1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 5901 GREEN VALLEY CIRCLE 3 CULVER CITY, CALIFORNIA 4 5 6 7 REPORTER'S TRANSCRIPT 8 August 25, 2015 9 10 P OTHER ADMINISTRATIVE MATTERS 11 P5 ADMINISTRATION DEPUTY DIRECTOR'S REPORT 12 P5.1 2016-2017 BUDGET CHANGE PROPOSALS 13 14 15 16 17 18 19 20 21 Reported by: Juli Price Jackson 22 No. CSR 5214 23 24 25 26 27 28 1 1 P R E S E N T 2 3 For the Board Jerome E. Horton of Equalization: Chairman 4 5 Sen. George Runner (Ret.) Vice-Chairman 6 7 Fiona Ma, CPA Member 8 9 Diane L. Harkey Member 10 11 Yvette Stowers Appearing for Betty T. 12 Yee, State Controller (per Government Code 13 Section 7.9) 14 Joann Richmond 15 Chief, Board Proceedings Division 16 17 Randy Ferris Chief Counsel 18 19 Edna Murphy Deputy Director 20 Administration 21 22 ---oOo--- 23 24 25 26 27 28 2 1 5901 GREEN VALLEY CIRCLE 2 CULVER CITY, CALIFORNIA 3 August 25, 2015 4 ---oOo--- 5 MR. HORTON: Ms. Richmond. 6 MS. RICHMOND: Our next matter is item P5, 7 Administration Deputy Director's Report, item P5.1, 8 2016-17 Budget Change Proposals. 9 MS. MURPHY: Good morning, Chairman Horton 10 and Members. I'm Edna Murphy, the Deputy Director 11 of Administration. 12 Before you today I have five budget change 13 proposals that will be submitted for inclusion in 14 the Governor's proposed 2016-17 budget. 15 The first item is requesting 2.3 million 16 for conversions of 19.5 limited term positions to 17 permanent, and 4.4 position equivalent in temporary 18 help to continue processing mandated workload 19 associated with ABX 129, fire prevention fee. The 20 total program revenues are anticipated to be 21 approximately 104 million annually. 22 Next we are requesting 5.7 million for 23 conversion of 22 limited term positions to permanent 24 and 12 additional two-year limited term positions to 25 address the increase in combined workload in the 26 Appeals Division Business Tax Section and Settlement 27 Program. 28 The 22 positions were originally approved 3 1 at the Southern California Appeals and Settlement 2 Unit Pilot. The pilot post ion has successfully 3 accelerated the resolution of an additional 3200 4 cases, valued at 477.8 million, since the inception 5 in 2010. They have been critical in minimizing the 6 gap between incoming and completed caseloads. 7 Next we're requesting 296,000 in federal 8 funds for the conversion of two limited term 9 positions to permanent to participate in the joint 10 operations centers, ensuring fuel tax compliance. 11 Participation in this project has allowed 12 the BOE to leverage State and federal resources to 13 identify evasion, nonreporting and underreporting. 14 Currently nine states participate in the 15 JLC, in which sophisticated analytical tools are 16 applied to the data set to identify anomalies, 17 inconsistencies and omissions in the data that 18 generate leads for the JLC audit teams to follow up 19 in the field. 20 The BOE anticipate an $1 million in revenue 21 from the JLC audits leads and investigations. 22 Next we are requesting 1.4 million in 23 fiscal year '16-'17 and 1.3 million in '17-'18 and 24 ongoing for 24 positions to administer security 25 guard services at the BOE headquarters and the 26 San Jose District office. 27 The staffing is a mix of permanent staff as 28 well as permanent intermittent staff and a manager 4 1 to allow for flexible scheduling. A contract will 2 still be needed to execute -- to be executed with 3 the unarmed security guard company to back fill 4 vacancies and/or for emergency coverage in the event 5 of employees calling in sick or unplanned time away 6 from work. 7 And then lastly, we're requesting 500,000 8 for BOE to reimburse the Department of General 9 Services for any reasonable costs and/or expenses to 10 enter into a lease or other agreement with a private 11 party for the facility -- to facilitate the 12 relocation of BOE's headquarters and annex 13 facilities into a consolidated location. 14 This funding would allow DGS to conduct a 15 site search development and feasibility analysis in 16 fiscal year '16-'17 for the relocation of BOE's 17 headquarters. 18 While BOE recognizes that the 450 N Street 19 building was ranked No. 16 out of 29 in the DGS 20 State Facility Long Range Planning Study, due to 21 potential legislative mandates, the BOE is still 22 projected to grow between 1 and 3 percent per year. 23 Due to growth, if we're not consolidated, 24 this will only lead to development of additional 25 costly leases and additional annex facilities, and 26 the continued fragmentation of an already 27 decentralized BOE headquarter operation. 28 Currently the BOE, in collaboration with 5 1 DGS, is preparing a time and motion study relative 2 to Return Processing in the BOE headquarters 3 facility. 4 This study will address the inefficiencies 5 in the Return Processing that are currently 6 experienced in a high-rise office building, as well 7 as our inability of the 450 N street facility to 8 meet our growth needs as it relates to staff, not to 9 mention the need for expanding our business 10 infrastructure in technology. 11 We believe we can make a case that it will 12 be a savings to the State to consolidate the BOE to 13 a new location so that DGS may repair the building 14 unoccupied, which will save time and money. And 15 then DGS can consolidate other State agencies and 16 departments currently in the State office building 17 with more significant deficiencies into the 450 N 18 Street. 19 This will then allow DGS the opportunity to 20 address the balance of their portfolio of State 21 office buildings in the greater Sacramento area that 22 require more significant improvement due to 23 infrastructure deficiencies. 24 I will be happy to answer any questions 25 that you have regarding the budget change proposals. 26 MR. HORTON: Member Ma. 27 MS. MA: Thank you very much. I don't have 28 a problem with a, b, c, and d, but I do have a 6 1 problem with e. 2 The BOE has very competent building folks 3 that have done a great job for us. I know in our 4 transition in our offices they have been very, very 5 attentive and highly professional and qualified. 6 DGS, on the other hand, you know, we have 7 been trying to work with DGS on a number of 8 different projects, including my Santa Rosa break 9 room, which has been requesting a break room for 10 necessary, like lunch, you know, maternity purposes, 11 and over the past eighteen months their estimates 12 have gone up three times significantly without any 13 sort of breakdown in terms of why the costs have 14 escalated almost double. 15 So, I don't have the confidence in DGS to 16 do this type of preliminary review. I would really 17 like us to reconsider and have our BOE staff do a 18 lot more of the preliminary and then work with DGS 19 at the end. 20 Their costs seem to be escalating. I still 21 don't have a breakdown of all the costs that we pay 22 to DGS for all the projects they're doing for us. 23 So, at this moment I'm not going to be 24 voting for this budget change proposal to give DGS 25 any more money. 26 MS. MURPHY: Okay. 27 MR. HORTON: There may be a response to 28 that? 7 1 MS. MURPHY: I just wanted to let Ms. Ma 2 know that we have reached out to DGS to see what 3 delegated authority we can have to kind of pursue 4 some of the preliminary work. 5 And, so, we're still talking to them and I 6 know you would like for us to meet with them as 7 well. And we're making that as well. 8 MR. HORTON: And I -- 9 MS. MA: I am sorry. 10 MR. HORTON: My apologies. 11 MS. MA: And I know they have a new 12 director right now and I haven't had a chance to sit 13 down with him. But over the past seven months, I 14 have not been satisfied with the level of service 15 that they have provided or the lack of transparency 16 in terms of the costs. 17 And, so, at this moment I am not voting for 18 that budget change proposal. 19 MR. HORTON: Maybe we can share with the 20 Members and we can proceed to seek an official 21 delegation of some of these duties. 22 I think all of the Members have shared the 23 similar experience. I mean, my Southern California 24 location, I drove around myself to find it, you 25 know. And we finally found it and looked at it and 26 kind of worked through the process. 27 And, I mean it's not necessarily a slight 28 against DGS, maybe there is capacity issues, 8 1 staffing issues or whatever. 2 But this -- and at the same time it's an 3 expression of confidence in our staff and their 4 ability to get this job done, which may hold true 5 for many of the other departments. 6 So, what's the process of us getting that 7 authority? 8 MS. MURPHY: Well, we reached out to them 9 initially to see if we could have delegation and 10 they provided that that wasn't kind of an 11 opportunity. 12 So, we want to sit down and have a meeting 13 with them to try to discuss what opportunities we 14 could have on our part to do some of the preliminary 15 work and be able to -- 16 MR. HORTON: Having to go to them for 17 permission to do that -- maybe there is a discussion 18 with the Governor's office about the efficiency and 19 the win-win of allowing the agencies to have a more 20 unique and -- understanding of their needs to be 21 able to facilitate that. And in many cases it's 22 going to be a cost savings to the State overall. 23 Member Harkey. 24 MS. HARKEY: I have something on a totally 25 different topic, but -- 26 MR. HORTON: Okay, roll. 27 MS. HARKEY: -- okay, roll. 28 I'm going to have to abstain on the first 9 1 one, which is to permanent establish the fire 2 prevention fee limited term positions. 3 I really am not comfortable voting for 4 permanent positions when there's ongoing litigation 5 which may eliminate the fee. So, I'm am going to 6 abstain on that one. 7 MR. HORTON: Noted. 8 Further discussion? 9 MR. RUNNER: Let me ask -- actually on both 10 of those -- going back to the issue, the facility 11 issue -- and I guess I'd like to know exactly and 12 have it -- have it clarified for me. 13 Maybe you come back with a -- rather than a 14 Board meeting, maybe a memo back to us -- on exactly 15 detailing what is our -- what is within our realm of 16 authority in this issue and what is not. 17 MS. MURPHY: Okay. 18 MR. RUNNER: So that we can get a better 19 idea of what kind of -- of delegation of authority 20 we would actually need to be seeking. 21 That would that help us -- help me out, at 22 least. 23 MS. MURPHY: And I'll also reach out to 24 Department of Finance as well because, again, the 25 funding has been approved so that DGS could do this. 26 But maybe we need to have the discussion on 27 whether or not -- if we could do it more efficiently 28 and in a better time constraint. Maybe we should 10 1 look to see if we can have that delegation. 2 Because most of the information that we get 3 is in our communication directly with DGS. And, so, 4 it may be helpful to find out whether or not that 5 funding can be given directly to us to do those same 6 activities. 7 MR. RUNNER: And let me follow up on the -- 8 on the other issue that came up and that is the 9 issue of permanent versus temporary positions. 10 How -- let's see, these have been temporary 11 positions for how many years now? 12 MS. MURPHY: So, we're going on our fifth 13 year. 14 MR. RUNNER: Okay. So, how long can can 15 keep somebody in a temporary position? 16 MS. MURPHY: Well, normally you can only 17 keep someone in a limited term position for two 18 years. 19 MR. RUNNER: Right. 20 MS. MURPHY: And, so, that becomes some of 21 the recruitment processes. 22 The last two times we've gone back they've 23 only allowed us to do the position limited term. 24 So, this time we're going back for the 25 permanency, so that we don't have to, you know, keep 26 asking for the positions over and over again. 27 The normal process -- if something was to 28 happen, if there was litigation that determined that 11 1 this was not an appropriate program, and they were 2 going to get rid of it, then we would be seeking how 3 to relocate those staff to other positions if they 4 were permanent. 5 MR. RUNNER: Let me -- I mean, the other 6 issue is -- I always get confused when we have 7 limited term positions that then become protected 8 employees -- even thought the positions are limited, 9 they -- the employees then end up being permanent, 10 if you will, right? 11 MS. MURPHY: Yes. 'Cause you have the 12 ability for some someone to accept a limited term 13 position, but they have permanent State status. 14 MR. RUNNER: Right. 15 MS. MURPHY: So, if they move into a 16 limited term position that's for two years, but it 17 was for promotion, just to get the experience or the 18 opportunity, they still have permanent status back 19 to the previous position that they were in. 20 MR. RUNNER: So, what happens if somebody 21 was -- I don't know if there's anybody like this -- 22 but somebody came into one of those limited term 23 positions in the very beginning. And each -- and, 24 so, they've been there for five years in a limited 25 term position. 26 And let's say -- what happens to them, if 27 indeed, then this -- the issue of litigation moves 28 forward and -- well, not litigation moves forward, 12 1 but the State ends up fighting that they could not 2 move forward as they thought on the fire fee, what 3 happens to those individuals -- not positions, those 4 individuals? 5 MS. MURPHY: So, that's a good question, 6 'cause normally when you move into a limited term 7 position, if it's your first time, then when the 8 two-year limited term expires, you're supposed to go 9 back to wherever you came from, so, your previous 10 position. 11 MR. RUNNER: Or you're -- 12 MS. MURPHY: If you -- 13 MR. RUNNER: -- what if they're new? 14 MS. MURPHY: -- or -- so, if they were new, 15 they would have no return rights to anything. So, 16 most people within those two years are trying to 17 seek permanent positions. 18 And, so, that's usually where our turnover 19 come in, because within those two years, they're 20 trying to move into a permanent position. 21 But if they got to the end of their 22 two-year limited term and they were not permanent 23 employees, they would get a notice within 30 days 24 that their limited term was expiring. And then they 25 would have to seek employment somewhere else. 26 MR. RUNNER: So -- so, is that -- is that 27 kind of what's happened then with our folks over -- 28 so, they've been in these limited term positions, 13 1 dealing with fire fee. They get their -- as they 2 come up to the end of their two years, then they 3 find themselves applying then for a permanent 4 position somewhere else in the BOE? 5 MS. MURPHY: Yes -- or outside, but -- 6 MR. RUNNER: Or outside? But somewhere 7 within -- somewhere within State -- 8 MS. MURPHY: -- within State government. 9 MR. RUNNER: -- within State government. 10 And then we end up with a vacancy that then 11 we fill then with another -- 12 MS. MURPHY: Another -- 13 MR. RUNNER: -- temporary position. And, 14 so, it's the cycle that we end up going through? 15 MS MURPHY: -- yes, yes. 16 MR. RUNNER: Okay. 17 MR. HORTON: Well, on the issue with the 18 headquarters and the potential delegation of duties 19 in that Member Ma has a more pressing issue, her 20 engagement with the director may actually resolve 21 this. 22 So, in the interests of synergy, I'd 23 recommend that we kind of work with her in order to 24 accomplish that. 25 The limited term position -- I mean, my 26 view is more in line with the employees, it's such 27 an uncertainty there to provide them some certainty. 28 How many positions are we talking about? 14 1 MS. MURPHY: This is 19.5 limited term. 2 MR. HORTON: Yeah, okay. 3 MS. MA: I have a question. 4 MR. HORTON: Member Ma. 5 MS. MA: I'm sorry, I don't know if this 6 was asked before, but for the CalFire fee, we just 7 collect the fee, right? 8 MS. MURPHY: Yes. 9 MS. MA: And we don't have any sort of 10 appeal authority or if constituents have an issue, 11 like a house burns and they get the statement and 12 they really would like relief, we don't have any 13 sort of authority over anything, right? 14 MS. MURPHY: No. I think -- 15 MS. MA: As far as I understand? 16 MS. MURPHY: -- all of that goes to -- as 17 far as the listing comes from CalFire. And they 18 administer all the appeals and the petitions and 19 stuff like that. 20 So, we administer and the collection of the 21 fee, but they actually own the program, the fire fee 22 program, CalFire. 23 MS. MA: Okay. So, we hire them and then 24 we bill CalFire. And they reimburse us for the 25 costs for -- 26 MS. MURPHY: Yeah, we get reimbursed for 27 our costs of collection. 28 MR. HORTON: Okay. Further discussion, 15 1 Members? 2 Hearing none, Members, we will take up item 3 b and item c. Moved by Member -- b, c, and d, moved 4 by Member Harkey -- well, strike that. 5 What am I doing? We need a consensus here 6 and a communication here. Yeah. 7 MR. RUNNER: So, it's b, c, and d? 8 MR. HORTON: I'm going to take the matters 9 up -- 10 MS. MURPHY: We can deal with -- 11 MR. HORTON: -- just as a means in which to 12 give direction or -- unless the Chief Counsel can 13 give us some insight? 14 I think we ought to proceed with all of 15 these relative to the limited term. In the 16 interests of the employees, we ought to be able to 17 see if we can provide them with some -- some 18 security. 19 The pending lawsuit, the Board and the 20 legislature and the judicial bodies tried to avoid 21 making decisions pursuant to -- to those -- to 22 pending lawsuits because of the nature in general, 23 but would encourage staff to have that discussion 24 with the Department of Finance and have that -- and 25 express Member Harkey's concerns to the Department 26 of Finance, as well as to the Department of Fire to 27 even provide greater security if five years down the 28 road for some reason it's deemed to be 16 1 unconstitutional that we include some protection for 2 our employees in that regard. 3 And acknowledge the abstention by Member 4 Harkey relative to the concerns shared by all of the 5 Members, and would ask that that be communicated to 6 DGS as well as the Department of Finance. 7 And we will receive and file your report 8 and encourage you to proceed with the budget 9 proposals, given those caveats. 10 Without objection from the Members, we will 11 receive and file. 12 Thank you, Randy. 13 Randy, we will take a break and you can 14 talk to me offline. 15 I see the puzzling face. 16 MR. RUNNER: With regard to giving 17 directions to moving forward with the BCPs? 18 MS. HARKEY: We just received and filed and 19 he can give directions. 20 MR. HORTON: Well, let me say this, my 21 understanding is that the staff has been directed to 22 move forward with the BCPs. 23 There are certain concerns we -- the Board 24 has expressed to staff and requested the staff share 25 those concerns and take the appropriate action to 26 mitigate those concerns, and particularly with the 27 delegation of duties as it relates to the Board's 28 oversight and building and construction and DGS as 17 1 well as the permanency of the funding source if 2 these positions are to go permanent and that there 3 is some subsequent action by the court, that we, in 4 turn, continue to protect our employees and make 5 sure that, in time, we find a way to allow them to 6 articulate back into the agency. And we share our 7 concerns with the Department of Fire, as well as the 8 Department of Finance, who will be responsible for 9 paying for those employees. 10 MR. RUNNER: And that's not a motion? 11 MS. HARKEY: So moved. 12 MR. HORTON: It's not a motion. It's 13 just -- 14 MS. HARKEY: So moved. 15 MR. HORTON: -- it's just direction that I 16 believe to be the consensus of the Board. 17 Without objection, that will be the order. 18 Does that help? 19 MS. BRIDGES: Yes. 20 MR. HORTON: Do you want a motion? 21 MS. BRIDGES: Do you want a motion? 22 Do we need a motion? 23 MR. FERRIS: We can talk. 24 MR. HORTON: Yeah, we'll come back if we 25 have to, Members. 26 Ms. Richmond. 27 MS. RICHMOND: That concludes our 28 administrative session. 18 1 (Whereupon other proceedings were had.) 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 19 1 MR. HORTON: Members, in an abundance of 2 caution, we're going to return to the BCP matters in 3 order to provide clarity to staff. We'll take those 4 matters up. 5 Ms. Richmond, that is P? 6 MS. RICHMOND: Item P5.1. 7 MR. RUNNER: That is BCPs? 8 MR. HORTON: Yes. 9 MS. HARKEY: Yes. 10 MR. HORTON: Members, we will take up item 11 e, note non -- no -- note a no vote from Member Ma. 12 Motion by Member Runner -- 13 MR. RUNNER: I'll say no. 14 MR. HORTON: -- no vote by Member Runner. 15 Motion by Member Harkey. 16 MS. STOWERS: Second. 17 MR. HORTON: Second by Member Stowers. 18 Noting the position of the Members, such 19 will be the case. 20 We'll now go, Members, to item No. 1a, 21 permanent establishment, noting abstention by Member 22 Harkey, is there a motion? 23 Moved by Member Stowers, second by Member 24 Runner. 25 MR. RUNNER: I will stay off. 26 MR. HORTON: Mr. Runner staying off. 27 Second by Member Ma. Member Ma seconds. 28 Noting the votes of the Members, such will be the 20 1 order with the affirmative and the negative vote. 2 Now, Members we're on b, c, and d. Is 3 there a motion to move forward with the budget 4 proposals? 5 MR. RUNNER: Move staff recommendation. 6 MR. HORTON: Member Runner moves staff 7 recommendation; second by Member Ma. 8 Without objection, Members, such will be 9 had order. 10 ---o0o--- 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 21 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, JULI PRICE JACKSON, Hearing Reporter for 8 the California State Board of Equalization certify 9 that on August 25, 2015 I recorded verbatim, in 10 shorthand, to the best of my ability, the 11 proceedings in the above-entitled hearing; that I 12 transcribed the shorthand writing into typewriting; 13 and that the preceding pages 1 through 21 constitute 14 a complete and accurate transcription of the 15 shorthand writing. 16 17 Dated: October 5, 2015 18 19 20 ____________________________ 21 JULI PRICE JACKSON 22 Hearing Reporter 23 24 25 26 27 28 22