1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 8 REPORTER'S TRANSCRIPT 9 JANUARY 25, 2018 10 11 12 ITEM I 13 OTHER CHIEF COUNSEL MATTERS 14 I1 15 RESOLUTION CONFERRING POWERS ON THE 16 EXECUTIVE DIRECTOR 17 18 19 20 21 22 23 24 25 26 27 REPORTED BY: Jillian M. Sumner 28 CSR NO. 13619 1 1 P R E S E N T 2 3 For the Board Honorable George Runner Equalization: Vice Chairman 4 Honorable Fiona Ma 5 CPA, Member 6 Honorable Jerome Horton Member 7 Yvette Stowers 8 Appearing for Betty T. Yee, State Controller 9 (per Government Code Section 7.9) 10 Joann Richmond 11 Chief Board Proceedings 12 Division 13 14 For Board of Equalization Staff: Henry Nanjo 15 Chief Counsel 16 Dean Kinnee Executive Director 17 18 19 ---oOo--- 20 21 22 23 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 JANUARY 25, 2018 4 ---oOo--- 5 MS. RICHMOND: Good afternoon, Members. 6 Our first item on this afternoon's agenda 7 is Chief Counsel Matter, Item I, Other Chief Counsel 8 Matter; I1, we have Resolution Conferring Powers on 9 the Executive Director. 10 MR. RUNNER: Mr. Nanjo. 11 MR. NANJO: Good afternoon, Member Runner, 12 Members of the Board, Ms. Stowers. 13 What we have in front of you today is a 14 draft -- or actually it's a resolution conferring 15 powers on our new Executive Director, Dean Kinnee. 16 There have been some comments and questions 17 I've received regarding the scope of the conferred 18 powers. So just a brief description on the process I 19 went through. 20 I modelled this, or used as a base, the 21 prior conferred powers that this Board executed for 22 Mr. David Gau. But since that time, we've had AB 102 23 and AB 131, and some other provisions which have 24 slightly altered the powers of the Board and the 25 responsibility of the Board. 26 So I went through and basically determined 27 which items were still necessary and which items were 28 no longer necessary. So some things have dropped out 3 1 between the version of Mr. -- that was used for 2 Mr. Gau, and this version for Mr. Kinnee. 3 A couple of items to note. Although there 4 is -- there's a little bit of ambiguity, because in 5 doing my research, I realize that even though some 6 powers of the Board were altered by those two pieces 7 of legislation and some Government Code sections had 8 changed, some other general provisions were not 9 altered. And that kind of created a little bit of 10 question whether or not there would be still some 11 powers that would need to be delegated for Mr. Kinnee 12 to do his proper function for the Board. 13 So that being said, that's how we ended up 14 with the resolution of conferred powers that you have 15 in front of you today. 16 There are a couple of important points that 17 I'd like to draw the Board's attention to. One is 18 with regards to approval of contracts over a million 19 dollars. 20 We have a situation where our outside 21 counsel on the Verizon matter, um, this Board had 22 previously approved the contract going over a million 23 dollars. I believe it was May of last year. We need 24 to do a further amendment, because, unfortunately, 25 due to the work that was necessary in that case, he's 26 gone past the amount in the -- in that particular 27 amendment. 28 So we're going to be entering into shortly a 4 1 further amendment, which only increases it 2 approximately 100 to 150,000. But because it's still 3 over a million, there was some question as to whether 4 that needed to come back to the Board. 5 So I've clarified that in this resolution of 6 conferred powers saying that unless the Board has 7 identified a reason or a desire for matters to come 8 back to the Board, or puts any kind of limitations or 9 criteria on it, once it's been through this Board for 10 approval over a million dollars, that any amendments 11 minor nature such as this to continue the work can be 12 done without coming back to the Board. 13 The other matter is I had not been able to 14 complete my research. So this is designed to be a 15 resolution of conferring powers just to get 16 Mr. Kinnee past the next month or two. I will 17 promise to this Board to bring back another agenda 18 item for another look at the resolution to make sure 19 it still is appropriate. At that time I'll be able 20 to further refine whether things need to be added 21 or -- or subtracted at that point. 22 So with that, I am available to answer any 23 questions the Board Members may have. 24 MR. RUNNER: Okay. 25 Any questions? 26 Member Stowers. 27 MS. STOWERS: Thank you. 28 Thank you for the resolution. And I want to 5 1 say starting off that since we appointed Mr. Kinnee 2 to the ED, myself and Controller Yee, we're very 3 pleased with what he's done so far to move the Board 4 forward. 5 However, we do have some concerns with the 6 resolution. And I would like for those concerns to 7 be addressed in writing. And I am not prepared to 8 approve the resolution at this time. 9 The concerns are dealing with items A, B and 10 C. A, the resolution granting the ED the authority 11 to execute any and all personnel documents as the 12 appointing power. 13 I'm concerned with that because under 14 Government Code 15600(h), the Board and Board Member 15 doesn't have authority over personnel matters. And 16 under that same code section, the ED is solely 17 responsible for selecting the CEAs. 18 And then as we all know, the Board lost its 19 delegation in April 2017. So with that being in 20 mind, I don't know if the Board has the authority to 21 act on any of these items. And if the Board doesn't 22 have the authority to act on the items, then how 23 could we delegate them to the ED? 24 So we really would appreciate a memo from 25 you explaining what the Board authority is on this 26 item, and then we can move forward there. 27 MR. NANJO: Okay. 28 MS. STOWERS: On Item B, dealing with budget 6 1 and fiscal documents saying 15600 prohibits a Board 2 Member from modifying approvement budget change 3 proposals. And it provides that the ED shall modify 4 and approve all documents -- financial documents. 5 So same -- same issue here. If the Board 6 can't act on something, um, how could the Board pass 7 that authority on to the ED? 8 Finally, regarding contracts over a million. 9 Same issue. Not sure what the Board authority is 10 currently, and how can we pass it on to the ED? 11 With that being said, I would like to get 12 something in writing, and would like to get 13 clarification that if we don't adopt this resolution 14 today, is that going to stop the operations of the 15 BOE? Can BOE continue to operate and move forward? 16 MR. NANJO: Thank you, um -- thank you, 17 Ms. Stowers. 18 So a couple things. One, I would recommend 19 that we, the Board, go ahead and appoint -- approve 20 this or adopt this resolution as is. 21 A couple reasons. One, to the extent that 22 the Board doesn't have the authority, the, um -- the 23 Legislation leaves the authority with the Executive 24 Director. So there is no change there. 25 The Board can only confer powers that it 26 has. If those powers don't exist with the Board, 27 then presumably, Mr. Kinnee, as the Executive 28 Director, would have those powers. So it doesn't 7 1 change the effect of it. 2 However, if there's any question, this would 3 clear up the question, um -- any of those questions 4 or challenges to whether or not those powers were 5 properly or appropriately conferred to Mr. Kinnee. 6 The other issue is it does impact a couple 7 things as I may have mentioned. It may -- we may 8 have a challenge with getting the approval of the 9 amendment on the Verizon contract that may actually 10 have to wait til the February meeting, depending on 11 what my conversations with both DGS and CDTFA, who's 12 doing the administrative work and moving those 13 contract amendments forward to us -- for us. 14 MS. STOWERS: Has DGS indicated that they 15 had a problem with Mr. Kinnee signing off on it, or 16 is it just CDTFA? 17 MR. NANJO: Right now it's CDTFA. The 18 problem is I haven't been able to get CDTFA to 19 forward them onto DGS until they're satisfied. And 20 we have a couple other issues. It's not just that 21 one. 22 MS. STOWERS: But they're not our -- they're 23 not responsible for approving BOE's contracts, 24 correct? 25 MR. NANJO: That is correct. But that 26 doesn't change the fact that we've been trying to get 27 these amendments moving since November, and they 28 still haven't moved forward. So it's -- it's been a 8 1 source of difficulty for us. 2 The other issue is just kind of to address, 3 um, some of your concerns. I have no problems 4 putting, um -- even -- even if the Board chooses to 5 approve this resolution of conferring powers, I 6 will -- I will have no problems doing a memo to the 7 Board Members or yourself, either one, to kind of 8 plan those out, kind of indicate what authorities we 9 have. 10 Kind of just as a way of example, a lot of 11 the Government Code Section 15600, the original, kind 12 of organic authority for this Board are the ones that 13 weren't changed. That language, for example, 15600 14 sub (a) prides that the Board shall prescribe rules 15 for its own government and for the transaction of its 16 business is a general provision, and that was not 17 changed by the Legislation. 18 So it's -- it's things of that nature that 19 are kind of general pronouncements of the Board's 20 authority. 21 The other thing I would direct the Board 22 Members attention to is the fact that the items that 23 are being conferred, execution of any and all 24 personnel documents as the appointing power, it goes 25 beyond just the CEAs and things that we do know that 26 Mr. Kinnee has authority -- definitely has authority 27 over as we're prescribed under either AB 102 or 131. 28 Mostly 102. 9 1 And we -- the other thing I think you 2 mentioned -- or the other item you mentioned, 3 Ms. Stowers, was execution of the fiscal documents 4 and the budget information. That one -- if you 5 notice, (b) is written in a way that it says, 6 "Execution of any and all budgetary fiscal documents 7 for and on behalf of the Board as the appointing 8 power." 9 So this covers -- this is broad enough to 10 cover things that may go beyond just those that may 11 have been contemplated in AB 102, which is what this 12 resolution of conferred powers was designed to do. 13 Finally, the other thing that it's 14 important -- that importantly exists with this 15 resolution of conferred powers is it allows 16 Mr. Kinnee to delegate those functions as he deems 17 necessary to his delegate -- you know -- delegatees, 18 for a lack of a better term. And that technically 19 doesn't exist until the resolution of conferred 20 powers is issued. 21 So -- 22 MR. RUNNER: Can I -- I would -- I think 23 your -- your points are -- are good. And I think I 24 would -- would think it would be in our best 25 interest, as Chief Counsel indicated, for us to go 26 adopt this. But at the same time, I think, review 27 those issues. 28 Because, um, again, I -- even -- even if we 10 1 are conferring powers to which we don't have 2 incorrectly, we ought to at least make sure the 3 document is correct. And my concern, I guess, is 4 that right now it's a bit of a rough sail right now 5 in our relationships with the other agencies anyhow. 6 And I would hate to give them -- in the sense of -- I 7 don't mean -- only in the sense that we're trying to 8 work through a lot of uncharted territory in 9 relationship. And I would hate to give them another 10 reason why they can't honor Mr. Kinnee as our -- as 11 our ED. 12 So -- but I think your points are spot on. 13 Mr. Horton. 14 MR. HORTON: Um, thank you, Chairman Runner. 15 Members, I've got to say, if there's 16 concerns relative to the document itself, the 17 document sort of codifies the intent of the Board. 18 So now that Ms. Stowers sort of brings that up, you 19 know, I share some of those same concerns, and would 20 ask that we put this over and have the document 21 reflect the true intent of -- of the parties relative 22 to that. 23 I do believe that Mr. Kinnee has the 24 authority relative to the legislation to act on just 25 about any personnel or budgetary matter unless it 26 specifically requires public discussion, public 27 disclosure and greater transparency. 28 Some of the other issues of, you know, 11 1 approving certain dollar values and so forth, I 2 actually believe that all of those issues should 3 probably come before the public to the extent that we 4 can, and not have them in closed session, those 5 discussions, to the extent that it does not so hinder 6 our position from a litigation perspective. 7 But, um, that would be my thought. Unless 8 there's something as far as time -- unless we are 9 pressed for time, and we actually need this -- need 10 this document, I think it should reflect the true 11 intent of the parties. 12 MR. RUNNER: I guess I -- I guess I thought 13 I heard the Chief Counsel thought that it was 14 timely. 15 MR. NANJO: Yes. It -- it -- it -- there 16 are a lot of positions that we're trying to fill, as 17 the Board Members know. It's kind of -- we're in a 18 challenging period, because we are very 19 short-staffed, and we have a lot of vacancies. And 20 it is my understanding that a resolution of conferred 21 powers of this nature would assist us in getting 22 things through, um, CDTFA, and some of the parties 23 that we're dealing with. 24 Suffice it to say that I don't think the 25 effects and the reality of AB 102 are really well 26 understood by some of the counter-parties we're 27 dealing with, CDTFA, DGS. In some cases, we've 28 gotten a little bit of push back on things that I 12 1 don't think we should be. So I think it would be 2 helpful to have the conferred powers. 3 So, again, it's my strong recommendation 4 that we go ahead and approve this. And we can even 5 bring it back next meeting if we want. 6 MR. RUNNER: Yeah. I -- again, I'm just 7 concerned about not being able to move forward in an 8 area that's a bit fuzzy right now in our 9 relationships. So, again, I don't have any trouble 10 at all putting -- asking it to be put back on the 11 agenda for next month for review again. But just at 12 least moving it forward, so at least we take that 13 issue off the table. 14 Member Stowers. 15 MS. STOWERS: I really would like for -- to 16 get clarification on what the powers are of the 17 Board. I'm concerned that you're telling us that 18 CDTFA, who is supposed to be basically providing 19 service to the Board, is putting some -- some 20 stoppage in trying to get work done. But, um -- and 21 I think that's probably where there needs to be some 22 cross-communication between the two. 23 But to hire employees, that's, you know -- 24 that's pretty much a CalHR issue for us right now. 25 So having or not having a resolution shouldn't stop 26 the ability to move forward with hiring. 27 Same thing with contracts. That's DGS. So 28 moving forward with a contract, even to extend the 13 1 contract, is DGS. It's not within -- that's really 2 clear that BOE doesn't have that power right now. 3 MR. HORTON: Historically, the Board of 4 Equalization has always conferred that power, that 5 authority to -- to the Executive Director. At least 6 over the, you know, 30-some years that I've been 7 engaged. 8 And so the presumption should be that the 9 Executive Director has that authority, especially 10 from CDTFA, which was created by the Legislation. 11 And -- so I would believe that the -- that the 12 Executive Director has the authority. We don't have 13 any authority to hire civil-service employees. Never 14 did, never should have. And we don't. 15 And the same thing with CEAs. Even prior to 16 to the Legislation, the Board of Equalization 17 relinquished that authority to the Executive 18 Director. 19 So I think we've already set forth the 20 position that the Executive Director has for those 21 positions. And the concern is just any misconception 22 that may be communicated as a result of a document 23 that says we were transferring authority that the 24 Legislation says we don't have. But -- and we 25 historically have not had. 26 MR. RUNNER: I -- I think this discussion 27 here identifies the fact that we have concerns about 28 it. I guess I'm more concerned about what are the 14 1 more practical aspects. I think we can -- we can 2 believe all we want about what authority we believe 3 they already have. But at this point, if we are 4 getting push back from those other agencies -- 5 And -- and, again, the Chief Counsel -- and 6 I'm going to ask the ED to come on up -- feels that 7 this would be helpful in them performing their jobs, 8 then I'm concerned that we have delayed a month in 9 regards to some important time. 10 And, again, I -- I don't think anybody is 11 going to criticize us for taking more authority when 12 we've already had this discussion. We know we want 13 an accurate document. But at the same time, we're 14 concerned about making sure that we don't have any -- 15 any, you know, unintentional problems by not moving 16 the document forward. 17 So I'm going to ask Mr. Kinnee specifically. 18 In your -- in your position, dealing with 19 these other agencies, do you think this is helpful? 20 Do you think this would be less helpful to you if we 21 didn't at least move something forward? 22 MR. HORTON: That's a broad statement. 23 MR. RUNNER: Well, it's -- then he can -- he 24 can identify -- 25 MR. KINNEE: As you're aware, I've just 26 taken over. You know -- 27 MR. RUNNER: Yeah. 28 MR. KINNEE: -- so Ms. Fleming and 15 1 Mr. Nanjo have been dealing with most of these 2 things. So I kind of defer to him. 3 Obviously, we're having a lot of challenges 4 getting things through, and we're working with the 5 other agencies. I don't know of any specific 6 problems. But, again, Mr. Nanjo has been working on, 7 like, contracts and items such as that. 8 MR. RUNNER: Okay. 9 MR. HORTON: In addition -- 10 MR. RUNNER: Yes, Member. 11 MR. HORTON: I mean, the Governor's office 12 is over all of these different departments. And 13 clearly the Governor's office is very much familiar 14 with what the Legislation says, what the authority 15 is. Maybe clarification from the Governor's office 16 or someone, CDTFA's Legal Department, could resolve 17 that. 18 Again, I share the concerns about implying 19 that we have some authority that we don't have, and 20 that we're transferring some authority that we don't 21 have to give. 22 So -- 23 MR. RUNNER: Okay. 24 MR. HORTON: And my apologies to -- to all. 25 I didn't have a chance to review it until it was -- 26 you know -- 27 MR. RUNNER: My understanding is there's a 28 lot of dysfunction right now from everything. 16 1 They've been trying to get paper clips to paper to 2 whatever. And so I just would hate to -- for them 3 not to be able to -- 4 MS. STOWERS: Yeah -- 5 MR. RUNNER: -- to create issues that create 6 more. But obviously if the Board wants to go ahead 7 and -- and put this off, then, until the next 8 meeting, and then we'll deal with what those 9 consequences are. 10 So basically at this point for lack of 11 motion, we will move on to the next item. And I 12 think -- 13 MR. NANJO: If I -- if I could make one 14 suggestion. 15 MR. RUNNER: Uh-huh. 16 MR. NANJO: What I would -- if the Board -- 17 I would request the Board entertain possibly 18 approving the resolution and striking through A, B 19 and C. Because as I understood Ms. Stowers, those 20 are the ones that had issues. I think it would be 21 helpful for us to have the remaining, um, in the 22 conferred powers for now. 23 MR. RUNNER: So that something is 24 established. Okay. 25 MR. NANJO: Yeah. 26 MS. STOWERS: That's a nice suggestion. 27 MR. RUNNER: Is there a motion for that? 28 MS. STOWERS: Move to approve the resolution 17 1 with the elimination of Items A, B and C. 2 MR. RUNNER: Okay. 3 MS. STOWERS: With the understanding that we 4 would come back -- 5 MR. NANJO: Absolutely. 6 MS. STOWERS: -- in February. 7 MR. NANJO: I would still do that. 8 MR. RUNNER: Okay. Is there a second? 9 MS. MA: Second. 10 MR. RUNNER: Okay. Second here, Member Ma. 11 Any objection? 12 Okay. Thank you very much. 13 MR. NANJO: Thank you. Thank you, Board 14 Members. 15 ---oOo--- 16 17 18 19 20 21 22 23 24 25 26 27 28 18 1 REPORTER'S CERTIFICATE 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, Jillian Sumner, Hearing Reporter for 8 the California State Board of Equalization certify 9 that on January 25, 2018 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 19 14 constitute a complete and accurate transcription of 15 the shorthand writing. 16 17 Dated: May 18, 2018 18 19 20 ____________________________ 21 JILLIAN SUMNER, CSR #13619 22 Hearing Reporter 23 24 25 26 27 28 19