than $20 million of death benefits and matured annuities with their owners or, in many cases, the owners’ heirs;
• Pay the State of California three percent compounded interest on the value of the held amounts from 1995, or from the date of the owner’s death, whichever is later.

“These policies were purchased to give the owners and their families peace of mind,” said Chiang. “I will move to quickly return those benefits to their rightful owners.”

State Controller John Chiang Makes 2 Announcements...and we're broke!

The State Controller's Office sent me two press releases with in minutes of one another so here they are...

Controller Releases March Cash Update

SACRAMENTO – State Controller John Chiang today released his monthly report covering California’s cash balance, receipts and disbursements in March. Total receipts for the month were $370 million lower (-5.8 percent) than estimates found in the Governor’s proposed 2011-12 State Budget.
“The State’s cash position actually worsened by $370 million in March, despite very strong income tax collections,” said Chiang. “California’s economic recovery is clearly underway but is threatened by a budget gridlock that could halt job-producing public works projects, further erode the State’s credit ratings, and delay billions of dollars in payments.”
Sales taxes were up $9.7 million (0.5 percent) in March, and personal income taxes came in $1.2 billion above (144.7 percent) estimates. The drop in revenues was caused by corporate taxes, which were down $387.6 million (-19.7 percent), and the cancelled sale and lease-back of State properties that was slated to generate $1.2 billion in March.

The State faced a $19 billion cash deficit on March 31. That deficit was covered by $9 billion of internal borrowing – short term loans from special funds – and $10 billion of external borrowing.
March 2011’s financial statement and the summary analysis can found on the Controller’s Web site at www.sco.ca.gov. The site also includes an April Tax Tracker, which lists the daily amount of personal income tax collected. The Governor’s proposed 2011-12 State Budget expects more than $6.8 billion of income tax collections in the month of April alone.
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Controller Co-Hosts Annual Financial Literacy Fair

SACRAMENTO – Controller John Chiang and Assembly Member Mike Eng today co-hosted a Financial Literacy Fair at the State Capitol, bringing together credit counselors, banks, financial services, and education, consumer protection and community-based organizations to tackle the challenge of enhancing financial skills for California families.
“All Californians deserve direct access to basic financial information that helps them make wise investments with their money, establish college funds for their children and save for their own retirement,” Chiang said. “Whether it is educating a college freshman about credit card debt, or a low-income worker about the dangers of predatory loans, empowering California families with good financial information will strengthen our communities and our State.”
The Controller is co-sponsoring with the New America Foundation legislation authored by Assembly Member Eng that will encourage the State to partner with businesses and non-profit organizations and share in developing information that can help California consumers make sound fiscal choices. The bill, AB 597 also will create an advisory committee focused on improving financial literacy throughout California.
“A well-informed and financially literate consumer can save thousands of dollars, avoid abnormal fees and charges and build up savings for retirement,” said Assembly Member Mike Eng (D-Monterey Park). “AB 597 makes financial literacy a priority in California by establishing a fund for the sole purpose of empowering our citizens to make informed choices and make them less susceptible to scams and predators.”
Almost 20 exhibitors  participated by providing information about wise investments, financial planning, consumer protection, credit counseling and ways to better manage money, save on taxes and enhance money skills.
Joining the Controller and Eng at the press conference and fair were Maria Sotero of the New America Foundation, and Assembly Member Alyson Huber (D-El Dorado Hills).

Chiang Unveils Costs for State Retiree Health Benefits, Offers Solutions

***UPDATE***
The press release we issued yesterday regarding the actuarial report on health and dental benefits for state retirees contained an error.  In a quote attributed to the Controller, the release said that if the State could reduce the assumed rate of health care inflation by 1 percent, it would cut the unfunded liability by $7.4 billion over 10 years.  The correct period of time is 30 years.
We apologize for the error.  A corrected version has been posted on the Controller’s website at www.sco.ca.gov.

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***END UPDATE***

SACRAMENTO – State Controller John Chiang today unveiled a new actuarial report that shows California faces a $59.9 billion bill to pay for health and dental benefits for state retirees over the next 30 years.

“As the State’s obligation to pay health and dental benefits for its current and retired workforce continues to grow, it is critical that we begin making down payments on this tab and adopt strategies to reduce health care costs,” Chiang said. “Because this bill is not immediately due, California has the time and the opportunity to reduce the impact on future generations by putting additional dollars into the annual payments so that we can invest those funds, grow that money and tackle our obligation in a responsible manner.”

The unfunded obligation as of June 30, 2010, grew $8.1 billion from the $51.8 billion obligation identified in the prior year. Less than half of the increase was simply due to another year of costs, payments and interest. The bulk of the increase was due to a change in the California Public Employees’ Retirement System’s (CalPERS) pension-benefit assumptions based on their latest 10-year study. That study found employees are retiring earlier, retirees are living longer, and actual premiums increased more than previously projected by the actuary. The increase appears larger because in 2008 and 2009, CalPERS decided to use surplus funds from its health care plans to reduce increases in health care premium rates. The 2011 rates were not subsidized, causing the premiums to jump back closer to what the level would have been without the surplus.

Unlike state pensions, which are pre-funded and allow investment returns to reduce liabilities, California retiree health benefits are covered on a “pay-as-you-go” basis, meaning as the costs come due each year. The latest actuarial report estimates California’s obligation for retiree health and dental benefits, also referred to as Other Postemployment Benefits (OPEB), based on two different funding scenarios:

• The current pay-as-you-go policy results in an actuarial unfunded obligation of $59.9 billion, which represents the total present value of future retiree health benefits earned as of June 30, 2010, by current and future state retirees. Based on this unfunded obligation, California has an annual OPEB cost of $4.2 billion for 2010-11 – or the amount the State would need to pay to cover these benefits. In the 2010-11 Budget Act, the State only provided $1.4 billion for retirees’ health and dental benefits.

• If the State shifted to fully pre-funding the costs of future benefits, the actuarial unfunded obligation would be cut by more than $21 billion to $38.5 billion. Under a full pre-funding approach, the State would set aside money in a separate trust solely for future retirement health care benefits. The investment income generated by that trust would be used to reduce the costs of paying for future benefits. The State would need to contribute $2.9 billion in 2010-11 to fully fund its obligation for this year.

A separate analysis performed at the request of the Controller shows that even incremental steps toward pre-funding the obligation would significantly reduce the State’s liability (see attached chart). For example, if the State pre-funded just 10 percent of its obligation, it would only need to pay $130.3 million more than its current pay-as-you-go contribution. But that additional payment would shave $2.7 billion off of the State’s unfunded liability. The report showed that even partially funding the obligation would cut the actuarial unfunded obligation.

In 2004, the Governmental Accounting Standards Board Statement 45 (GASB 45) required states and local governments to publicly disclose the future costs of paying for post-employment benefits other than pensions for current state retirees and employees. Chiang commissioned California’s first report shortly after taking office in 2007. This report is the fourth to be issued under his administration.

While GASB 45 does not require states to fully fund its obligations, all three credit rating agencies have urged states to at least have a funding plan in place to avoid any future downgrades.

Chiang urged the State to follow the lead of several bargaining units that are starting to pre-fund their obligations. In August 2009, the California Association of Highway Patrolmen established a trust with the California Employers’ Retiree Benefit Trust (CERBT) to prefund its health and dental benefits for retired CHP officers under Bargaining Unit 5. Recently, other bargaining units, such as the International Union of Operating Engineers (Bargaining Unit 12) and the Union of American Physicians and Dentists (Bargaining Unit 16) have contacted the CERBT to begin the process of entering into contracts to begin in 2012 to prefund their post-retirement health and dental benefits obligations.

In addition to cutting costs by prefunding the obligation, Chiang said the State should take steps to contain health care costs by promoting prevention and wellness, and innovations in health care delivery. He also recommends switching from the traditional fees-for-services payment model to one that pays providers based on performance and outcomes.

“If we can reduce the assumed rate of health care inflation by 1 percent, that could cut our unfunded liability by $7.4 billion over 10 years,” Chiang said. “I continue to call on CalPERS to make prevention and chronic disease management a priority to reduce the demand for health care.”

The actuarial report and a chart showing how much pre-funding would cut future costs can be found on the Controller’s Web site at http://www.sco.ca.gov/.

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State Controller: Redevelopment Agencies Lack of Accountability and Transparency, Several Missed Payments to Schools, Questionable Loans

SACRAMENTO – State Controller John Chiang today released the results of a five-week, limited-scope review of 18 redevelopment agencies (RDAs) across the State of California. The Controller found no reliable means to measure the impact of redevelopment activity on job growth because RDAs either do not track them or their methodologies lack uniformity and are often arbitrary. The review exposes the difficulty of holding RDAs accountable for their funding decisions when existing legal standards are so loose that any area can be deemed “blighted.”
The report also identified several missed payments to school districts and widespread accounting and reporting deficiencies, questionable payroll practices, substandard audits, faulty loans, and inappropriate use of affordable housing funds.
“For a government activity which consumes more than $5.5 billion of public resources annually, we should be troubled that there are no objective performance measures demonstrating that taxpayer’s are receiving optimal return for each invested dollar,” said Controller Chiang. “Locally-controlled economic development is vital to California’s long-term prosperity. However, the existing approach – born in the 1940’s – is not how anyone concerned with performance, efficiency, and accountability would draw it up today.”
The 18 selected agencies represent 16 percent of all redevelopment dollars in fiscal year 2009-10. Auditors from the Controller’s office conducted the review by interviewing redevelopment staff and analyzing financial statements, reports, plans, budget documents, ledgers, job creation data, and payroll records.
The report notes that the 18 RDAs share no consensus in defining a blighted area. While run-down sections of Los Angeles with abandoned buildings show obvious need for redevelopment, other cities were far broader in their declaration of blight. Coronado’s redevelopment area covers every privately-owned parcel in the city, including multi-million dollar beachfront homes. In Palm Desert, redevelopment dollars are being used to renovate greens and bunkers at a 4.5 star golf resort. That RDA receives the 10th-highest tax revenue in the State, with a fund balance worth $4,666 for each of the city’s 52,000 residents.
Only 10 of the 18 RDAs attempted to track the number of jobs created by their projects. Of those ten agencies, four could provide no methodology or explanation for their figures. The remaining six all used different methods to find the number of jobs created. The County of Riverside used projections from developers, while the City of Desert Hot Springs looked at permit and employment records.
Employee compensation levels for RDAs were largely consistent with the salary and benefits offered to other local government employees. But the report found that redevelopment dollars often went to city or county payroll without evidence that those dollars actually supported redevelopment services. In the City of Pittsburg, the redevelopment agency signed a service agreement with the city and transferred $3 million to the city’s general fund. But no documentation exists to show that the $3 million actually went to redevelopment services.
Five of the 18 RDAs failed to make $33.6 million in required payments to schools within their redevelopment areas. When RDAs fail to make these payments, it increases the State General Fund’s financial obligations to local school districts. While RDAs are able to borrow funds in order to make these school payments, none of the five agencies attempted to do so.
While all the RDAs made the required deposits into their Low & Moderate Housing funds, the review found that many of them made inappropriate charges to this account that were not directly related to affordable housing, as required by the State’s Health and Safety Code.

·       The City of Los Angeles inappropriately charged 20 percent of its redevelopment administration costs to the fund (amounting to $833,000).

·       The City of Calexico also charged a percentage of its administrative costs, but also charged the fund for code enforcement and the cost of performing audits of the RDA.

·       The City of Desert Hot Springs inappropriately charged $162,000 for “code enforcement.”

·       The City of Parlier inappropriately charged the cost of purchasing a daycare center.

·       The City of Hercules inappropriately charged $9,600 of its lobbyist expenses.

None of the 18 reviewed agencies met all of their filing requirements. In some cases, annual financial reports were fed to the RDA governing bodies in pieces, while others simply did not file. Auditors from the Controller’s office found that many of the RDAs’ department staff were confused by filing requirements, and the report recommends strong training improvements for financial staff. The report also found that independent audits often failed to identify major audit violations and did not include all required information.
“The lack of accountability and transparency is a breeding ground for waste, abuse, and impropriety,” said Controller Chiang. “In whatever form local redevelopment takes in the future, the level of oversight and openness must be consistent with the amount of public dollars entrusted to their care.”
Two of the RDAs made questionable loans to their cities’ general fund. In Pittsburg, the agency loaned $16.6 million in fiscal year 2009-10 without interest to the city for specified projects. By the end of the fiscal year, $15.4 million was unspent, allowing the city to earn interest on those funds. The City of Calexico’s RDA loaned $1.75 million to the city in 1993 with six percent interest. The City Council, acting as the RDA board, lowered the interest rate to 1.42 percent in 2004. While the loan was supposed to be fully repaid by 2009, the city still owes $1.1 million to the redevelopment fund, based on information provided to the State Controller’s office.
The full report  can be found on the State Controller’s website at www.sco.ca.gov.

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State Controller Releases More Salary & Benefit Info

SACRAMENTO – State Controller John Chiang today updated his website showing the salary, pension benefits and other employee compensation for several hundred land reclamation, levee maintenance, health, hospital, and local water districts.
Last October, the Controller collected and posted wage information for more than 600,000 city and county employees. He then ordered special districts across the State to report the same information, and the first 746 districts were loaded last month.
Compensation information for employees of special districts is being collected and posted on the website in four phases. The second phase – launched today – includes almost $5 billion in payroll reported by 539 local agencies. The next phase, expected at the end of April, will include cemetery, electric, financing or construction facilities, flood control, water conservation, recreation, and community service districts.
The Local Government Compensation Reporting website covers elected officials as well as public employees. It includes the following information for each position:

·       Minimum and maximum salary ranges;

·       Actual wages paid;

·       The applicable retirement formula;

·       Any contributions by the employer to the employee’s share of pension costs;

·       Any contributions by the employer to the employee’s deferred compensation plan; and

·       Any employer payments for the employee’s health, vision and dental premium benefits.

In addition, the website shows employees who hold multiple positions within a single local government. Postings are updated weekly with any new information received.
Seventy-seven percent of all special districts in the second phase successfully followed the new reporting requirements. A list of agencies that failed to file in time for today’s launch can also be found on this website. Each non-complying agency could face a penalty of $5,000. The Controller anticipates completing the website with all special district information, along with compensation for state employees, in June of 2011.

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Controller Releases January 2011 Cash Update

PR11:08
2/10/2011

Contact: Jacob Roper

916-445-2636

SACRAMENTO – State Controller John Chiang today released his monthly report covering California’s cash balance, receipts and disbursements in January.

Total receipts for the month were $714.5 million, or 8.1 percent higher than estimates found in the Governor’s proposed 2011-12 State Budget. Sales taxes were up $192.4 million (19.2 percent) in January, but corporate taxes were down $69.2 million (-16.4 percent).

“January revenues rose above expectations, but unemployment has remained in the double digits. And while the stock market was up, January corporate taxes were down,” said Chiang. “These mixed messages tell us we still have a long way to go. We urgently need a solid budget with real solutions for California.”

In the month of January, personal income taxes came in $628.4 million above (8.8 percent) estimates. Part of this jump was due to lower-than-expected taxpayer refund payments, possibly because taxpayers are filing later than usual. The State Controller’s Office expected to issue $380 million in the month of January, but only $197 million was sent to taxpayers.

The State faced an $18.5 billion cash deficit on January 31. That deficit was covered by $8.5 billion of internal borrowing – short term loans from special funds – and $10 billion of external borrowing.

The Controller also launched a new section of his website today showing basic information on State revenues and program funding over the past 10 years. State Finances 101, along with January 2011's financial statement and the summary analysis, can be found on the Controller's website at www.sco.ca.gov.

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Controller Urges Support for CalPERS, CalSTRS Reform

PR11:07
2/9/2011

Contact: Hallye Jordan

916-445-2636

SACRAMENTO – State Controller John Chiang today announced he is sponsoring two bills to improve the performance of and the public’s confidence in the nation’s two largest public pension funds – the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS). The bills would cap the amount of gifts members and staff may receive each year, and require a pension fund board member or employee to wait two years after leaving before working with a firm that has business with the funds.

“The appearance of impropriety by some former board members and investment staff of CalPERS raises concerns that members and staff may be using their past relationships and positions of power to influence decisions regarding the investment of public pension funds,” Chiang said. “I believe these bills are a critical step toward restoring the public’s confidence in the professionalism of all of our activities on behalf of the retired public employees and teachers, and the taxpayers of California.”

Authored by Senator Gloria Negrete McLeod, chair of the Senate Public Employment and Retirement Committee, one bill will lower the amount of gifts CalPERS’ and CalSTRS’ members and staff are allowed to receive under the Political Reform Act. By reducing the amount from the current $420 a year to $50 a year, the bill will address the influence-peddling practices revealed when the placement agent scandal broke in the spring of 2009.

“California’s public pension systems are the largest in the country and should be held to a higher standard,” said Negrete McLeod. “Limiting gifts from individuals and organizations trying to influence the decisions of pension boards and government employees is the right thing to do.”

The second measure, by Assembly Member Furutani, chair of the Assembly Public Employees, Retirement and Social Security Committee, would prohibit, for two years, CalPERS’ and CalSTRS’ board members and employees from accepting a job with any employer who had substantial contracts or investments in the five years the employee or board member worked at the fund. Employees or board members who had worked with placement agents during the 10 years prior to leaving CalPERS or CalSTRS would be prohibited from going to work for the agent or the agent’s firm for two years after leaving the public pension system.

“Public trust and government accountability within the nation’s largest pension systems are critical to any of the reform proposals that are on the table,” Furutani said. “Implementing a ‘cooling-off period’ would ensure that decisions being made by board members and staff are being made for the right reasons and not to encourage future employment opportunities.”

In letters to CalPERS’ and CalSTRS’ officials sent late last week, Chiang noted that the placement agent scandal has eroded the public’s confidence in the handling of public funds. “These measures were developed with the principal goal of protecting (CalPERS and CalSTRS) investments from unsound influence and restoring the system’s credibility in the public eye,” Chiang wrote.

The legislation may be discussed at the CalSTRS meetings this week and at the next CalPERS meetings that start February 14. The bills are expected to be in print within the next two weeks.

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Controller Releases More Local Government Payroll Figures

Controller Releases More Local Government Payroll Figures

PR11:04
2/1/2011

Contact: Hallye Jordan
916-445-2636

SACRAMENTO – State Controller John Chiang today unveiled an updated website showing the salary, pension benefits and other employee compensation for several hundred local transit, waste disposal, and fire and police protection districts.
“Californians were offered instant access to salary information in their own communities when I launched the first public payroll site of city and county compensation last fall,” said Chiang. “Posting this information allows California residents to see where their public dollars are being spent and to better hold their local agencies accountable.”
Last October, the Controller collected and posted wage information for more than 600,000 city and county employees. He then ordered special districts across the state to report the same information.
Compensation information for employees of special districts is being collected and posted on the website in four phases. The first phase – launched today – includes more than $3 billion in payroll reported by 693 local agencies. The next phase will include land reclamation and levee maintenance, health, hospital and water agencies.
The Local Government Compensation Reporting website covers elected officials as well as public employees. It includes the following information for each position:

·       Minimum and maximum salary ranges;

·       Actual wages paid;

·       The applicable retirement formula;

·       Any contributions by the employer to the employee’s share of pension costs;

·       Any contributions by the employer to the employee’s deferred compensation plan; and

·       Any employer payments for the employee’s health, vision and dental premium benefits.

In addition, the website shows employees who hold multiple positions within a single local government. Postings are updated weekly with any new information received.
Eighty percent of all special districts in the first phase successfully followed the new reporting requirements. A list of agencies that failed to file in time for today’s launch can also be found on his website. Each non-complying agency could face a penalty of $5,000. The Controller anticipates completing the website with all special district information, along with compensation for state employees, in June of 2011.

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