1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 REPORTER'S TRANSCRIPT 7 AUGUST 21, 2018 8 9 10 11 12 ITEM K1 13 EXECUTIVE DIRECTOR'S REPORT; 14 K1.2 15 2019/20 BUDGET CHANGE CONCEPTS 16 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 Equalization: 4 Honorable George Runner Chair 5 Honorable Fiona Ma 6 CPA, Vice Chair 7 Honorable Jerome Horton Third District 8 Honorable Diane L. Harkey 9 Fourth District 10 Yvette Stowers Appearing for Betty T. 11 Yee, State Controller (per Government Code 12 Section 7.9) 13 Joann Richmond Chief 14 Board Proceedings Division 15 For Board of Equalization Staff: Dean Kinnee 16 Executive Director 17 Henry Nanjo Chief Counsel 18 Mark Durham 19 Chief Board of Equalization's 20 Legislative, Research and Statistics Division 21 22 ---oOo--- 23 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 AUGUST 21, 2018 4 ---oOo--- 5 MS. RICHMOND: Our next item is Item K1.2, 6 2019/20 Budget Change Concepts. 7 MR. KINNEE: Chairman Runner, Honorable 8 Members. I'm Dean Kinnee, Executive Director of the 9 Board of Equalization. 10 Mr. Mark Durham, Chief of the Board's 11 Legislative, Research and Statistics Division will be 12 presenting for this item. 13 MR. DURHAM: Good afternoon, Mr. Chair and 14 Honorable Members. I'm Mark Durham with the 15 Legislative, Research and Statistics Division. 16 As Mr. Kinnee mentioned earlier, the Board 17 of Equalization continues to work with the Department 18 of General Services in locating and securing a 19 permanent BOE headquarters, which would eventually 20 consolidate BOE into one location. 21 The funding for this remove -- for this move 22 requires the BOE to prepare and submit a BCP to the 23 Department of Finance. 24 The BOE is working with DGS and CDTFA 25 facilities and budget staff on the BCP and the 26 funding amounts. 27 The BCP is due to the Department of Finance 28 by September 4th. The Department of Finance has 3 1 stated that the information contained in the BCP is 2 part of the Governor's Budget process and must be 3 treated as confidential until it's released to the 4 Legislature as part of the Governor's Budget April 5 1st finance letter or the May revise. 6 Each Department is responsible for 7 maintaining the confidentiality of their BCP. The 8 Department of Finance sign off will reflect the BCP 9 has been released to the Legislature. 10 MR. RUNNER: Who -- who has determined that 11 the BCPs are confidential? 12 MR. DURHAM: Department of Finance. 13 MR. RUNNER: How -- I -- you know -- 14 MS. HARKEY: How can -- 15 MR. RUNNER: I think we all had our turn 16 on -- on -- on FTB. And FTB sits and votes on BCPs. 17 And Department of Finance sits on that Board. 18 MR. DURHAM: I'm just reading what's off the 19 Department of Finance web page. 20 I also know the one other department we 21 tried to get some data from, they -- they were 22 sending back -- we can't comment on that, because 23 it's -- it's -- BCPs are confidential. 24 MS. STOWERS: It's -- may I, Chair? 25 MR. RUNNER: Yeah. 26 MS. STOWERS: It's my understanding that 27 this issue has come up before, and Department of 28 Finance says, "Yes, they're confidential." But they 4 1 recognize that you guys do have a board, and you 2 report to a board. And same thing with the Franchise 3 Tax Board. 4 So I thought it was they were just -- they 5 understand that you're going to have to disclose that 6 to your board. 7 MR. RUNNER: Yeah, I -- I -- I would be 8 terribly confused if we were the sitting board, and 9 we don't have access to the BCP. 10 Here's what's really ironic is the BCP has 11 to do with the cost of moving, to which we don't have 12 any say in. And now we don't have any ability to see 13 the BCP, but, yet, it's coming from the BOE? 14 MR. HORTON: And let me just add a little to 15 that. 16 MR. RUNNER: Okay. 17 MR. HORTON: Is it the intent of -- of the 18 Executive team to ask -- to submit a BCP requesting 19 2.5 million-plus to relocate 36 people five miles and 20 establish a brand new hearing office? 21 Are -- are we now to make that 22 recommendation? And they -- it's already -- I'm 23 confused. Why would we do that? 24 MR. DURHAM: Well, part -- well, the process 25 is that we're working with DGS. 26 MR. HORTON: Right. 27 MR. DURHAM: And my understanding is we 28 can't -- we can't move unless we get the funding for 5 1 that. And the only person I know that can approve 2 the funding is the Department of Finance. 3 MR. RUNNER: Why doesn't the request come 4 from DGS? 5 MS. HARKEY: That's what I'm saying. Let 6 DGS do the BCP. I don't want the BCP running through 7 the BOE. And then we're going to get shellac for 8 spending 2.5 million for what we could spend a 9 quarter-of-a-million dollars for, and get it all 10 handled here. 11 MR. DURHAM: That's a good point. 12 MR. NANJO: I can -- 13 MR. RUNNER: Mr. Nanjo. 14 MR. NANJO: I can assist a little bit here 15 being formerly from DGS. 16 The way Department of Finance handles this 17 is unfortunately the cost of the move -- even though 18 we don't have any say in whether we move or not or 19 how much is spent, the problem is the cost of the 20 move has to be paid out of our budget. Which is why 21 the BCP has to augment our budget. 22 MS. HARKEY: Okay. I -- 23 MR. HORTON: Well, let me -- 24 MR. RUNNER: Let -- let's go ahead go -- 25 Member Harkey, go ahead. 26 MS. HARKEY: Okay. 27 What I would like to see is I would like to 28 see a vote of this Board as to whether they approve 6 1 of what's being requested, even though we -- because 2 BOE is the BOE. We're the Board of the Board of 3 Equalization. So anything that comes through here, 4 it's going to be us. And it's our responsibility. 5 Now, DGS may be the procurer, or, you know, 6 the -- the tag team for what happens, because 7 Department of Finance would prefer it that way. But 8 that being said, I think we ought to have some say, 9 at least -- at least in a public hearing as to what 10 we want to do, and what we want to spend. 11 And I don't personally want to see staff, 12 which reports, you know, through us, sending out 13 something for 2.5 million, and then saying the Board 14 of Equalization -- and staff included in that -- 15 being tarred for spending $2.5 million on new 16 facilities for us that, quite honestly, none of us 17 will be there to enjoy. 18 And you won't enjoy them very well either 19 if -- if the public, you know, catches wind of 20 2.5 million for something that's really kind of 21 unnecessary. 22 So I would like to see the staff of the 23 Board not make the newspapers. I would like to see 24 the staff of the Board be able to function as they 25 have always done, which is, you know, honorably, with 26 integrity, and with a procedure. 27 We have great staff. We're very small 28 staffed, but we've got great staff. And I don't want 7 1 to see this blow up for your sake or for ours. You 2 know, I mean, we can take shellackings. We're -- 3 we're pretty good at it. But I don't think staff 4 signs up for that. 5 MR. NANJO: So I have -- I have not run this 6 past the Executive Director, so I'm kind of going out 7 on a limb a little bit here. But I -- one thought -- 8 and I'm, for lack of a better term, verbally 9 brainstorming here. 10 But one thought is maybe ask DGS to come 11 next meeting and present their plan. They can talk 12 about the reasons. And one of the things the Board, 13 if they desire, can do is ask DGS, "We're not in 14 favor" -- you know, you can notify them that you're 15 not in favor of this. And is there any way that this 16 could be funded out of their budget. 17 I'm not aware of anything. But, again, 18 that's not my -- I'm not with them anymore. So I -- 19 I mean, that -- that -- that would be a thought I 20 would have, is have them come out and see if there's 21 any way -- because I -- I fully agree that it 22 doesn't -- there's something wrong with that picture 23 that we're not supportive of it, yet it has to be in 24 our budget, and we have to make this BCP request for 25 millions of dollars. 26 MS. HARKEY: Yeah, I agree. 27 MR. RUNNER: Member Horton. 28 MR. HORTON: Thank you, Mr. Chair. 8 1 I don't know if -- I appreciate the 2 recommendation. I think the Board should probably go 3 on record as to what their recommendation is. And 4 that the Executive team should provide us with as 5 much input as you can attain to assist us in making 6 that recommendation. 7 And I'm -- for one, is a -- I'm -- I mean, I 8 don't have a vote in acquisition of furniture and 9 things of that nature. I never have. But I, for 10 one, am a no vote on recommending that this goes 11 forward. This budget proposal that the agency makes 12 this proposal. I would rather use it -- use those 13 funds to increase Board staff's salaries to make them 14 comparable to the outside agency. 15 So to the extent that we could take five 16 million and spread that out over our -- our -- our 17 agency, that would give everyone a -- maybe a 18 10 percent raise instead of us spending this money 19 this way. 20 I mean, if I've got to participate in the 21 decision-making process, which I don't -- let me just 22 be clear about that -- 23 MS. HARKEY: That's why I think it needs to 24 come back on the agenda, Member Horton. You can 25 address the issue at that time. Let DGS come and 26 make their presentation, and then we can each -- we 27 can each offer a comment or suggestion. They can 28 take it or leave it. But at least you will be of 9 1 record. Right now there is no vote. 2 MR. HORTON: Well, maybe -- Mr. Chair, if I 3 may. 4 Maybe a recommendation, unless we got the 5 facts. I don't necessarily -- 6 MS. HARKEY: Right. 7 MR. HORTON: I mean, the horse is out of the 8 barn. I mean, so the decision has been made even 9 though the process has been circumventing -- 10 MR. RUNNER: Well, I -- I haven't bought off 11 on this idea that this Board does not approve BCPs. 12 MS. HARKEY: I haven't either. 13 MR. RUNNER: So at that point, we have the 14 ability -- 15 MR. HORTON: Well, in the past we have. 16 MR. RUNNER: Right. And, again, we've all 17 sat on FTB where we do that. So -- with Finance 18 sitting next to us. So -- 19 MR. HORTON: Finance doesn't participate. 20 MS. STOWERS: May I comment? 21 MR. RUNNER: They don't participate in what? 22 MS. STOWERS: They don't -- they don't vote 23 on the BCPs. 24 MR. RUNNER: No, but they're there. 25 MS. STOWERS: They're there. 26 MR. RUNNER: Sitting next to us. 27 MS. STOWERS: I -- I've got confirmation 28 that as far as the concept for the BCP, that will be 10 1 presented to the Board Members. But I think it is 2 AB 102 that says that the Board Members don't vote on 3 BCP. 4 MR. RUNNER: No, it does not say that. It 5 says that no Board Member -- it talks specifically 6 about Board Member; not the Board. 7 MS. STOWERS: Okay. 8 MR. RUNNER: And so that -- I do not believe 9 that that particular piece of legislation -- what 10 they're concerned about, I believe, is individual 11 Board Members interrupting and influencing the BCP 12 process. It does not speak to the Board itself 13 participating in the Board process -- or in the BCP 14 process, correct? 15 MR. NANJO: It's a little ambiguous. 16 MR. RUNNER: Does it say the Board or Board 17 Member? 18 MR. KINNEE: It says -- I can read it. It's 19 Government Code 15600. 20 MR. NANJO: It says a Board Member. 21 MR. KINNEE: Yeah. 22 MR. RUNNER: That's pretty specific. 23 MR. KINNEE: A Board Member shall not 24 modify or approve a budget change proposal for the 25 Board of the California -- 26 MS. HARKEY: You can't do it alone. 27 MR. RUNNER: Right. 28 MR. KINNEE: -- Department of Tax Fee. 11 1 Executive Director shall modify or approve all budget 2 change proposals for the Board. 3 MR. RUNNER: Right. So I think that's 4 pretty clear that's Board Member, not this Board. 5 So, any way, I would expect for us to see -- 6 unless somebody can give us some specific legal 7 counsel as to why we think we can't see BCPs. I 8 would think this Board has an expectation to see 9 BCPs. 10 MS. HARKEY: I -- I would -- I would, too. 11 And I think that any -- you know, the BCP and any 12 plans for a move, our move actually needs to be open 13 and transparent. We don't want this going under the 14 radar screen for the staff purposes or for our own. 15 It's just not, you know -- it's not the way we 16 operate. 17 There were a lot of accusations made during 18 the break up of the Board. None of which I felt 19 founded. There were maybe some -- some issues that 20 could have been resolved. But I certainly don't want 21 this floating up for -- for yourselves. You know, 22 cause we don't -- you don't need any more hassle at 23 the staff level. And we certainly don't need any 24 more false accusations. 25 If we are unable to make a decision, that 26 needs to come out in the public that we're prohibited 27 from it. 28 But I don't believe that the law -- that the 12 1 statute that you read prohibits the Board itself from 2 hearing BCPs. 3 So I would like to have DGS come and 4 present. I think that's a good idea. And then we 5 can just have this all out in the open. And 6 everybody can, you know, issue their opinion. And 7 DGS, if they choose to go -- 8 MR. RUNNER: I think -- yeah, I agree. I 9 agree based upon this discussion that it would be 10 good for DGS to talk about what they've decided to 11 do. But I think it's a secondary issue in regards to 12 the BCP that has to follow that. 13 MS. HARKEY: Right. Well, I would think 14 they both come back at the same time. Would they 15 not? 16 MS. STOWERS: I -- I -- 17 MR. HORTON: Mr. Nanjo, what's your opinion? 18 MR. NANJO: Well, I think my suggestion was 19 that you address both issues at the same time with 20 DGS and explore whether or not there's a way that 21 they can -- if this is their decision and their 22 determination, whether they can fund it out of their 23 budget. 24 MR. RUNNER: Mr. Nanjo, you're going to have 25 to determine whether or not the statute allows for 26 this Board to vote on a BCP. 27 MS. HARKEY: Yeah, what he said. 28 MR. NANJO: I will -- I will look at that 13 1 before -- 2 MR. RUNNER: Okay. 3 MR. NANJO: -- the next meeting. Thank 4 you. 5 Yes. 6 MR. HORTON: Plus, you know, a memo can't -- 7 MR. NANJO: Yeah. I think a BCC is 8 clearly within -- there's no prohibition against BCC. 9 BCP I will take a closer look at. Because I think 10 that provision is very ambiguous. And if nothing 11 else, there's -- it does say a Board Member. 12 MR. RUNNER: Mm-hm. Okay. 13 Other quick -- 14 MS. STOWERS: That's all I was asking is 15 just take a look at it. Perhaps consult with -- you 16 take a look at it. 17 MR. RUNNER: Okay. 18 MR. NANJO: I'll take a look at it. 19 MR. RUNNER: Okay. Okay. 20 MR. HORTON: On BCP process -- 21 MR. RUNNER: Mm-hm. 22 MR. HORTON: Mr. Chair, if I may. 23 MR. RUNNER: Yes, sir. 24 MR. HORTON: This is more of a transitional 25 concern as the Board begins to transition. 26 It's my desire, to the extent that, you 27 know, I can invest the time to get there, is that 28 there's a level of continuity and that the 14 1 newly-elected Board Members are able to perform their 2 constitutional duties. 3 I understand and appreciate the process that 4 we went through, but I am hopeful that someone can 5 articulate to the Board what's the process by which 6 Members would be able to address the BCP-related 7 issues in their office. Or based on a -- an 8 analysis, a cost-benefit workload analysis, actual 9 factual data to ensure that we are in compliance with 10 the constitutional duties of the Members of the Board 11 of Equalization. 12 If the Members fall short of their 13 constitutional duties by virtue that they don't have 14 the staff or the support, I would not want it to be 15 at a result of us not at least attempting to make 16 sure that we have those staffing levels. 17 Department of Finance did what I thought was 18 a fairly reasonable analysis. And it wasn't accepted 19 for whatever reason. And so I don't -- I do want to 20 say for the record that I don't believe that's the 21 duties of the Members. I do believe that the 22 Executive Director has authority to establish a 23 process by which they can represent the Members in 24 that process. 25 And hopefully the BCPs that will be coming 26 forward will address those staffing classification 27 issues. And at the same time, the parity issue with 28 the assessors and the appraisers, the salary-parity 15 1 issue. 2 Even if we're rejected -- I mean, even if 3 we're rejected -- these are just recommendations. 4 But if we were rejected, I think we -- we stand on 5 solid ground for asking for salary parodies, solid 6 ground for asking for a workload analysis relative to 7 the constitutional duties and then making decisions 8 based on that data. 9 The same thing with the location of the 10 offices. Whether at the end of the day the decision 11 is not based on facts, it's based on some other 12 logic, we're not the decision-makers, so -- as far as 13 the final decision is. But we do have a 14 responsibility. 15 MR. RUNNER: Okay. 16 Any other discussion on that item? 17 Okay. Next item. 18 ---o0o--- 19 20 21 22 23 24 25 26 27 28 16 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 September 21, 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 16 14 constitute a complete and accurate transcription of 15 the shorthand writing. 16 17 Dated: April 10, 2019 18 19 20 ____________________________ 21 JILLIAN SUMNER, CSR #13619 22 Hearing Reporter 23 24 25 26 27 28 17