1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 JUNE 14, 2016 10 11 12 13 14 15 ITEM P 16 OTHER ADMINISTRATIVE MATTERS 17 ITEM P7 18 TECHNOLOGY DEPUTY DIRECTOR'S REPORT 19 1. CROS PROJECT UPDATE AND ACTIONS 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 16 Equalization Staff: Brenda Fleming Deputy Director 17 Technology Services 18 Chris Caietti Director 19 CROS Project 20 Trista Gonzalez Business Project Manager 21 CROS Project 22 23 ---oOo--- 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 JUNE 14, 2016 4 ---oOo--- 5 MS. MA: Ms. Richmond, next item, please? 6 MS. RICHMOND: Our next item is item P7, 7 Technology Deputy Director's Report; item P7.1 is 8 the CROS Project Update and Actions. 9 MS. FLEMING: Good morning, Chairwoman Ma, 10 Honorable Members. Happy Tuesday. Good to see you. 11 I'm Brenda Fleming, CIO for the agency and 12 Deputy Director for Technology Services Department. 13 I'm pleased to be here today to give you 14 this month's report on CROS and have Mr. Chris 15 Caietti, our Project Director, and Trista Gonzalez, 16 our Business Manager, provide this month's report. 17 MS. MA: Great. Welcome. 18 MR. CAIETTI: Morning. 19 So I'm Chris Caietti. I'm CROS Project 20 Director. And with me is Trista Gonzalez, as Brenda 21 pointed out. And we're here to give the opportunity 22 to provide you an update on the CROS Project today. 23 I'll turn it over to Trista. 24 MS. GONZALEZ: Good morning. Trista 25 Gonzalez, CROS Business Project Manager. 26 The negotiation process continues with all 27 bidders and there are no new issues to report. 28 We're on track to have a contract 3 1 formalized and signed this summer and a contractor 2 on board later this year. 3 The Fit and Ready Campaign continues. We 4 are looking forward to sharing project information 5 at the headquarters Professional Development Days 6 next week. 7 Additionally, our program area readiness 8 team continues to work with all of the business 9 program areas in refining business rules and 10 documenting our processes. This also includes 11 working with the Financial Management Division to 12 refine the Fund Allocation Business Rules. 13 MR. CAIETTI: And in regards to the core 14 project management activities, improvements for the 15 enterprise planning and resource management process 16 to ensure availability and staff resources for CROS 17 are in progress. The team continues to refine our 18 CROS Project Governance Plan to support effective 19 and timely decision-making for the project at all 20 appropriate levels. 21 Based on the approval of Special Project 22 Report III in May, the team has rebaselined the 23 project schedule as planned. SPR-IV will be 24 completed once the proposal has been selected. 25 And the fiscal year '16-'17 Spring Finance 26 Letter was approved by the Legislature. 27 Some of the activities we have planned for 28 the upcoming month is to continue to collaborate 4 1 with our project oversight stakeholders at the 2 Department of Technology, Department of Finance and 3 the Legislature. 4 And our budget status, as of the end of 5 April, we are -- for the year-to-date we are 6 slightly over budget, but that's due to some 7 unanticipated software costs in the amount of about 8 $18,000. But we anticipate that'll be trued up at 9 the end of the May month period. 10 The project to date, we are still under 11 budget by over $2 million. 12 That concludes our report, and we're 13 prepared to have -- respond to any questions that 14 you may have. 15 MS. MA: You have a question? Yeah. 16 Mr. Horton. 17 MR. HORTON: Thank you, Madam Chair. 18 The -- share with me the strategy for 19 cross-training our current employees to allow them 20 an opportunity to matriculate into some of these 21 positions. 22 MS. GONZALEZ: Sure. We do have 23 opportunities right now on the project for folks 24 from the business areas to come and act as subject 25 matter experts. We have some that are involved -- 26 or have been involved in the evaluation process and 27 will continue during this summer in contract 28 finalization. 5 1 And we're always looking for, you know, 2 great field experience from districts or from 3 headquarter sections so they can bring their 4 expertise and perhaps fill some of the vacancies 5 that we will get with the '16-'17 Spring Finance 6 Letter. 7 Further, we are reaching out to folks in 8 all of the areas, both as part of the organizational 9 change management core team and as CROS liaisons. 10 And we're working with those folks, introducing the 11 business rules and getting them familiar with the 12 RFP and some of the CROS artifacts. 13 So we do see opportunities for those folks 14 to actually be more involved in CROS during 15 implementation. 16 MR. HORTON: Is there a, um -- is there an 17 opportunity to establish some -- a course or classes 18 or something that the employees could take where we 19 provide the training in order for them to be able to 20 transition into these positions? 21 MR. CAIETTI: Once we select the vendor and 22 select the product, you'll have more definite 23 information on what kind of training that will be 24 provided to them. Right now it's unknown until we 25 actually select the vendor and the products that 26 they'll be trained on, both from the business and 27 the technology side. 28 MS. FLEMING: So, thank you for that, 6 1 Chris. 2 Honorable Members, Madam Chair, Mr. Horton, 3 the -- as Chris said, when the bidder -- and there's 4 two at this point. So when the bidders are putting 5 their proposals on the table, there definitely is 6 training. 7 The bidders at this point, there's two 8 different approaches. So it really is going to 9 depend on the approach from them. Certainly the 10 software is -- is software that totally will take 11 care of tax administration. So a lot of the roles 12 and responsibilities will be the same. Really what 13 the training that's being proposed from those 14 bidders is just really how to use the system and how 15 to optimize those efficiencies from using the 16 system. So there will be significant training. 17 The hope and the plan, based upon what 18 we're seeing currently with those proposals, is that 19 there will be subject matter experts that will have 20 the opportunity to be totally immersed in it 21 initially, and then those staff will be the term 22 you've heard, I'm sure, "train the trainers." 23 MR. HORTON: Mm-hmm. 24 MS. FLEMING: They will be allowed to do 25 some additional training. But there will be 26 significant, you know, training as a part of the 27 proposal and as a part of standing up the new 28 solutions. So there will be significant things 7 1 there. 2 I'm being careful because a lot of that, as 3 you know, is still in that confidential mode. 4 MR. HORTON: Right, right. 5 MS. FLEMING: And so there's going to be -- 6 you know, tax administration is tax administration. 7 But there will be new opportunities to do things a 8 bit differently, and so it will start to roll that 9 out as we get more specific -- more specific details 10 of the actual contract. 11 MR. HORTON: Thank you. 12 Thank you, Madam Chair. 13 MS. MA: I do have a question. So all of 14 these new programs that are being established 15 through the Legislature -- 16 MS. FLEMING: Mm-hmm. 17 MS. MA: -- and require perhaps some 18 software changes, I mean how do we accommodate that 19 moving forward if, you know, CROS is right now just 20 working on the programs we have today? And I'm just 21 thinking like the Cannabis Compliance Project, 22 they're going to pick a vendor who probably is going 23 to, you know, set up a system. We have to comply -- 24 MS. FLEMING: Right. 25 MS. MA: -- and we have to able to collect 26 and audit. And so how do we propose doing that, to 27 add to the CROS system, or is it going to be a 28 stand-alone system? 8 1 MS. FLEMING: So I'm going to be -- I'm 2 going to give our team an opportunity to answer that 3 question because it's in -- in Trista's bailiwick. 4 But it has been accommodated as a part of the new 5 requirements. And I'll allow Trista to -- 6 MS. MA: Okay. 7 MS. GONZALEZ: Yes. When we -- when we 8 went out to bid and we've had confidential 9 discussions with all of the bidders, we have talked 10 about potential future tax program changes and 11 additional tax programs. So they are well aware. 12 How the nuts and bolts of all of that works 13 during implementation and the timing, I'm not quite 14 sure. You know, we'll have to see when we get 15 there. But, yes, we have made all of the bidders 16 very aware that we expect to have more programs. 17 MS. MA: And can I also ask, I understand 18 we've been around a long time and taxpayers have 19 been used to either paying, you know, annually, 20 semi-annually, quarterly. I'm just wondering 21 whether there's any movement with this new CROS 22 system to be able to collect taxes like more 23 frequently, like weekly? 24 I've talked to a lot of taxpayers, they 25 would like to get the money out of their accounts. 26 They're able to do it. They're wondering why they 27 can't just deposit more frequently versus waiting 28 the quarterly and having to, you know, hold on to 9 1 the money. 2 MS. FLEMING: Yes. As a matter of fact -- 3 and, again, I'm being careful because of the 4 confidentiality. 5 The solution of the software itself -- and 6 I hate to say this because it's going to sound 7 pretty corny. But it allows you to do whatever you 8 want to do. 9 Really what's going to happen, it's quite, 10 for both of the bidders, pretty extraordinary 11 solutions. It's very -- it's much more contemporary 12 and much more, you know, in terms of the 13 productivity of its features and functions, it 14 brings a lot more to the table than the existing 15 system, legacy systems, and the constraints that 16 that brings. 17 So it gives you a lot more capability to 18 pretty much do whatever you want to do. I think the 19 fundamental issue is going to be from a -- from a 20 policy perspective, how you would want to do so. 21 And currently the way that our requirements are 22 written and our rules are written is they're 23 designed to say, You tell us what you want to do. 24 And with this system it allows us to configure it 25 and to meet any -- any range of needs. 26 The bidders are bidders that are -- that 27 are these commercial off-the-shelf solutions and so 28 they do exist in a number of other states, with a 10 1 broad range of, you know, who, what, when, where and 2 how to do a tax administration. So it absolutely 3 will give us that capability. We'll listen to you 4 and to the organization about how you would like to 5 have that configured, but absolutely. 6 MS. MA: Okay. Ms. Harkey. 7 MS. HARKEY: Hi. Ms. Fleming, are we at 8 the table, so to speak, on the specifications that 9 we will need to collect from medical marijuana and 10 the cannabis industry as a whole? Because I know 11 there was some concern that we did not have people 12 at the table because we were tracking from an 13 agriculture perspective, which may not be and 14 probably is not what we need from a tax 15 perspective. 16 MS. FLEMING: Correct. Those meetings, 17 yes, Vice Chair Harkey, those meetings are 18 continuing. We're still meeting on a weekly basis. 19 The priority at this point is the core 20 functionality, which is that track and trace system. 21 So to your point, it has more to do with tracking of 22 the product itself. But working with the Department 23 of Technology and all of the agencies, GovOps, 24 etcetera, all of the agencies that are 25 participating, we absolutely are sitting at the 26 table with them. 27 There have been, and I think the issue on 28 the table over the last two weeks is that in 11 1 addition to just tracking the crop is this issue of 2 adding a portal. That's not in statute, but it is 3 this additional functionality that would allow law 4 enforcement to be able to go to the portal to 5 determine if a -- a -- one of the sellers 6 potentially is maybe in an illegal status. 7 So currently when you're looking at that 8 track and trace from seed to sale, the sale portion 9 of it we would leverage the existing systems and 10 technology that we have, including the capability 11 with CROS. But to the extent that this portal is 12 added and maybe some additional reporting, we would 13 have to make some adjustments for some additional 14 reporting, etcetera. 15 So I do expect that we're going to have to 16 make some -- some modifications to our existing 17 systems and it will be available in CROS. But, yes, 18 we are still meeting with them weekly to try to 19 understand what those requirements are. 20 Again, in that track and trace system, they 21 too are looking at a commercial off-the-shelf 22 product, and so there's lots of demos and research 23 that's occurring. 24 MS. HARKEY: Well, I would just like to be 25 sure that you connect on a regular basis with Ms. Ma 26 because she is probably the one person that can be 27 sure you're at the table for the purpose. 28 MS. FLEMING: Absolutely. 12 1 MS. HARKEY: And I know that, you know, 2 tracking the product is one thing, but tracking the 3 tax is going to be a whole nother -- 4 MS. FLEMING: Completely. 5 MS. HARKEY: -- completely different animal 6 that we're going to need to get our hands around. 7 And need to get in early so that if this kicks off, 8 which we expect it will, we'll be -- we won't be 9 blamed for not being up to speed. 10 MS. FLEMING: Exactly. 11 MS. HARKEY: And I think it's really 12 important that we make that point. And I -- you 13 know, it's -- it's a whole different animal and we 14 need -- we need to be at the table. I don't -- I 15 don't want to hear the BOE's not holding up their 16 end, okay? 17 MS. FLEMING: Exactly. Yes, ma'am. I hear 18 you. Thank you. 19 MS. HARKEY: Well, not your fault. I know 20 you're trying. 21 MS. MA: And I know Ms. Fleming has been 22 going to the meetings and making sure that we are at 23 the table with all the other technology -- 24 MS. FLEMING: Yes. 25 MS. MA: -- agency representatives. And I 26 know my staff, Tim Morland, I know Michele 27 Pielsticker, they've been attending all the meetings 28 that are out there with the stakeholders to make 13 1 sure that we are also in the middle and engaged in 2 everything. 3 MS. FLEMING: Absolutely. 4 MS. MA: So thank you. 5 MS. FLEMING: And we appreciate the support 6 and the direction. Thank you. 7 MS. MA: Okay. Thank you very much -- 8 MS. FLEMING: Thank you. 9 MS. MA: -- for your report. 10 ---oOo--- 11 12 13 14 15 16 17 18 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 June 14, 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: July 8, 2016 18 19 20 ____________________________ 21 KATHLEEN SKIDGEL, CSR #9039 22 Hearing Reporter 23 24 25 26 27 28 15