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 APRIL 26, 2016 9 10 11 12 ITEM P 13 OTHER ADMINISTRATIVE MATTERS 14 ITEM P6 15 ADMINISTRATION DEPUTY DIRECTOR'S REPORT 16 1. BUDGET UPDATE 17 2. UPDATE ON SCO BOARD OF EQUALIZATION REVIEW 18 3. UPDATE ON BARGAINING PROCESS 19 20 21 22 23 24 25 26 27 REPORTED BY: Kathleen Skidgel 28 CSR NO. 9039 1 1 P R E S E N T 2 3 For the Board of Equalization: Fiona Ma, CPA 4 Chairwoman 5 Diane L. Harkey Vice Chair 6 Jerome E. Horton 7 Member 8 Sen. George Runner (Ret.) Member 9 Yvette Stowers 10 Appearing for Betty T. Yee, State Controller 11 (per Government Code Section 7.9) 12 Joann Richmond 13 Chief Board Proceedings 14 Division 15 For Board of Equalization Staff: Edna Murphy 16 Deputy Director Administration 17 Julia Findley 18 Acting Chief Financial Management 19 Sandra Mayorga 20 Chief Human Resources 21 Randy Ferris 22 Chief Counsel Legal Department 23 24 ---oOo--- 25 26 27 28 2 1 5901 GREEN VALLEY CIRCLE 2 CULVER CITY, CALIFORNIA 3 APRIL 26, 2016 4 ---oOo--- 5 MS. MA: Ms. Richmond, next item, please. 6 MS. RICHMOND: Our next item is P6, the 7 Administration Deputy Director's Report. Item P6.1 8 Budget Update. 9 MS. MA: Okay. Welcome, Ms. Murphy and Ms. 10 Findley and Ms. Mayorga. Please introduce yourself 11 for the record, and then proceed with your 12 presentation. 13 MS. MURPHY: Thank you. 14 Good afternoon, Chairwoman Ma and Members. 15 I'm Edna Murphy, Deputy Director of Administration. 16 With me today is Ms. Julia Findley, Acting Chief of 17 the Financial Management Division, who will be 18 providing an update on the SCO Board of Equalization 19 Review. Following that, we will have Ms. Sandra 20 Mayorga, Human Resources Division Chief, that will 21 provide an update on the bargaining process. 22 My first item is an update on the Board of 23 Equalization's budget. As of March 31st, the BOE's 24 personal services expenditures are at 72 percent. 25 The operating expense and equipment expenditures are 26 at 69 percent, with an overall expenditures-to-date 27 of 71 percent. 28 Next, is an update on our 2016-'17 budget 3 1 process. Currently, we are scheduled to attend the 2 Senate Sub 4 Budget Committee Hearing on April 28th, 3 from 9:30 to 12:00 p.m., and we are scheduled for 4 the Assembly Sub 4 Budget Hearing for May 3rd. 5 The Department of Finance has approved 6 three Budget Concepts which were presented and 7 approved by the Board back in August and three 8 Spring Finance Letters that were presented and 9 approved by the Board in January, for inclusion in 10 the Governor's 2016-'17 budget. 11 I'd be happy to answer any questions that 12 you may have. 13 MS. MA: I have a question. When you say 14 71 percent, is that on target? 15 MS. MURPHY: It's on target. So target 16 would be 75 percent at this time. 17 MS. MA: Okay. 18 MS. MURPHY: Yes, ma'am. 19 MS. MA: Thank you very much. 20 Okay. Ms. Buehler -- I mean Ms. Findley. 21 MS. FINDLEY: Good afternoon, Chairwoman Ma 22 and Members. I'm Julia Findley, Acting Chief, 23 Financial Management Division. 24 I'm here to provide you a status report on 25 the State Controller's Office Internal Accounting 26 and Administrative Reviews Control Report of 27 November 2015. 28 Since March 2016 Board meeting, we have 4 1 accomplished the following milestones: 2 A Draft Corrective Action Plan was 3 submitted for Board review on April 15th, 2016; we 4 expect to have a final draft completed on May 6, 5 2016; 6 We are moving forward with the IRIS 7 programming to secure needed reports; business 8 requirements begin on May 6, 2016; 9 We attended a vendor demonstration on 10 expanding the BOE's existing accounting software 11 Sage 300, and we are working collaboratively with 12 the Department of Finance on the timing and nature 13 of the BOE-proposed one-time adjustment. 14 Although we have made substantial progress 15 in addressing the issues raised by the State 16 Controller's Office, there is still work to be done. 17 In addition, there are some factors impacting our 18 ability to address the findings as quickly as we 19 would like. 20 We are currently recruiting for three 21 manager positions. We are entering into our fiscal 22 year end closed process. Financial management staff 23 are heavily involved in the implementation of 24 legislation mandates, including MTS and RRAPIR, and 25 we are actively working with CROS on a gap analysis. 26 In closing, I commend my Financial 27 Management Team for their dedication and commitment 28 in addressing the SCO findings, as well as the 5 1 Technology Services Department, Human Resources 2 Division, Local Revenue Allocation Unit, Internal 3 Audit Division, CROS, and Ms. Bridges. 4 That concludes my report. I'm happy to 5 answer any questions you may have. 6 MS. MA: Ms. Stowers. 7 MS. STOWERS: Just one quick question. You 8 said the final draft report May 6. That's the 9 report to the Board Members? 10 MS. FINDLEY: Yes. 11 MS. STOWERS: And what's the deadline for 12 submitting a report to SCO? 13 MS. FINDLEY: May 18th, 2016. 14 MS. STOWERS: May 18? 15 MS. FINDLEY: Mm-hmm. 16 MS. MA: I have a question also. So I know 17 that we were trying to get an outside CPA firm to 18 come in and review the report and the changes that 19 we made and we were not successful -- 20 MS. FINDLEY: Yes. 21 MS. MA: -- in getting any bidders. So is 22 there a thought for other type of review by another 23 agency or people, personnel? 24 MS. FINDLEY: We -- I believe Ms. Bridges 25 sent an email out recently. We would like to look 26 at maybe considering asking the Bureau of State 27 Audits or possibly Department of Finance that could 28 also come in and perform that level of review for 6 1 us, or another agency that would have audit 2 background that could come in and assist us. 3 MS. HARKEY: Ms. Ma? 4 MS. MA: Ms. Harkey. 5 MS. HARKEY: I believe that that was one of 6 the suggestions when we started down this path, that 7 we might want to incorporate one of the other 8 departments. So I would be very much in favor of 9 that, as long as -- I don't want it to slow down the 10 response to the SCO because we have to have that. 11 But I think it's always good to have -- when you've 12 had this kind of a hiccup, to have that kind of a 13 check, a look back. 14 So I will leave it up to whoever is our 15 audit team. 16 MR. RUNNER: Just a quick observation on 17 that. 18 I mean I think that's a great idea. The 19 only problem is when does the report have to be to 20 the Controller? 21 MS. MA: May 18. 22 MS. FINDLEY: May 18th. That's the 23 Corrective Action Plan. It's just telling them what 24 we've done -- 25 MR. RUNNER: Oh, okay. 26 MS. FINDLEY: -- and how we've addressed 27 things. 28 MR. RUNNER: It's independent of -- 7 1 MS. FINDLEY: Yes. 2 MR. RUNNER: -- what it is that we may 3 have -- 4 MS. FINDLEY: Yes. 5 MR. RUNNER: -- a third party coming in and 6 reviewing. Gotcha. 7 MS. FINDLEY: Absolutely. 8 MR. RUNNER: Okay. 9 MS. STOWERS: Madam Chair? 10 MS. MA: Ms. Stowers. 11 MS. STOWERS: If we were to use one of 12 those agencies, would there be a fee involved, some 13 interagency fee? 14 MS. FINDLEY: Yes. I would -- 15 MS. MA: Well, I mean, our RFP also have a 16 fee. 17 MS. STOWERS: Yeah. 18 MS. FINDLEY: Yes. 19 MS. MA: Okay. We will discuss this 20 further, I guess -- 21 MS. FINDLEY: Okay. Thank you. 22 MS. MA: -- in terms of which agency you 23 all think is the most appropriate and who has time 24 and the resources to do it. 25 MS. FINDLEY: We can reach out to them. 26 MS. MA: Okay. 27 MS. FINDLEY: Thank you very much. 28 MS. MA: Great. 8 1 Ms. Mayorga. 2 MS. MAYORGA: Yes. Good afternoon, 3 Chairwoman and Board Members. I am Sandra Mayorga, 4 the Chief of Human Resources Division. I will be 5 providing a brief update on the current status of 6 bargaining. 7 Bargaining negotiations between the State 8 and the Union commenced on April 13th, 2016 and will 9 continue for the next several weeks and possibly 10 months. We are very fortunate for this round of 11 bargaining as our Labor Relations Officer was 12 invited to be a part of the State negotiating team. 13 Now that collective bargaining has 14 officially started, any dialogue on specific 15 concerns regarding bargaining issue is under the 16 exclusive domain of CalHR, the California Department 17 of Human Resources. 18 Periodic updates on the status of 19 negotiations will be provided to the extent they are 20 available and not privileged or confidential. 21 That concludes my report at this time, so 22 I'd be happy to answer any questions. 23 MS. MA: Ms. Harkey. 24 MS. HARKEY: I would just hope that that 25 message could go out to the personnel in the 26 district that are unhappy with some of what they're 27 hearing or what is real or what's not real. Because 28 I know we are not involved in the negotiation 9 1 process, and I have received a lot of emails which I 2 have not answered because I'm not really privy to 3 answer, not even -- the volume is one thing, but 4 what you say is quite another. And since the 5 negotiations are taking place, I think it would be 6 really helpful to let the employees know that it is 7 CalHR and it is SEIU and CalHR and that's where the 8 negotiations are taking place. 9 MS. MAYORGA: Okay. That's duly noted. 10 I'll take that back to the Labor Relations Officer 11 and see what type of messaging we can convey to the 12 exclusive bargaining team, and perhaps they can get 13 that message out to their members. 14 MS. HARKEY: Yeah. Because I don't want 15 people to think I'm ignoring them. I just -- 16 MS. MAYORGA: Absolutely. 17 MS. HARKEY: -- am not privy to the 18 negotiations. 19 MS. MAYORGA: Mm-hmm. 20 MS. HARKEY: Nor can I, because is it the 21 Dills Act? 22 MS. MAYORGA: Correct. 23 MS. HARKEY: Thank you. 24 MR. HORTON: Madam Chair. 25 MS. MA: Mr. Horton. 26 MR. HORTON: I also feel it's important 27 that it's articulated, the role that -- the role of 28 the Board Members in that process. And as well as 10 1 that the Members are advised themselves on how to 2 voice their opinion in this process is very 3 important. 4 It is a real challenge for me, but I will 5 do what I can to conform. As long as there is a 6 process by which, you know, the opinion of the 7 employees of the organization can be expressed by 8 the Members who represent them through this process. 9 I also think it's important that you share 10 with the Members the -- the Harvest Letter and how 11 it works and how the Members can best utilize that 12 as a means of communicating to the one individual 13 that sits on the bargaining table. I do not believe 14 that one individual has complete autonomy from this 15 Board. 16 MS. MAYORGA: So is the question about the 17 process of the Harvest Memo? 18 As we go forward in the next round of 19 bargaining, of course what we do is we get our 20 direction from CalHR. That Harvest Memo is an 21 opportunity for us to reach out to our management 22 team, to look at what are the issues that we feel we 23 need to bring forward in the next round of 24 bargaining. That's that process. 25 The employees certainly have an avenue to 26 go through their Unions, to voice that through their 27 Unions, and then the two parties meet. That's where 28 we come to the table and we bargain in good faith. 11 1 That's where the real robust discussions come in -- 2 come into fruition. So it's just an opportunity to 3 bring the issues to the table. 4 MR. HORTON: Are the Members -- are the 5 Members able to issue a Harvest Letter? 6 MS. MAYORGA: You are able, and I believe 7 we have sent out a recent direction that if you want 8 to submit individual Harvest Memos to CalHR, they're 9 willing to consider those. 10 MR. HORTON: And what would be the process 11 by which a Member chose not to do that -- 12 MS. MAYORGA: That would just be -- 13 MR. HORTON: -- by which a Member would 14 articulate? 15 MS. MAYORGA: That would just be a matter 16 of documenting the issues that are relevant and 17 important to you that you want us to bring back. 18 MR. HORTON: I'm not -- excuse me. I 19 apologize. When I pause, I'm just trying to get my 20 voice back. 21 MS. MAYORGA: Sorry about that. 22 MR. HORTON: What would be the process by 23 which the Members could communicate to, through this 24 process? Would that be a direct communication to 25 the Executive Director in addition to or separate 26 from the Harvest Letter? 27 MS. MAYORGA: At this point, because 28 bargaining has already commenced, I would recommend 12 1 that that letter be directed to the Executive 2 Director who in turn will provide that information 3 to Human Resources and the Labor Relations 4 Officer. 5 MR. HORTON: Okay. One last question, 6 Madam Chair, if I may. 7 Is that Harvest Letter a public record 8 document, public document, or is it confidential? 9 MS. MAYORGA: I'm going to look to my Legal 10 Counsel, Mr. Ferris. 11 MR. HORTON: I already asked this question, 12 so I'm not catching him off guard, Members. 13 MR. FERRIS: Probably the best view of it 14 is it is not disc losable because it's subject to 15 the deliberative process exception to the Public 16 Records Act. 17 But, as the Members may be aware, whenever 18 there is a PRA request, there has to be a balancing 19 of the State's interests with respect to 20 confidentiality associated with a deliberative 21 process and also the public's interest in a -- in a 22 transparent government. 23 So there's no hard and fast rules about how 24 that would work if there were specific Public 25 Records Act requests. In part, it may depend upon 26 the actual content of a particular harvest memo and 27 how sensitive the information may or not be as you 28 balance and weigh whose interest is stronger, the 13 1 government's interest in the deliberative process 2 confidentiality or the public's interest in the 3 transparency. 4 So the Legal Department would have to be 5 involved for BOE with respect to that sort of 6 analysis, and then CalHR's Legal Department would 7 have to be involved in that analysis to the extent 8 the PRA request was addressed to CalHR. 9 How was that for lawyer talk? 10 MR. HORTON: You did good. 11 Thank you, Madam Chair. Thank you, Mr. 12 Ferris. Thank you, Ms. Mayorga. 13 MS. MAYORGA: Thank you. 14 MS. MA: Okay, thank you. We look forward 15 to further updates. 16 MS. MAYORGA: Okay. Thank you. 17 MS. MA: Thank you, ladies. 18 ---oOo--- 19 20 21 22 23 24 25 26 27 28 14 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 certify 9 that on April 26, 2016 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 14 constitute 14 a complete and accurate transcription of the 15 shorthand writing. 16 17 Dated: May 17, 2016 18 19 20 ____________________________ 21 KATHLEEN SKIDGEL, CSR #9039 22 Hearing Reporter 23 24 25 26 27 28 15