1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 5901 GREEN VALLEY CIRCLE 3 CULVER CITY, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 FEBRUARY 23, 2016 10 (PREPARED FROM AUDIO RECORDING) 11 12 13 14 ITEM P 15 OTHER ADMINISTRATIVE MATTERS 16 ITEM P5 17 ADMINISTRATION DEPUTY DIRECTOR'S REPORT 18 1. RECRUITMENT AND RETENTION EFFORTS 19 20 21 22 23 24 25 26 27 Prepared by: Kathleen Skidgel 28 CSR #9039 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 Chair 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 16 Division 17 For Board of Equalization Staff: Sandra Mayorga 18 Chief Human Resources Division 19 20 Randy Ferris Chief Counsel 21 Legal Department 22 23 ---oOo--- 24 25 26 27 28 2 1 INDEX OF SPEAKERS 2 SPEAKER PAGE 3 Margarita Maldonado 10, 20 Vice President 4 SEIU 1000 5 James Zoes 11 Business Tax Specialist I 6 Board of Equalization 7 Donna Vanschijndel 12 Franchise Tax Board 8 SEIU 1000 9 Ronald Lee 15 Program Specialist III 10 Franchise Tax Board 11 Dolly Avila 18 Franchise Tax Board 12 SEIU 1000 13 ---oOo--- 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 3 1 5901 GREEN VALLEY CIRCLE 2 CULVER CITY, CALIFORNIA 3 FEBRUARY 23, 2016 4 ---oOo--- 5 MR. HORTON: Ms. Richmond. 6 MS. RICHMOND: Our next matter is Item P5, 7 the Administration Deputy Director's Report; Item 8 P5.1, Recruitment and Retention Efforts. 9 MR. HORTON: Members, we have a number of 10 guests who have asked to speak. Let's see here. We 11 have one, two, three, four, five, I believe. Let's 12 see. 13 Could I ask -- let's see, one, two, three, 14 four, five. Let's see if we can clear five seats so 15 they can be all -- instead of surrounding you, maybe 16 if I can get you to move over to the sixth seat, Ms. 17 Mayour (verbatim). 18 MS. MAYORGA: Mayorga. 19 MR. HORTON: Mayorga, my apologies. Or 20 over here to the -- 21 And then as I call you up, just take the 22 first seat and move through. 23 Ms. Maldonado, Vice President, SEIU 1000. 24 Ms. Zoes, BTS I, with the Board of 25 Equalization. 26 I can't read this, but I can read the -- 27 well, I know the first name, Dolly, Franchise Tax 28 Board, SEIU 1000. 4 1 Ronald Lee. 2 Donald -- Donna. 3 MS. VANSCHIJNDEL: Yes, Vanschijndel. 4 MR. HORTON: Vanschijndel. 5 MS. VANSCHIJNDEL: Vanschijndel, yes. 6 MR. HORTON: Thank you very much. I'd have 7 never gotten that one. 8 VANSCHIJNDEL: That's okay. 9 MR. HORTON: SEIU 1000, Unit 1 bargaining 10 team. 11 Members, we will hear from Ms. Mayorga 12 first and then take the witnesses that are here. 13 Welcome. 14 MR. RUNNER: Welcome. 15 MS. MAYORGA: Good after- -- good morning, 16 Chairman and Board Members. I'm Sandra Mayorga. 17 I'm the Chief of Human Resources Division. And I'll 18 be providing you with an update on the current 19 recruitment and retention efforts under way on 20 behalf of the Administration Department's Director's 21 Report. 22 I'll be reporting out on Item P5.1, 23 recruitment and retention efforts, improving 24 recruitment and retention and upward mobility 25 opportunities here at the Board. 26 I'm pleased to announce that the Human 27 Resources Division continues its statewide outreach 28 activities by providing assistance and advice to 5 1 people pursuing careers in state service. Multiple 2 events sponsored by our Board Members, conferences, 3 and job fairs are attended by BOE program staff and 4 HRD representatives on behalf of California 5 residents. 6 I'm going to highlight some of the many HRD 7 accomplishments in fiscal year '14-'15 and our 8 continued commitment to improving recruitment and 9 retention and upward mobility opportunities going 10 forward. 11 One of the programs that I'm proud to 12 present on is our mentoring program. HRD, which is 13 the Human Resources Division, Workforce Planning 14 Section kicked off our second year of BOE mentoring, 15 and we have a total of 79 mentoring pairs. 16 The BOE is proud to continue our BOE 17 Mentoring Program which is a component of our third 18 goal of the 2015-2020 BOE Strategic Plan. The BOE 19 Mentoring Program will assist us in achieving that 20 goal by creating learning partnerships between 21 mentors and mentees to enhance skill sets and assist 22 professional growth and development for BOE 23 employees. 24 Another item I'd like to present on is our 25 Career Center field office visits. Our Workforce 26 Planning Section took the BOE Career Center on the 27 road, meeting with a total of 165 employees in the 28 field offices. Our Workforce Planning team visited 6 1 the BOE Norwalk and West Covina District Offices and 2 also presented on topics such as "Career Branding" 3 at the Professional Development Day for District 4 4 in Los Angeles. 5 In addition, the Workforce Planning Section 6 visited the BOE's Oakland, Santa Rosa, San Francisco 7 San Jose, Salinas, Riverside, Irvine and Fairfield 8 District Offices. And these sections provide 9 one-on-one consultive services to our BOE staff. 10 Some of the services that my Career Center 11 offers is that we -- we provide application, resume, 12 cover letter writing, and we also assist in mock 13 oral interview processing. 14 So it's -- it's been a great success this 15 year. So we look forward to getting out again this 16 year. 17 Another most significant highlight that I'd 18 like to present is our Workforce Succession Planning 19 Executive Report. Our Workforce Planning Section 20 completed its first ever Workforce Succession Plan 21 in Fiscal Year '15-'16 Executive Report for BOE. 22 The Executive Report provides an overview 23 of internal resources department-wide. And our 24 Workforce and Succession Plan will assist management 25 in identifying competency gaps in developing 26 strategies and addressing the needs. Succession 27 plans -- planning assists management in tapping into 28 institutional knowledge that would be lost due to 7 1 recruitment -- due to retirement and general 2 attrition. 3 The BOE is facing unprecedented changes, 4 substantial loss in the future workforce. Currently 5 35 percent of our employees are eligible to retire; 6 49 of those eligible within the next five years. 7 And most notably, the BOE is being hit hard in our 8 leadership. We currently have, out of 38 CEA 9 positions, 10 are currently vacant or projected to 10 be vacant at the end of the year, which equates to a 11 26 percent vacancy rate. 12 And to address this critical need, HRD 13 continues to look at ways in streamlining the CEA 14 hiring process to better meet the high level needs 15 and time frames of our BOE Board Members. And I'm 16 proud to report that the Workforce Planning Section, 17 in collaboration with BOE Department Deputies, have 18 made huge strides in this area. 19 And some of the most critical things that 20 I'd like to highlight: 6 of the 11 departments have 21 already established training schedules for our 22 employees in key classifications within their 23 department; 9 of the 11 departments have already 24 created desk manuals and standard operating 25 procedures for high level leadership/mission 26 critical positions which is key for knowledge 27 transfer; and 9 of our 11 departments are beginning 28 implementation phase in utilizing our entrance and 8 1 exit survey process to better understand what our 2 retention and recruitment efforts may be going 3 forward. 4 Also noted, I'd like to highlight in 5 closing in my report is our BOE upward mobility 6 hires an Upward Mobility Program which is 7 coordinated by our EEO Office. And per the 8 California Department of Human Resources, upward 9 mobility is a planned development and advancement of 10 employees from low-paying occupations in entry-level 11 technical and professional and administrative 12 positions. And in calendar year 2015 BOE had a 13 total of 31 upward mobility hires in the following 14 technical and professional administrative positions: 15 In the BTS, our Business Tax Representatives, we had 16 18 hires; in the Staff Services Analysts, we had 9; 17 in the Administrative Assistant, we had 1; and Tax 18 Auditor, 3. 19 The Equal Employment Opportunity Office 20 coordinates the BOE Upward Mobility Program for 21 employees in low-paying classifications to promote 22 to the Business Tax Representative and Tax Auditor 23 classes. Employees in the Upper Mobility Program 24 are provided tuition reimbursement for the classes 25 needed to meet the minimum qualifications for our 26 Business Tax Rep. and our Tax Associate exams. 27 In addition, at the discretion of a 28 supervisor and based on operational needs, employees 9 1 may be given a reasonable amount of state time to 2 attend these classes. And in 2015, 61 employees 3 were actively participating in our BOE Upward 4 Mobility Program. 5 That continues my report this morning. And 6 if there's anything you'd like to ask, I'd be happy 7 to answer. 8 MR. HORTON: Members, let us hear from the 9 witnesses, and then we'll go to the Q and A. 10 We would start with Ms. Maldonado. 11 ---oOo--- 12 MARGARITA MALDONADO 13 ---oOo--- 14 MS. MALDONADO: All right. Thank you so 15 much for this opportunity. And I'm -- it's good to 16 hear some of the efforts that are under way 17 around -- around this issue. And I have to tell you 18 that I think our witnesses here will be able to 19 express some other ideas about trying to remedy this 20 issue that we have with recruiting and retaining 21 skilled staff. 22 So I want to start off our discussion here 23 with James Zoes who is a Board of Equalization 24 Auditor from Houston. So I'm going to hand it over 25 to James, and then we'll have the witnesses speak, 26 and then wrap up with -- with another potential 27 solution for this issue. 28 ---oOo--- 10 1 JAMES ZOES 2 ---oOo--- 3 MR. ZOES: Hello. Hello. My name is James 4 Zoes. I'm a SEIU Local 1000, Unit 1 bargaining team 5 member, representing all Unit 1 employees statewide. 6 In my State capacity, I work for the Board of 7 Equalization as a Business Taxes Specialist I, in my 8 23rd year in the out-of-state district from Houston, 9 Texas. 10 The Board's mission is committed to 11 philosophy of serving -- of service and 12 accountability to the public through a sound 13 administration of tax laws, through programs that 14 enable and encourage people to voluntarily comply 15 with the law. The Audit Program is a very important 16 way in which we provide assistance and information 17 to the public. 18 In order to attain this, the BOE has to be 19 able to retain a skilled staff -- a very skilled, 20 highly trained, audit staff who perform this 21 technical work. It's important to not just be able 22 to hire employees at the entry level but maintain 23 the Auditors through the journeyman level and into 24 the expertise level or specialist areas, because it 25 is from that group of employees we fill these vacant 26 positions in the CEA level mentioned earlier. 27 The benefits to maintaining a well-trained 28 skilled audit staff are not just to the State, to 11 1 the Governor, the Board, but to the State -- to the 2 taxpayers statewide, to the constituency, and to all 3 members in the State of California. 4 Thank you. 5 ---oOo--- 6 DONNA VANSCHIJNDEL 7 ---oOo--- 8 MS. VANSCHIJNDEL: Good morning, Board 9 Members. My name is Donna Vanschijndel and I'm an 10 SEIU 1000, Unit 1 bargaining team member. And I 11 represent all Unit 1 Members statewide. 12 In my State capacity, I'm a 27-year 13 employee of the Franchise Tax Board with the 14 position of a Program Specialist II. And what I'd 15 like to talk to you today is what some of the 16 information with the Franchise Tax Board Workforce 17 Plan has identified regarding the recruitment and 18 retention problem, and that the FTB acknowledges 19 that this is an area that needs quick attention. 20 The improved economy, increased number of 21 retirement age eligibility employees, and fierce 22 competition with the private sector has made the 23 recruiting and retention problem problematic. 24 Although the Department has been able to maintain a 25 decent number of job applicants at most postings, 26 the number of highly qualified candidates are 27 diminishing. 28 Okay. Additionally, the Department, 12 1 because of the loss of -- the competition and the 2 loss of retention, the Department has to hire a 3 large pool of new Auditors every year and that they 4 are being retrained by staff. As a result, the 5 senior staff has to stop what they're doing, train 6 the new staff. So then the most difficult audits 7 are really not being conducted. We have to go back, 8 retrain, get them to where they can actually do the 9 audits on their own, and then we can go back to 10 doing our job as Auditors versus mentors and 11 trainees. 12 The FTB has also identified the risks 13 associated with the loss of job knowledge. And they 14 basically identify that, depending upon the business 15 area, the knowledge loss could be critical and could 16 ultimately impact revenue. Backfilling positions 17 with the right knowledge may be difficult. If we 18 lose people due to retention, there's no one to 19 backfill or promote up in. It takes training. It 20 takes time to go from an entry level to a journey 21 level to a specialist position. 22 And then it says: "As a result, critical 23 functions may not be completed timely, resulting in 24 delays of revenue." 25 They've also basically gave this risk of 26 loss, they gave it a description. Let me read this 27 real quick. It says: 28 "With an anticipated increase in the 13 1 number of staff leaving the Department due 2 to retirement and loss of retention, 3 promotions and more competitive job market, 4 there is an increasing risk in the coming 5 years that program areas will lose and have 6 difficulty replacing employees with the 7 knowledge and ability to perform the work 8 that enables the Department to carry out 9 its mission and achieve its strategic 10 goals. The Franchise Tax Board needs to 11 ensure it recruits the right employees, 12 train them while they are here, and provide 13 them with the programs and the 14 opportunities for upward mobility, and to 15 be able to retain their knowledge." 16 So what I believe is if we can successfully 17 create a great Recruitment and Retention Program by 18 making sure that the Auditors' salaries are 19 competitive so we can get people to come in, to come 20 here, that we can train them. Because we've got the 21 staff, we've got the knowledge to train them; we 22 have no problem with that. It's retaining them 23 where we have the problem. 24 And if we can make a clear path where they 25 can go from the Tax Auditor series into the 26 Specialist series so they see it as a career and an 27 opportunity to stay here, we wouldn't be here having 28 the problems that we are having today. 14 1 ---oOo--- 2 RONALD LEE 3 ---oOo--- 4 MR. LEE: Okay. My name is Ron Lee. I 5 work for the Franchise Tax Board. I'm here to talk 6 about the employee side. So I'm giving you -- 7 they're talking about the big picture. I'm going to 8 talk about -- give you a personal picture of what's 9 behind what they're talking about. So I'll bring 10 you a personal side to the issue. 11 You know, the easiest solution that we've 12 known about for a long time in regards to revenue or 13 the recruitment and retention issue is the deep 14 class concept. Now, if you compare that with the 15 IRS, the IRS has in each GS-12, GS-13, GS-14, they 16 have 10 merit steps within each of those classes. 17 At the FTB, in the Program Specialist series -- so 18 PS-1, -2 and -3, when you get promoted to that 19 position you basically get a promotional bump, 20 salary bump, and then you get one more increase, and 21 that's it. 22 So, for example, when I was a -- when I was 23 promoted, I'm a PS, Program Specialist 3. When I 24 was promoted to a 2 and a 3 and a 1, I basically got 25 initial promotional raise, and then I got one more 26 raise the next year and that was it. 27 A Program Specialist 3 is, you know, the 28 top Auditor for the program. That's the highest 15 1 program we have. That type of Auditor is qualified 2 in handling complex issues in program, in their 3 program, as well as other programs, lead on team 4 audits, mentors, trains, and provides technical 5 expertise to Management, and also to Legal. And for 6 me personally, I've also testified at the superior 7 court on some cases. 8 Now, a PS-3 -- a PS-3 is equivalent to a 9 GS-14 at the IRS. We basically do the same -- same 10 things. A GS-14 at the IRS makes 145,000. I make a 11 hundred -- 101,000. So that's a big -- that's a big 12 difference, right. 13 Now, I've been with the FTB -- a little 14 personal, more personal side of me. I've been with 15 the FTB for 24 years. I work very hard, putting in 16 a lot of extra time, you know, read a ton of court 17 cases. And I was able to be promoted to PS-3 in 18 nine years. That's probably one of the quickest -- 19 quickest routes. But then everything stopped. 20 So, you know, there's no more competition, 21 no more promotions. So for the last 15 years, you 22 know, I personally have not been able to be promoted 23 or get even a merit increase. 24 However, I still, in my capacity as, you 25 know, a lead Auditor, I work complex tax shelter 26 cases and complex pass-through entity cases. And as 27 an example, in the last, say, seven years, just on 28 three of my cases that I've closed, I've brought in 16 1 half a billion dollars to the State of California. 2 Okay. So with that said, you know, I ask, 3 you know, how many promotions have I had in the last 4 15 years? Zero. How many merit increases? Zero. 5 So, you know, while management is promoting 6 the lower level Auditors and effectively giving them 7 raises in that -- and Mr. Horton acknowledged that 8 when he came out to our West Covina office -- the 9 top Auditors who are responsible for, you know, 10 working the most complex issues, who bring in the 11 lion's share of the revenue to the FTB, year after 12 year have been ignored. So I'm kind of representing 13 the PS-3's when I -- when I'm here today. 14 So back to the deep class. The lack of the 15 deep class concept at the FTB, you know, it's caused 16 problems. So experienced Auditors are retiring and 17 they're leaving for -- or they're leaving for higher 18 paying jobs somewhere else. 19 In the last eight years, I can tell you the 20 FTB has hired a lot of new Auditors, you know, and 21 they're inexperienced. But, you know, with the 22 economy, management needs to give these people 23 raises to keep them, right? And they can't because 24 they're locked in. 25 So in order to do that, they promote. And 26 that's the only thing they can do. And so obviously 27 when you do that, that can cause some problems, you 28 know, with the quality of the staff. And so in 17 1 closing, you know, I just wanted to show -- show you 2 a personal side of the -- of what the issue we're 3 raising today. And probably if we could institute a 4 deep class concept within the FTB, that would really 5 go a long ways to solving the problem. 6 ---oOo--- 7 DOLLY AVILA 8 ---oOo--- 9 MS. AVILA: Okay, I'm up. My name is Dolly 10 Avila. I'm bargaining team member with SEIU 1000. 11 And I'm also responsible for listening to all of the 12 issues for all of our members. But, in addition to 13 that, I'm also a Franchise Tax Board Auditor, 14 Program specialist 2, and I'm in the S Corp Program, 15 and I also do tax shelter audits. 16 So the purpose of this discussion is to 17 provide information to all of you regarding the 18 Auditor, Compliance, and staffing issues. And so 19 I'd just like to give you some more information that 20 may not have been touched on by all of our 21 presenters here. 22 When I first started with the State, most 23 of the Auditors that came to the State had some 24 outside experience and -- and -- which was good for 25 the State. 26 Currently, when we hire new Auditors, they 27 are fresh out of college and many don't have the 28 experience. So the Auditors are using the State, 18 1 the Franchise Tax Board and Board of Equalization, 2 as a training ground. So that's a significant 3 issue. 4 And in talking with B of E Auditors as a 5 bargaining rep for SEIU, some of the B of E Auditors 6 have told me about how sometimes they are 7 temporarily promoted for temporary assignments. And 8 during the temporary assignments they are paid at -- 9 for example, a Tax Auditor would be doing a 10 temporary assignment as -- at an ATA level. And so 11 they'll perform that assignment for about 10 months. 12 And then once they complete the assignment, they go 13 back to the Tax Auditor pay. So that is very 14 discouraging to them. They are really not happy 15 about that. 16 And in addition, some of the issues at the 17 Board of Equalization, with the Tax Auditors, when 18 someone leaves, for example they retire or they 19 resign and go to another job, for example, if it's 20 an ATA position, the managers -- or when they hire 21 again, they don't -- they hire a Tax Auditor versus 22 promoting an Auditor to a Tax Auditor position that 23 was -- that was just made vacant. So that's also, 24 you know, kind of demoralizing. 25 And one issue that I've -- I've talked 26 about with recruiters is that when they are out 27 recruiting for B of E and FTB, many new -- new 28 accounting students bypass the State because of the 19 1 low pay. They'll see -- they'll look at our salary 2 range and say, oh no, we can't live -- we can't 3 work, you know, starting at that range. So that's 4 really important for -- for all of you to 5 understand. 6 And, in addition, I've also talked to 7 managers. And sometimes when we -- they go through 8 a round of hiring, they don't find qualified 9 candidates. So our goal is to hire the best and the 10 brightest. And I think sometimes we might be 11 missing the best and the brightest because of our 12 classification structure. 13 So -- and so, in closing, I just -- I want 14 to ensure that B of E and the -- that the current 15 B of E's current and future Auditor structure will 16 support the Board of Equalization, the State, and 17 the employees and to fulfill its mission of 18 generating and collecting revenue and to provide all 19 California -- Californians with a good life in this 20 great state. 21 MR. HORTON: Thank you. 22 ---oOo--- 23 MARGARITA MALDONADO 24 ---oOo--- 25 MS. MALDONADO: Thank you. I wanted to 26 take this opportunity to further bridge some 27 parallels here. Obviously we have our elected 28 bargaining members who have the responsibility of 20 1 negotiating for our 95,000 members. And we not only 2 have expertise in our own prospective departments 3 that we work for, but our interactions with other 4 departments. 5 And so with having the talent of Auditors 6 who are also part of the bargaining team, it really 7 enriches the voice of people in the classification. 8 And so I just want to make sure that that parallel 9 is being recognized. Although we do have the three 10 speakers with the Franchise Tax Board, they do have 11 a direct connection with, also, their counterparts 12 at the Board of Equalization. 13 And the other thing that I also want to 14 bring up is that this opportunity that we have right 15 now, we really need to seize it. Where the economy 16 in California is making a shift, how are we ensuring 17 that we have the right talent in place to be able to 18 ensure that the revenues that are coming into the 19 State are being captured? And it's really the 20 staff, the Audit and Compliance staff, who ensure 21 that that is -- is happening. 22 And I understand there are these efforts 23 under way through the Board of Equalization, but we 24 need to go a little bit further. And we need to 25 ensure that everyone who has a responsibility and 26 overseeing the revenues that need to come in have a 27 voice in this conversation. And this is a primary 28 reason why we are coming to you, and we see that it 21 1 is one of your direct responsibilities in carrying 2 out the mission for the Board of Equalization as 3 well as your -- your elected role -- role as Board 4 Members. 5 And there is nothing in the Dills Act that 6 precludes you from using that position to be the 7 advocate that you need to be for the employees 8 which -- who are considered the staffing 9 infrastructure for the Board that is further 10 carrying out the mission, and ensuring that the -- 11 the employees who are on the front line have the 12 opportunity to engage in the appropriate 13 conversation to give you the solutions and also give 14 you a lens into where -- what kind of issues have 15 come up from where they sit. Which is not to say 16 it's not inaccurate from other -- other seats, but 17 having a front row seat into this -- this area 18 and -- that they work in and seeing in a day-to-day 19 basis makes a difference. And you having that kind 20 of access is critical in thinking about what the 21 appropriate solutions are. 22 And I -- I do want to extend our 23 appreciation to the Chairman and also to Member Ma 24 for the support and the conversation that we've had 25 so far. We are looking forward to expanding that 26 conversation with the other Board Members so that 27 you can also have a further opportunity to be on the 28 front line of understanding how our members can help 22 1 ensure that you are able to do your best work. 2 And what we have come to the Board with 3 today, also, in sharing this very important 4 information, is we also have a resolution that will 5 help move -- what we believe will help move the 6 process along and maybe even put some urgency to the 7 efforts that have been identified here. 8 And so I'd like the read this resolution 9 for your consideration. 10 Whereas, the Board of Equalization prides 11 itself on working collaboratively with the Service 12 Employees International Union, SEIU Local 1000, with 13 the understanding that only working together can we 14 best fulfill the mission of the Board of 15 Equalization; and 16 Whereas, the employees of the Board of 17 Equalization are SEIU Local 1000 members; and 18 Whereas, the SEIU Local 1000 is 19 committed to the working conditions of all 20 represented employees, ensuring the Board of 21 Equalization is a thriving organization and 22 committed to all Californians having a good life; and 23 Whereas, the Board of Equalization 24 employees have a direct responsibility in BOE's 25 ability to fulfill its mission, including the 26 collection of revenue in the billions of dollars; and 27 Whereas, the Board of Equalization is 28 committed to a staffing infrastructure that will 23 1 expand revenue generation by supporting upward 2 mobility opportunities and the establishment of 3 strategies to attract and retain skilled audit and 4 compliance staff; and 5 Therefore, be it resolved that we, the 6 Members of the Board of Equalization, hereby call on 7 Board of Equalization management to conduct -- to 8 conduct a Board of Equalization classifications 9 salary study with comparable classifications. 10 I want to highlight "comparable 11 classifications." Any classification study that is 12 going -- needs to be conducted, it should have an 13 apples to apples comparison. When we're talking 14 about revenue generating audit classifications, 15 those are where those classifications need to be 16 aligned. 17 We are also further being resolved to 18 commission data that identifies the length of 19 employment for employees who are responsible for 20 audit and compliance functions, identify the average 21 time to fully train and gain experience to reach 22 journey level abilities for audit and compliance 23 employees; and 24 Therefore, be it further resolved, that 25 we, the Members of the Board of Equalization, call 26 on BOE management to also, provide a staffing 27 succession plan for audit and compliance functions, 28 provide career ladders for audit and compliance 24 1 staff from entry to the top classification level and 2 identify classification compaction areas. 3 Therefore be it resolved, that we, the 4 Members of the Board of Equalization, call on BOE 5 management to, within 60 days of the resolution 6 being enacted, hold a public discussion to review 7 all of the data. 8 We feel that this is a generous timeline, 9 but we also understand that there are some efforts 10 that are already under way, hearing that there is 11 some work around a succession plan. But we feel 12 that we need a broader discussion on the -- around 13 this issue given the urgency of ensuring that we are 14 able to bring people in, have the right staff in 15 place. 16 A 39 percent of staff that are eligible to 17 retire, it seems to me a bit of a crisis. And so we 18 need to operate in that type of a situation here. 19 And we would respectfully ask you to approve this 20 resolution. And I will provide it -- a copy of it 21 to the Board so you can further look at this. 22 And obviously we are available for some 23 additional questions if you have them. 24 MR. HORTON: Thank you for your 25 presentation. We would advise that the Board can 26 direct staff without a resolution. But I think the 27 resolution certainly codifies the view and gives us 28 a starting point. 25 1 Members, I'd like to clear up the issue as 2 it relates to the Dills Act and go to Ms. Mayorga 3 and get her comments on that. I understand that 4 there may be a different perspective as to the Board 5 of Equalization's role and our exposure as it may be 6 related to the Dills Act. 7 MS. MAYORGA: I'm sorry, Chairman. I'm not 8 aware of any -- 9 MR. HORTON: Okay. 10 MS. MAYORGA: -- misunderstanding. 11 MR. HORTON: So the Board -- my 12 understanding, or least the advice that I received 13 earlier was that the Board was at the bargaining 14 table; therefore, the Board could not participate to 15 some degree. 16 I'd like for the Members just to have an 17 understanding as to what degree, from our legal 18 perspective, that we can participate in this 19 process. 20 MR. FERRIS: Randy Ferris, Chief Counsel. 21 MR. HORTON: Welcome, Randy. 22 MR. FERRIS: I think the prior discussions 23 were what -- what was the Board able to do through 24 resolutions to directly participate and attempt to 25 impact ongoing collective bargaining discussions. 26 MR. HORTON: Okay. 27 MR. FERRIS: So there is general language 28 in the Dills Act that prohibits anyone from 26 1 interfering with the collective bargaining process. 2 The kind of discussion that's going on 3 right now of a general supportive nature of the 4 recruitment and retention of our very important 5 resources and our employees, that's -- that's 6 completely appropriate and -- 7 MR. HORTON: Excellent. 8 MR. FERRIS: -- the Members should be 9 concerned with that. 10 MR. HORTON: Excellent. Thank you very 11 much. 12 Members, we'll now open it up for 13 discussion from Members. 14 Member Ma. 15 MS. MA: Thank you very much. 16 Thank you all for being here. And I know 17 that Ms. Mayorga just started about seven months 18 ago, so she's inherited a lot of, you know, 19 practices, procedures, that's been happening. So I 20 appreciate Ms. Mayorga's leadership on this. 21 I know you have a lot of experience working 22 with different agencies in terms of some of the 23 issues that we're talking about, but I do have a 24 couple of just comments, and questions perhaps, and 25 I'm just going to start with the mentoring. I think 26 that's a great opportunity for folks to, you know, 27 cross-train, as well as, you know, learn from 28 others. 27 1 I know I have a mentee. He is in the SCOP 2 Program, and I've been able to go on ride-alongs 3 with him and understand exactly what he does. And 4 I've been inviting him, you know, to participate in 5 some of our activities so he also can -- can be a 6 voice to the constituents on what is available to 7 them in terms of seminars, in terms of consultations 8 and all of that. So I think the Mentoring Program 9 is a good thing. 10 You talked about some of the departments 11 that have instituted either training or desk manuals 12 or entrance and exit surveys, and they were like out 13 of the 11 but they weren't all 11. There were 6 out 14 of 11, 9 out of 11. So which two or five are not 15 actively participating in these programs? 16 MS. MAYORGA: Okay. I don't have that 17 particular information. I just brought the stats 18 with me. 19 MS. MA: Okay. 20 MS. MAYORGA: But I can certainly provide 21 that to you. 22 We're just now starting these efforts with 23 succession planning, so we're moving into our 24 Phase 2 of workforce succession, and these are some 25 of the key components that we've identified in the 26 first phase. 27 So, there's a lot of work that goes into a 28 lot of these initiatives, so we are partnering with 28 1 other departments, you know, as we're learning, you 2 know, best practices. And we're sharing that 3 information with one another. 4 MS. MA: Okay. 5 MS. MAYORGA: So just depending on, you 6 know, the department and workload. As I stated in 7 my presentation, we have a huge leadership drain, so 8 that's causing some issues for some of the 9 departments where we're -- not only are we having to 10 juggle, you know, leadership leaving, but we're also 11 trying to keep some of these very important 12 initiatives to the forefront. 13 MS. MA: Yeah. And the leadership drain 14 does actually concern me. 15 MS. MAYORGA: Mm-hmm. 16 MS. MA: Because we do our own exit 17 interviews with some of these high level CEA's that 18 are leaving, and it's important that they are 19 documenting what it is that they feel needs to be 20 improved in our agency and why they're leaving for 21 either other agencies or other job opportunities. 22 Classes. I understand from some of the 23 staff because I've gone and spoke to, you know, 24 every level in all of my districts about some of 25 these classes that are required in order to move to 26 the next level. And I understand that the BOE has 27 cancelled many classes over the past couple years, 28 made it very inconvenient for staff to go only to, 29 1 like, Sacramento to take a class. 2 Is there any possibility for us to partner 3 with maybe some of the universities or online 4 courses so that, you know, staff, in terms of 5 quality of life and retention, they don't have to 6 take a day off and actually can do this like on 7 their own time and pass these classes and get in 8 line for the next opportunity. 9 MS. MAYORGA: Yeah. We're -- we're 10 actually looking for different ways of providing 11 training to all of our staff at BOE. We understand 12 that, you know, logistically it may not be feasible 13 for us to get out into the district offices. So 14 we're looking at, you know, doing webinars, you 15 know, having more online courses. 16 We are going to continue to look at the 17 college onsite courses. You know, unfortunately it 18 deals with resources. And so we had limited 19 resources last year and a lot of our efforts were 20 directed in different areas. But we are going to be 21 coming out with a survey and reaching out to all of 22 our department heads to seek what type of training 23 we need going forward. 24 So definitely, it is a big issues for us, 25 and it's a big initiative for us as well. 26 MS. MA: I'm also disappointed when 27 hardship requests are denied. I think, you know, 28 for different reasons, whether we're trying to keep 30 1 employees here and because of illnesses or personal, 2 you know, situations, that we are denying ill- -- 3 hardship transfers. 4 MS. MAYORGA: Mm-hmm. 5 MS. MA: And I don't know what the policy 6 is, but I really do feel like we should be trying to 7 accommodate folks who want to stay with the agency 8 and perhaps, you know, cannot drive the 50 miles to 9 work everyday, or have a parent or a family member 10 that they need to, you know, to attend to at home. 11 So this is the third time we've asked for 12 hardship transfer in my district that it's been 13 denied, and it's very, very troubling to me. 14 Vacancy. You know, I understand that there 15 are a lot of people in the blanket right now and 16 that there's a vacancy list, and therefore, you 17 know, the Department of Finance is not granting us 18 extra staff to do, you know, some of the extra work 19 that's needed, even in the legislation that has been 20 passed and proposed and we're supposed to be 21 responsible. 22 So, I'm just wondering what is the 23 situation with the blanket and the vacancy list? 24 MS. MAYORGA: We are looking at that. 25 We're working with -- I work directly with the 26 Executive Office. We are looking at reports, you 27 know, positions, permanent positions in the blanket. 28 As positions become vacant in the program, we're 31 1 recommending that those positions -- you know, 2 people moved out of the blanket. 3 So, it's something that we didn't get here 4 overnight so it's going to take us some time. But 5 definitely, it has been a focus and important for 6 everybody in the Department that we know that we 7 need to address that issue. 8 MS. MA: So are people being hired in the 9 blanket around the civil service system or even 10 hired at, you know, with less experience than people 11 who have been here at the agency for many years at 12 higher salaries? I mean that's something that I've 13 heard as well that's creating morale issue. 14 MS. MAYORGA: That's kind of a general 15 statement. I'd have to look at specific hires, you 16 know, in order to be able to respond to that. But 17 certainly, all hires are, you know, based on, you 18 know, merit principles and they work with us in the 19 personnel office to ensure that any recruitment that 20 we're initiating, it's merit-based, we're going 21 through a selection process. 22 So, unless there's a specific hire for me 23 to look at, definitely that's what our role is in 24 HR. 25 MS. MA: Okay. And we'd probably like to 26 get more analysis later on, you know, in terms 27 of how -- 28 MS. MAYORGA: Absolutely. 32 1 MS. MA: -- you know, this issue is. 2 Having a clear path obviously, I think, is 3 very important. As we hire new folks here, they 4 would like to see their upward mobility and 5 opportunities. And I know that you're working on 6 trying to fix some of these classification issues so 7 that people do have a clear path instead of getting 8 stuck at a certain level and not being able to 9 promote up or get, you know, pay increase, I think 10 is not acceptable and not a good way to kind of 11 retain staff. 12 Does the IRS have a COLA increase system? 13 I understand that way back the IRS was paid less, 14 and then now because they have instituted some sort 15 of COLA increase, now they're getting paid more than 16 our State Auditors and Compliance folks. 17 MS. MAYORGA: I'm not aware of any, you 18 know, built-in COLA systems. But all rank and file 19 pay equity is -- you know, is an issue for 20 bargaining and negotiation. So those are issues 21 that are brought up at the table. 22 MS. MA: Okay. 23 And I'm just wondering is there a 24 difference in pay between the Franchise Tax Board 25 Auditors and Compliance and the BOE Auditors and 26 Compliance? Or is everybody under the same CalHR 27 system? 28 MS. MALDONADO: It's all under the same 33 1 CalHR system. They have different levels, but the 2 pay is -- there's some similarity. 3 I will highlight that the -- and this is 4 something that Ron brought up. Once you become the 5 journey level or really expert Auditor, then there 6 aren't any other opportunities for you to be able to 7 promote, and that is on both sides. 8 The other issue is that if you are in 9 Sacramento, the type of cases that you would have in 10 Sacramento are different from our out-of-state or 11 even in our field offices around the state because 12 the BOE only allocates a certain level of 13 classification in those areas. But sometimes the 14 complexity of the work, it really does require a 15 higher level to be allocated in those different 16 areas. So we do all fall under CalHR. 17 I do also want to bring up that just 18 because of the timing that we're in -- we are in 19 right now, we are going to go into negotiations in 20 April. However, we also have a provision in our 21 contract, if ever the State runs into a situation 22 where they feel that they are having recruitment and 23 retention problems, that they have all the authority 24 necessary to adjust that problem. And that is a 25 provision that goes throughout the year, throughout 26 our contract. 27 So the idea that we -- it is something that 28 can't be discussed or can only be handled in that is 34 1 absolutely incorrect. That that provision could be 2 enacted today. 3 MR. HORTON: Okay. 4 MS. MA: And I understand you're at the 5 bargaining table right now, right? 6 MS. MAYORGA: We will have a representative 7 at the bargaining table this year. 8 MS. MA: Okay. So it has not started yet? 9 MS. MAYORGA: It has not started. 10 MS. MA: Okay. When is the process? 11 MS. MALDONADO: April 13th. 12 MS. MAYORGA: April. 13 MS. MA: April 13th starting, and then how 14 long -- 15 MS. MALDONADO: And then we'll continue 16 until we are able to get a successor agreement. But 17 the language that enables the Board of Equalization 18 to remedy this issue is -- has always been at their 19 disposal for many years, no matter if we're at the 20 table or not. And that is recruitment and retention 21 language that resides in the contract. 22 MS. MA: This is something new to me, so 23 maybe we can. 24 MS. MALDONADO: I can send you the 25 provision. I can send you the provision that's 26 there. 27 MS. MA: Okay. 28 MS. MALDONADO: Some departments haven't 35 1 acted. I mean it is not unusual for departments to 2 have a recruitment and retention problem, especially 3 with not having the appropriate succession planning 4 in place. And so many of our, you know, talented 5 people hit retirement age, and this is a statewide 6 problem, but that was something that they had put 7 into place for certain classifications. 8 Like I said, it's been in our contract for 9 years. 10 MS. MA: Okay. Perhaps you can share that. 11 MS. MALDONADO: I absolutely will. 12 MS. MA: Thank you. Thank you all for your 13 service and coming today and sharing with us your 14 experiences. 15 MR. HORTON: Member Stowers. 16 MS. STOWERS: Yes, thank you. 17 Two questions. First, dealing with Audit 18 and Compliance staff. The Franchise Tax Board uses 19 the Program Specialist 2 and 3 series. And I do 20 believe there's a great deal of that classification 21 in the field. 22 The BOE equivalent is the Business Tax 23 Specialist 2 and 3. Have we -- we talked back in 24 November about doing a study to look at BOE workload 25 to see if we have justification to get more of that 26 classification in the field as opposed to the 27 Sacramento headquarters location. 28 MS. MAYORGA: We have -- HR has not been 36 1 commissioned with an assignment to look at that 2 workload study. 3 MS. STOWERS: I think that would be a good 4 start in seeing our workload, to see what we have 5 out there. So for those who are taking the test, 6 they will have the work to do. 7 My second issue is outside of the Audit and 8 Compliance. What are we doing as far as recruiting 9 and retaining Accountants and CPAs for our Financial 10 Management Division? It's critical that we have 11 qualified staff there to deal with the allocation of 12 the funds that our auditors and collectors obtain, 13 and I think that should be number one on the list. 14 MS. MAYORGA: I'll note that. 15 MR. HORTON: Member Runner. 16 MR. RUNNER: Yeah, thank you. Going into 17 this discussion I kind of understood and knew it was 18 going to be a little more of a longer, complex 19 discussion. That's one of the reasons why I 20 requested to put it over so that we could get 21 additional briefing. And I think what we're going 22 to end up is probably more -- more -- more question 23 than resolution. 24 Let me just -- let me just ask a couple of 25 things in that process. First of all, I think 26 you'll find, and I think this Board is consistently 27 and I think will continue to do, trying to 28 restructure the Board in such a way that we try to 37 1 get as many jobs out into the field as possible. 2 I don't -- I think for the most part many 3 of us feel like we don't believe your career should 4 have to move through -- should have to go through 5 Sacramento. That there's an opportunity there, and 6 as a result of that, I think we're always going and 7 asking the staff to look at what are the kinds of 8 things that are done at the headquarters which can 9 be done as efficiently and even more effectively he 10 when done in a field office. 11 So I think that's an issue. I think that's 12 a concern when we talk about the expertise that's in 13 the field office. And by having more 14 responsibilities closer to taxpayers, we help 15 resolve that. And I think that that's a continued 16 issue that we will continue to deal with. I know 17 that management is in the midst of examining a 18 number of those issues right now. And so I think 19 that's important. 20 One of the issues that has been brought to 21 my attention, and I know I worked with SEIU, and I'm 22 kind of disappointed we haven't had this 23 conversation prior to this meeting, is the issue of 24 health insurance for out-of-state offices. I know 25 that we've requested that be a part of the 26 bargaining. What happened, I think, last time is it 27 ended up being a work group and I don't think it 28 resolved anything. 38 1 And so I'm really concerned about when I go 2 and visit out-of-state offices and your members, 3 when it is that they told me that they just don't 4 have the same kind of health insurance 5 opportunities. As a result of that, they end up 6 basically spending their own money. 7 And so I would really hope that you will -- 8 as you go to the bargaining table, that you will 9 hold strong on that issue for your members. 10 MS. MALDONADO: Absolutely. 11 MR. RUNNER: Because I think that's 12 important and it's one that we think is valuable, 13 because that's really important when it comes to the 14 issue of retention and opportunities, particularly 15 in those out-of-state offices. 16 And so that's one that I know we've asked, 17 and continue to want to have you continue to work 18 with. 19 I am a little confused in regards to what 20 our options are in the issue of recruiting and when 21 we can do. One of the things that struggle with as 22 we deal with our vacancy issues is that our average 23 salaries right now are above the midline, midpoint. 24 And as a result of that, we end up having to carry 25 vacancies. So I'm confused as to how much of this 26 is our issue versus how much of this is the 27 administration's issue -- 28 MS. MALDONADO: And I mean you have -- 39 1 MR. RUNNER: Let me just finish that. 2 MS. MALDONADO: Oh, sure. 3 MR. RUNNER: -- you know, in regards to 4 then being able to have positions, be able to still 5 meet budget requirements in that regard. 6 And so I am a little confused in regards to 7 that because, again -- again, I would encourage 8 if -- what seems to me, and again, I don't think 9 we're the only agency that has problems with staff 10 above the midrange, which is what the budget's based 11 upon. 12 And so I hope you're successful as you deal 13 with the administration in regards to seeing what 14 needs to be done, in regards to bringing up the 15 whole -- kind of the whole sea level in order to be 16 able to meet these needs and these opportunities and 17 create these kind of positions and -- and pay rate. 18 Again, I'm confused, and that's why we're 19 going to have to continue conversation in regards to 20 what we really can do as far as -- without getting 21 in difficulties with both the administration, with 22 Finance, and with CalHR. 23 My final thought though, and then I'll be 24 glad to have some response, is one of the areas that 25 I know where I'm particularly concerned about and 26 that is in our staffing, and it hasn't come out at 27 all here, and that's in property tax, because we 28 have a big competition when it comes to the 40 1 counties. 2 MS. MALDONADO: Mm-hmm. 3 MR. RUNNER: We can talk about what the IRS 4 is doing and all those issues. And, again, 5 that's -- that's an interesting issue and, you know, 6 I'm not sure how we at times compete with the 7 federal government who gets to write checks way 8 beyond any means that they have. 9 But -- but on the other side of that, I am 10 concerned about the fact that we have great 11 difficulty in recruiting quality and new property 12 tax people as a result of what counties are now 13 paying their property tax people. And that's a 14 particular issue that I think we've got to kind of 15 come to grips with. 16 So, I think -- I mean I'm with you in 17 regards to trying to figure out how to expand the 18 roles. 19 MS. MALDONADO: Right. 20 MR. RUNNER: And how to be able to make 21 sure we're competitive and whatnot. I'm just 22 unclear exactly what our path is and what -- and 23 what we need to then deal with in the 24 administration. And then, like I said, I'm 25 particularly concerned then as we deal with some of 26 these issues in regards to health insurance, some of 27 those issues that are truly problematic and we have 28 employees in the other -- out-of-state who basically 41 1 have less money in their pocket, only because they 2 don't have the same options. 3 MS. MALDONADO: Yeah, I know, I really 4 appreciate that. And the other -- you're right, we 5 do have -- we were able to secure, in our last 6 contract, the ability to have a discussion with 7 CalHR around what the impact is for out-of-state, as 8 well as some of what happens when you live in a 9 rural community in California, around accessibility. 10 I think one of the benefits that we have 11 found with the out of care is that how do we -- in 12 part of the discussion that we have, is how do we 13 partner with some of those HMOs, where it's not so 14 much around having a large hospital or some kind of 15 services, but more that CalPERS has kind of limited 16 how we partnership with those health care providers 17 so that in turn they could provide a more affordable 18 access -- 19 MR. RUNNER: Right. 20 MS. MALDONADO: -- to our members. 21 And so we are still continuing that 22 discussion with CalPERS. CalPERS is obviously, 23 because they are the securer of this benefit, they 24 are an important factor here. And they are helping 25 us navigate that, and we are not by any means 26 walking away from that. 27 And James Zoes was a part of that work 28 group and also had commissioned that the State look 42 1 into what the -- how big the problem is. And then 2 also trying to find the right solution. 3 MR. RUNNER: And I know in the past we've 4 even contemplated legislation when it has been used 5 in the past. And, again, I'd open -- I'd be very 6 open to SEIU in terms of sponsoring the legislation 7 that would enable us to -- to be able to meet that 8 as we've had to deal with that in the past -- 9 MS. MALDONADO: Mm-hmm. 10 MR. RUNNER: -- in order to kind of close 11 that gap. 12 MS. MALDONADO: Right. No, absolutely. 13 That would be an interesting discussion with the 14 administration, to try to get that funding back. 15 MR. RUNNER: Right. 16 MS. MALDONADO: Obviously it would be very 17 important to us. 18 I need to get some more information on the 19 property tax because you're right that I don't know 20 if it's because it's just very small that we haven't 21 heard about it, or people are just working and 22 working and they haven't really lifted up their 23 heads. So we'll want to definitely look into that. 24 The other piece that I want to try to 25 create some clarity around is how you go about 26 fixing this -- the problem, right, of -- of 27 recruitment and retention. And as a Board, you have 28 your jurisdiction and your responsibility to your 43 1 constituency, which is also responsible -- that you 2 have the responsibility you have in carrying out the 3 mission. 4 There are -- you have access to the budget 5 for the Board of Equalization. There are obviously 6 there are some vacancies there. A recruitment and 7 retention is not particularly a part of the base pay 8 initially. A recruitment and retention is something 9 that you give above and beyond while you were trying 10 to get through the problem. 11 Ultimately, we believe that we need a 12 longer term solution and the pay needs to be lifted 13 up. But the recruitment and retention gives you 14 that temporary way to fund being able to attract and 15 also retain staff. And that's totally within the 16 jurisdiction of the Board of Equalization to do. 17 MR. RUNNER: Again, I'm just unaware, and I 18 guess that's where I think we need additional 19 briefing to find out exactly what it is that we are 20 able to do. 21 MS. MALDONADO: Right. 22 MR. RUNNER: I just know that we're like 23 crazy trying to get people out of the blanket and 24 trying to make sure that we are meeting the 25 opportunities that Finance is putting on us so that 26 we could actually get funding for the positions 27 we're asking for. 28 MS. MALDONADO: Right. 44 1 MR. RUNNER: I don't know if -- Sandra, if 2 you have some thoughts or you on observations on 3 that. 4 MS. MAYORGA: That is a really valid point. 5 I mean we do need to look at our blanket and the use 6 of the blanket and moving permanent positions into 7 funded positions. Because that is one thing that 8 Finance will look at if we, you know, go forward 9 with the BCP, they're going to want to know how 10 vacancies we have in the Department. And they're 11 first going to look to us to, you know, redirect 12 within our own resources. 13 So, I think that's really important that we 14 address that first. 15 MR. RUNNER: Thank you. 16 MS. MALDONADO: The other piece on that is 17 we've had the opportunity to collect data ourselves 18 and we have information that shows the value of 19 compensating an Auditor or Compliance staff at an 20 adequate level by the type of revenue that they 21 would be generating. And so they would -- 22 essentially the positions would pay for themselves. 23 If you're having vacancies, the question is why are 24 those -- why are we having so many vacancies? And 25 so is -- is there an opportunity to then ensure that 26 there is some financial incentive to be able to 27 attract them? 28 MR. RUNNER: I think our problem -- our 45 1 problem is our vacancies are -- we're having to hold 2 vacancies because we're -- our pay rate is over the 3 midrange. 4 MS. HARKEY: That's exactly right. 5 MS. MAYORGA: That's correct. 6 MR. RUNNER: So I mean it's like we -- 7 we -- I have no doubt that we could even fill those 8 vacancies. 9 MS. MALDONADO: Mm-hmm. 10 MR. RUNNER: The problem is that if we fill 11 those vacancies then we are -- that we are over 12 budget. And so I think that -- that becomes our 13 problem. 14 So, yes, we're carrying vacancies, but 15 we're not carrying vacancies because we can't fill 16 them. 17 MS. MALDONADO: Right. 18 MR. RUNNER: We're carrying vacancies 19 because our average pay rate is over the midrange. 20 MS. MALDONADO: And -- and I will say that 21 you can -- that through the budget change process, 22 through the BCP process, that does enable the Board 23 of Equalization to get the necessary funds. 24 It is a struggle -- I'm not going to act 25 like it's not -- for departments to go in and try to 26 secure those dollars. But I'm telling you from our 27 experience if we don't, especially listening to the 28 numbers, we are going to be in a serious crisis. 46 1 And so what is it going to take to be able 2 to bring in the qualified staff necessary? And I 3 believe this resolution helps us get to the place 4 where we have all of the data so that we are not 5 confused about what are the remedies to fix the 6 problem. 7 MR. RUNNER: I think another -- 8 MR. LEE: Yeah, so what you were -- there 9 are -- there are variances within the classes. So 10 some of the classes may be under the -- under the 11 baseline range. 12 MR. RUNNER: Right. 13 MR. LEE: And some of our over it. Right? 14 MR. RUNNER: Right. 15 MR. LEE: So that -- that's the problem. 16 MR. RUNNER: And our budget is based upon 17 the average. 18 MR. LEE: Yeah. 19 MR. RUNNER: So basically our problem is -- 20 and, you know, it's kind of an interesting issue 21 because it kind of goes back to our retention and 22 our succession planning because the fact is we're 23 over often times because we've had such long-term 24 employees. And so as a result of having long-term 25 employees, people have moved up. 26 MS. MALDONADO: Mm-hmm. 27 MR. RUNNER: -- you know, in their pay 28 rate, and now we're above -- the middle. And so 47 1 that -- in once sense we end up with a problem 2 because people are staying. 3 MS. MALDONADO: Right. 4 MR. RUNNER: And that becomes the challenge 5 that we have. 6 So, again, I think it's worthy of an 7 ongoing discussion and we need to have it. So thank 8 you. 9 MS. MALDONADO: Yeah, I know. And one 10 other piece as well. I had a conversation with 11 Finance not too long ago, and I know that they have 12 been trying to find what is the right -- what's the 13 right mix of -- for budgeting for positions? And so 14 I think that is also worth a conversation with 15 Department of Finance, to see how they're going to 16 fund going forward. 17 MR. HORTON: Member Harkey. 18 MS. HARKEY: I just want to make some quick 19 comments, and I probably don't -- I don't need 20 really any response. We've had a great conversation 21 about this. 22 But I do want to state that when we have 23 low-skilled or entry level people going out on 24 audits and other things and we're dealing with 25 sophisticated clients, it's a cost to the clients as 26 well. 27 So, you know, especially Irvine, San Diego, 28 we are kind of like training. We bring them in, 48 1 train them, and then they go off and they get a very 2 nice paying job. And I think there is a trade-off 3 between those employees who are looking for a longer 4 range career than those that are just looking for 5 the dollars that are out there. And we -- we 6 suffer, unfortunately, with both. 7 And so our -- our clients, and even across 8 the State -- I mean out-of-state suffer if they get 9 a brand new person coming in. And even -- even the 10 smaller business that's got a first-time audit or 11 something, it's very, very -- it's time consuming 12 for the person who is in the business or the 13 individual who is trying to get on with their life. 14 So, I do support, you know, promoting and 15 having -- trying to retain some of our experienced 16 audit staff and others. 17 We have been working, I know, over the last 18 year on the blanket. And I think we're whittled 19 down tremendously, at least by half. And what that 20 was, was basically bringing people in on a temporary 21 basis and not -- but they did all go through the 22 merit program, as I understand it. So there's no -- 23 there shouldn't be any, you know, discrepancy there. 24 I think we're all held to that standard. It's just 25 a matter of getting them into the permanent 26 positions, which I think we have been doing. 27 I agree with the property tax. We have a 28 real hard time retaining property tax people. As 49 1 you know we do statewide property tax assessment, 2 and this is one of the largest generators of income 3 for the State of California, and we don't 4 really have -- we can't compete with the county 5 level as far as the -- you know, the people that 6 might come into the State to get trained will be out 7 to a county job as soon as they can because it just 8 pays so much more, and they're close to home and you 9 know. 10 So I think -- I think that is a key area, 11 and I think it's an area where we generate a lot of 12 money for the State and it's best that we be 13 accurate. 14 The out-of-state health insurance. Again, 15 very important to the people that I speak to. And I 16 would like to see a little more forward momentum. 17 So, other than that, I think that a lot of 18 the hiring and the leaving is recession driven. I 19 bet you when we face a little downturn, we're going 20 to have a lot of people wanting to come home and 21 maybe it'll help us out. But I do think at that 22 point you do have -- you know, we do have to do 23 something about all the retirees we've got and the 24 retention. And somebody being around for 24 years 25 and not getting -- not able to get an increase is, 26 you know, at this point is -- is a bit problematic. 27 So thank you very much. 28 MR. HORTON: Members, this has been a -- a 50 1 very excellent conversation, I believe. And I think 2 it's the beginning of many future conversations. I 3 do believe that there are a number of solutions that 4 are available and that we ought to begin to 5 entertain those solutions. 6 As some of the Members have expressed, it 7 is a little confusing, you know, and we need to 8 clear up that confusion. One of the areas I think 9 we need to bring some clarity to is what authority 10 exists at what level? You have the bargaining 11 process. You have -- they have -- there's certain 12 authorities that takes place there. And the Board 13 of Equalization, I understand, has a role there. We 14 need to clear up what that role is. And we need to 15 have some sense from all of the Members what -- what 16 priorities are as to whatever our role is in that 17 process as we participate, that the priorities of 18 the Members is the priorities that are going forward 19 in that discussion process. And so I think that's 20 important. 21 The role of CalHR and what authority they 22 have pursuant to the initiative of the Governor, 23 what the Governor's asked CalHR and others to look 24 at the retention process. The Board needs -- we 25 need to have an understanding of what authority 26 exists there and what power and what changes we can 27 make. 28 We understand -- it sounds as if though we 51 1 even need a better understanding of the authority 2 that exists at the Board of Equalization as it 3 relates to retention and recruitment so that we can 4 begin to codify that authority and begin to move in 5 the direction that the majority of the Board 6 believes is appropriate to best represent our staff 7 as well as management. 8 There are issues that -- relative to the 9 limited term that's been articulated here, limited 10 term positions. Those positions are generally 11 codified in legislation. And to fix that is a 12 matter of going back and proving that the program is 13 working and that there should be a permanent 14 program. 15 So we need to look at all of our limited 16 term positions. We would ask for a study of that, 17 that provides a listing of all the limited term 18 positions and how they were created and what avenues 19 we have in order to make those positions permanent. 20 For example, the expansion of the Appeals 21 Unit was a limited term position. I believe we had 22 some 22 limited term positions, and it was a 23 laborious process to convince the Legislature and 24 the Governor that's those positions should be 25 permanent. 26 The numbers generated by that team of folks 27 were astonishing. We accelerated revenue to the 28 State of California. We minimized the impact on 52 1 California taxpayers by resolving the issue at an 2 earlier stage. Fortunately, we were able to get the 3 Legislature, leaders of the Legislature to come out 4 and actually view what the Settlement Division was 5 doing and we're heading towards permanent -- making 6 that permanent. 7 The Fire Fee, another limited term 8 position. Once we resolve the adjudication and all 9 those issues, we need to take a look at the 10 legislative component. 11 I also believe that it's very, very 12 important that we change our perspective, and I 13 believe this information will help us change that 14 perspective. Historically, we've been looking at 15 the Board of Equalization, Franchise Tax Board, 16 Payroll Tax, EDD as if though the glass is half 17 full. The reality is we audit less than one percent 18 of the universe. 19 We can do measures in order to minimize the 20 tax burden on California taxpayers by coming in and 21 providing them advice at an earlier stage. You wait 22 three years, which is the period of an audit, by 23 that time the liability has accumulated to such a 24 point that you're probably going to put them out of 25 business if you come in and assess them a liability. 26 So there are efforts that we can do if we 27 look at the situation as a glass not being half full 28 but half empty. So we go to the Legislature. We 53 1 take that work plan, and we would certainly 2 encourage staff to develop that work plan. I think 3 I mentioned that before, that study that justifies 4 or at least edifies the Legislature about the 5 ability and the potential of these agencies that are 6 a revenue-generating agency as a way of addressing 7 the limited term, as a way of addressing the need 8 for additional staff, additional promotions, 9 additional compaction issues, so that we can begin 10 to resolve some of these issues. 11 As articulated earlier, I think we have to 12 distinguish ourselves and make sure that we're 13 comparing apples to apples as opposed to looking at 14 an Auditor at the Franchise Tax Board, Board of 15 Equalization and compared to an Auditor at Human 16 Health Center. No disrespect to those Auditors, but 17 the performance and the duty is quite different and 18 should be measured perspective to what they do. 19 Some of the things that is within the Board 20 of Equalization authority is that we can, as 21 Mr. Runner has articulated, and I think Member Ma 22 has articulated, is the desire to take a look at the 23 priority of staffing within the agency. 24 As we experience vacancy, where should 25 those vacancies be? Should those vacancies be in 26 the district because we now have issues in the 27 district about not having sufficient staff in order 28 to perform the audits and to provide the service 54 1 that we want to provide to the constituency? We 2 need to take a look at our priorities. So that 3 study needs to come back to the Board of 4 Equalization so that we begin to prioritize how we 5 allocate our positions. 6 The hardship issues, I share Member Ma's 7 concern in that regard. But we need to understand 8 what authority we actually have. That is a matter 9 that is -- is generally dealt with by CalHR. They 10 actually make the decision. Once we understand 11 that, then we can begin to engage CalHR or past 12 legislation. All of the Members here are very 13 capable of moving in a direction, we just need some 14 direction from staff as to where -- how to begin to 15 deal with that. 16 Classes. I just wanted to point out that 17 promotions are not predicated on staff taking 18 classes. There's typically on-the-job training. 19 So we can cross-train our employees. We 20 can begin to teach them. And I think classes are 21 very, very important, and particularly when things 22 are changing so rapidly. But cross-training happens 23 to be a good way to begin to -- where we allow 24 individuals to work outside the class -- their 25 particular class, assistance where many CPA firms 26 actually sent out a -- groups to do the more 27 complicated audits, we may be able to include 28 Auditors with less experience in those groups so 55 1 they can begin to gain that experience and be able 2 to pass the exam. 3 The same thing holds true in the area of 4 Compliance, as we see the evolution in Compliance 5 and the need for additional training and that area 6 as well. Compliance generates a lot of funds for 7 the State of California, and we need to take a look 8 at that. 9 There are issues of parity within our own 10 agency where we have Compliance supervisors that are 11 not paid the same as Audit supervisors. We need to 12 take a look at that classification and the duty 13 statement. They're both supervisors, arguably 14 supervising at the same level. We need to determine 15 whether or not we have the authority to fix that. 16 That goes back to the tri-level determination of 17 where the authority is, and then communicate that to 18 the Board of Equalization and so that the Members 19 can begin to give direction as to what we feel 20 should be prioritized. 21 The issues of compaction, class, 22 classification, merit steps, are all real issues. 23 And so, how do we fix them? And this is where the 24 study comes in. We do this study, and I would 25 suggest that we direct staff to do the study as 26 requested in the -- in the resolution, to determine 27 what the problem is, where the area is, what the 28 priority is, how we go about actually fixing that, 56 1 so that we don't have these confusions. We actually 2 know and can put together a strategic strategy on 3 how we're going to begin to fix these issues as 4 articulated by the Members, articulated by the 5 Members of SEIU. 6 The reality is 49 percent is what the 7 number was, over the next five, ten years, of 8 employees who are going to leave the Board of 9 Equalization. Some 1700 of those employees are the 10 higher level positions, which means we're going to 11 have a significant brain drain. 12 This is all inside baseball. With a study, 13 with an analysis, we now have a document that we can 14 begin to take forward, we can begin to articulate 15 the position of the Board of Equalization, Franchise 16 Tax Board, Employee Development, so that people 17 understand. 18 I can share with you, people don't 19 understand. The Legislature, if you talk to the 20 Legislature, they believe we audit everybody. If 21 you talk to some of the taxpayers, they believe the 22 same thing. 23 But the realty is it's not true. I visited 24 a number of the universities last -- last week as a 25 result of the VITA Program and talked directly to 26 the students and I said, where are you looking? I'm 27 excited about working for the Board of Equalization, 28 come work for the Board of Equalization. They said, 57 1 Member Horton, we're going to look for the one of 2 the Big Four firms because the salary just isn't 3 there. 4 And one of the realities that I think we 5 need to be cognizant of is that our entry level 6 salary is below the poverty line for some employees. 7 We have employees with the Board of Equalization who 8 are homeless as a result of the salaries that they 9 have. They all qualify -- many of them qualify for 10 Earned Income Tax Credit because of those issues. 11 We need to begin to take a look at those, and I 12 think we're in a key position to be able to take a 13 look at the equity and the parity as it relates to 14 that, those issues. 15 Professional development. We have an 16 opportunity to professional development, to provide 17 the training. Maybe we ought to modify the 18 professional development programs so that we make 19 sure that we identify the specifics. As a result of 20 Ms. Mayorga's efforts, and I want to thank you and 21 commend you for that, of reaching out to the 22 district to find out whether training is necessary, 23 so we can kind of put that into the professional 24 development and begin to provide that training. 25 I'm simply saying that we can -- there are 26 solutions. We can implement those solutions, and I 27 believe we have the power and the authority to do 28 so. 58 1 But I think the first step is for us to 2 clear up this confusion that may exist, do the 3 studies, do the analysis, compare apples to apples. 4 Provide the information, not only to the Executive 5 team, but also to the Members of the Board so that 6 we can begin to make decisions on the direction that 7 we -- we need to go. 8 Because the reality is, the reality, this 9 is just reality, is is that we're going to have a 10 drain. The Governor, everyone realizes the State 11 has a serious succession plan problem by virtue of 12 the baby boomers. They're all -- they're all 13 retiring. And when they retire, the problem of the 14 salary being over the median range, hey, it's going 15 to go away. All of them are going to retire in the 16 next five years. That problem's going to solve 17 itself. 18 The problem that we're left with is -- is 19 having to train these tons of new people, take our 20 experts out from doing what they do currently so 21 they can provide the training. That's a loss to the 22 General Fund, and I think we need to begin to tell 23 that story. 24 The other story I think is important to 25 tell is that through this evolution, these audits 26 are not getting easier. You know, we've got a POS 27 system out there, we've got computer systems out 28 there. We've got all kind of -- it's getting far 59 1 more technical. As they pass more legislation, it's 2 getting far more complicated. 3 So the classification and the duties that 4 you did ten years ago is not sufficient for what you 5 have to do today, the training and the studying and 6 so forth. And correspondingly, the salary is not 7 sufficient either. The salary has to be comparable 8 to the duties and the classification, and we're not 9 telling that story because we don't have the -- the 10 collective information to do that. 11 And so, to that extent, I'm very supportive 12 of the items articulated in this resolution and 13 think that staff ought to -- ought to begin to do 14 the study, begin to do the analysis. Position us to 15 solve this problem, or at least position us to use 16 the bully pulpit of our office to advocate for a 17 solution. It is in the best interest of California 18 taxpayers because it minimizes their burden, the 19 penalties that they ultimately have to pay, the 20 taxes, the interest and so forth. It is the best 21 interest of California because it accelerates 22 revenue to the State of California. Arguably, we 23 can increase our revenue by increasing our activity. 24 So to that end, I would encourage staff 25 that we set up an opportunity, that staff begins to 26 do these studies to gather this information. Meet 27 with each one of our Members, have that discussion, 28 get their priorities, and then report back to us 60 1 collectively so we can have these types of 2 discussions in the public. 3 MS. MALDONADO: I really appreciate that, 4 Mr. Chairman. 5 MR. RUNNER: Mr. Chair. 6 MR. HORTON: Mr. Runner. My apologies. 7 MR. RUNNER: Again, I don't -- I think that 8 the issues of -- have been laid out here in regards 9 to, you know, length of employment, employee's 10 respons- -- you know, all these things are certainly 11 things that we should be always looking at. 12 What I'm concerned about -- and I certainly 13 don't have any issues at all with the staff going in 14 and taking a look at these -- I just want to remind 15 everybody that we also have also asked them, and I 16 think it can be in conjunction with this, to deal 17 with the issues of vacancy, vacancy location, 18 staffing model for the headquarters. I think that 19 could all be wrapped together. 20 So I -- my concern is I don't want staff 21 all of a sudden to go -- start going off in another 22 direction with another new study or something. As 23 much as it is, I think all of these do wrap 24 together. And I would just encourage us to 25 have continued discussions with the management staff 26 on this issue and -- and also then accomplish some 27 of the things that are also mentioned here in the 28 resolution. 61 1 MR. HORTON: Yeah, I would -- I would 2 concur, Member Runner. I mean I thought I mentioned 3 prioritizing the vacancies and so forth. 4 MR. RUNNER: Yeah. 5 MR. HORTON: I think all of this -- and I'm 6 for one to give policy direction to staff and then 7 rely on their expertise as to what these issues are, 8 and then come back and give us the information 9 and -- that we need. And particularly, the 10 authority here, the bargaining authority, the 11 authority of CalHR. I mean I don't think we're at 12 the bargaining table, but that's a discussion for 13 another day. 14 Member Ma. 15 MS. MA: Yeah. I'd also like to add that 16 there's been a reorganization plan that's been 17 talked about since I started, for the last year. I 18 mean I saw it. I don't how to read it. It looks -- 19 I don't think anybody really knows how to read it. 20 And so, whatever reorganization plan is 21 presented, that everybody understands it, it's 22 realistic, that we're all moving together on it, 23 that everybody has input on it. Because the thing 24 that I saw when I first started didn't make sense 25 is, it hasn't been happening. I think staff is very 26 confused and waiting around for some clarity on what 27 this reorganization plan is. So I think that also 28 should be a priority as well. 62 1 MR. HORTON: Let me -- let me add in as I 2 think I missed -- although other Members, the 3 out-of-state issue, not only with the health care, 4 there is the compensation for just being 5 out-of-state. 6 A number of us visit New York. And if 7 you -- the office is in downtown New York. Hey, you 8 can't -- you can't take a taxi in New York for, you 9 know, with the salaries we're getting paid. So -- 10 And then the City of Los Angeles, the City 11 of San Francisco, all of those -- someone spoke 12 about a COLA. There are distinguishing areas where 13 the cost of living is just so much higher, so much 14 higher. And as we embark upon this issue, the 15 Governor and Legislature, we embark upon trying to 16 deal with poverty, sometimes poverty begins at home 17 and we need to talk about the poverty that exists 18 here within the State and the Franchise Tax Board. 19 In LA County, 40 percent of working folks 20 work below the poverty line. You know, and to -- 21 the Earned Income Tax Credit, $56,000. Well, that's 22 a whole lot of our employees that fall within 23 this -- this classification of being poor. Or as I 24 would say "po'." 25 So let's see if we can get it fixed. 26 With that, the Board will receive and file. 27 I think there's enough discussion for staff to have 28 some understanding. We would ask that they advise 63 1 the Board when they can bring this information back 2 for further discussion. And I think the Board has 3 collectively said that they're supportive of the 4 measures within the resolution and have collectively 5 directed staff to begin the process of developing 6 those studies. 7 Maybe a joint labor management team -- not 8 bargaining -- joint labor management team as relates 9 to this, that you form that. Ms. Mayorga's very 10 good at doing that, so we'd ask her to reach out to 11 SEIU and they begin to have those conversations. 12 But not only SEIU, we have another number of other 13 units here, that we need to have those 14 conversations. 15 Our lawyers, we should have Tax Counsel 16 5's. I understand the Franchise Tax Board just got 17 a Tax Counsel 5. We ought to provide that. Some of 18 our lawyers, they have to be here five years before 19 they can get a promotion from a Tax Counsel 1 to a 20 Tax Counsel 3. I mean where's the equity in that 21 relative to merit and performance? 22 So, there's so many issues here, but the 23 beauty of it is we have the power and authority to 24 fix many of these issues. We just need to make sure 25 that we know how to and when to and so forth. 26 Thank you very much. The Board will 27 receive and file. 28 ---oOo--- 64 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, Kathleen Skidgel, Hearing Reporter for 8 the California State Board of Equalization, state 9 that I transcribed from recorded audio, to the best 10 of my ability, the proceedings in the above-entitled 11 hearing; and that the preceding pages 1 through 64 12 constitute my transcription of the proceedings. 13 14 Dated: February 26, 2016 15 16 17 ____________________________ 18 Kathleen Skidgel, CSR #9039 19 Hearing Reporter 20 21 22 23 24 25 26 27 28 65