1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 REPORTER'S TRANSCRIPT 7 OCTOBER 23, 2018 8 9 10 11 12 13 ITEM L1 14 DISCUSSION AND DECISION ON RESPONSE 15 TO BOE BUILDING CONSOLIDATION PLAN 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 Yvette Stowers 9 Appearing for Betty T. Yee, State Controller 10 (per Government Code Section 7.9) 11 Joann Richmond 12 Chief Board Proceedings 13 Division For Board of 14 Equalization Staff: Henry Nanjo Chief Counsel 15 Dean Kinnee 16 Executive Director 17 18 ---oOo--- 19 20 21 22 23 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 OCTOBER 23, 2018 4 ---oOo--- 5 MS. RICHMOND: Our next item is Item L, 6 Board Member Requested Matters; L1 is Discussion and 7 Decision of Response to Building Consolidation 8 Plan. 9 MR. RUNNER: Okay. This is Mr. Horton. 10 MR. HORTON: Thank you, Mr. Chair. 11 Members, my -- you know, I know we've sort 12 of discussed this issue on several different 13 occasions. And each occasion I took more of an 14 academic sort of perspective. I'll try to flush out 15 the issues. 16 My primary concern is with -- well, a number 17 of different concerns -- but Government Code 18 Section 8314, and other related statutes, which 19 indicate that the Board Members may be held 20 personally liable for permitting others to use public 21 resources inappropriately. And given the various 22 recommendations as it relates to strategies to 23 accomplish the objective of the Legislature, who set 24 forth certain policies, in which makes sense. I 25 actually concur with those policy directions. 26 But the actual cost is where I have pause. 27 And more with the governance issue in relationship to 28 the general intent and concept of separation of 3 1 duties to ensure that no one state agency has 2 complete autonomy to make a decision about the 3 policy, as well as the procurement, as well as the 4 payment. 5 And so I don't know if that's the case. But 6 I do need some clarity as to whether or not who has 7 what authority here. Because -- but I'm being 8 advised -- or seem to be interpreted the advice is 9 that DGS has complete authority in all of those 10 different areas. 11 So a couple of questions to Mr. Nanjo, if I 12 will. 13 And, Members, I've shared these questions 14 with him in advance to assure that he was prepared. 15 So I'm not trying to -- I'm not catching him off 16 guard. 17 MR. NANJO: Which I appreciate, sir. 18 MR. HORTON: Yeah. 19 Mr. Nanjo, can you tell us, just for the -- 20 for the record, what role the Board Members play in 21 that process? 22 MR. NANJO: Very limited. 23 If I could go over -- perhaps it might be 24 good to discuss what the process is that's occurring, 25 resulting in the current plan to move this -- the 26 Board of Equalization and the agency consolidating 27 them in the Natomas office. 28 The funding for that move and the build out, 4 1 which is the primary cost, I think that's the 2 two-million-dollar estimate that you were referring 3 to, Member Horton? 4 MR. HORTON: Right. 5 MR. NANJO: Is from -- is being paid out of 6 the Architectural Revolving Fund. 7 Now, the Architectural Revolving Fund, as I 8 understand it, is a, for lack of a better term, a 9 deposit fund that is managed and maintained by the 10 Department of General Services. 11 And what that -- what goes into the 12 Architectural Revolving Fund, or ARF, is money that's 13 paid by a state agency for a future project, either a 14 building project, remodel, or what have you. 15 MR. HORTON: And what's the -- apologies for 16 interrupting. 17 MR. NANJO: Sure. 18 MR. HORTON: But it might be helpful if I 19 can -- 20 MR. NANJO: Absolutely. 21 MR. HORTON: -- get more understanding as 22 you go through this process. 23 What's the source of those funds? Where do 24 those funds come for? And who approves moving them 25 into this particular pod of money? 26 MR. NANJO: So the state agencies involved 27 deposits the money in the DGS fund. So that would be 28 the decision that's made by the state agency. 5 1 In this particular case what happened 2 was -- as I looked back and did some research, was 3 BOE -- what we've euphemistically called 1.0 before 4 the split that was caused by AB 102 -- deposited 5 several million dollars. I think it was in the 6 neighborhood of three or four million dollars. I 7 don't remember the exact amount. But that was in 8 anticipation of a rehab of this building. 9 MR. HORTON: So was that approved by the 10 Members? 11 MR. NANJO: I don't know what the history 12 is, but that -- I'm assuming that that was either 13 approved by the Members or occurred somehow. So I 14 don't have the history going back that far. 15 MR. HORTON: Historically, the conferring 16 powers was limited in two -- two primary ways; one, 17 dollar value, dollar threshold, a million dollars; 18 two, any real estate transaction. 19 It would seem to me that -- so any real 20 estate transaction, any dollar value in excess of a 21 million dollars would require Board approval. 22 MR. NANJO: Correct. 23 But what I'm not sure about is, as the Board 24 Members may know, I was previously over at Department 25 of General Services. It was my understanding that in 26 some instances moneys were allocated via the state 27 budget and placed directly in the ARF for particular 28 projects. 6 1 In that case, I don't know if the Board 2 would have had the same governance responsibilities 3 of that case. However -- 4 MR. HORTON: Who has -- is the -- is the 5 intended purpose of these funds that were allocated 6 to this account the same, or -- in your opinion? I 7 don't mean to catch you off guard on this one. 8 MR. NANJO: Not a problem. 9 MR. HORTON: But it seems -- so the purpose 10 was originally -- on 1.0, the purpose of allocating 11 those funds, presuming that the Board made the 12 decision to allocate it, there was a specific purpose 13 associated with that in that ultimate decision to 14 allocate the funds over to that account. 15 MR. NANJO: Correct. 16 MR. HORTON: And so -- are the funds 17 restricted at that point to be used only for that 18 purpose, or can someone decide to use them for 19 another purpose? 20 MR. NANJO: My recollection from my time at 21 Department of General Services is that those funds 22 can be changed for use for other purposes. That 23 change is made normally by the state agency who 24 deposited those funds in con -- or I should say the 25 state agency who is the owner of those funds, and the 26 Department of Finance in conjunction with each 27 other -- in consultation with each other. 28 MR. HORTON: So in this case the Board would 7 1 maintain its fiduciary responsibility of oversight of 2 those funds? 3 MR. NANJO: Not in this case. Because, 4 unfortunately, what happened in our case -- if I can 5 refer to us as BOE as a whole -- was AB 102 made 6 changes to Government Code Sections 15570.26 (b) and 7 (c). 8 And, essentially, what happened was those 9 funds were transferred -- the ownership of those 10 funds were transferred from BOE, when CDTFA was 11 created, to CDTFA. 12 So, presumably, at that point there's an 13 argument that CDTFA was the owner of those funds. 14 And at that point, the Board would have lost 15 jurisdiction of those funds. 16 MR. HORTON: There's -- so the funds to -- 17 the funds used -- that will be used to -- to build a 18 new Board room, new offices for the Members, and 19 consolidate the staff, those funds that are used to 20 the benefit of the BOE are controlled by a separate 21 agency that has no accountability to the public 22 whatsoever? 23 I'm trying to -- I'm mindful -- I'm 24 concerned about the separation of powers. 25 MR. NANJO: Yes, I understand. 26 MR. HORTON: So -- and so -- 27 MR. NANJO: So my understanding -- I -- the 28 only place that I don't want to make a comment is I 8 1 don't know -- I don't know what accountability to the 2 public CDTFA has. 3 MR. HORTON: Well, strike that statement. 4 MR. NANJO: But I will confirm that it was 5 my understanding that those funds are now able to be 6 allocated by -- excuse me -- California Department of 7 Tax and Fee Administration, or CDTFA, in conjunction 8 with DOF. And -- 9 MR. HORTON: And -- and the decision that 10 the Board originally made was the decision that was 11 required to take place in the public, and do a public 12 hearing, or this public process that we've 13 established. That's no longer applicable in changing 14 the use of those funds. Those funds can be changed 15 after discretion of the Executive Director of 16 CDTFA. 17 MR. NANJO: I believe that's correct in 18 consultation with DOF. 19 MR. HORTON: And it's your belief that that 20 decision made by CDTFA, that the Board Members cannot 21 be held personally liable for that decision? 22 MR. NANJO: Yes, because that decision is 23 beyond your authority. 24 MR. HORTON: Okay. There's a series of 25 other questions. But I think you've -- you've kind 26 of got to the issue of governance and separation of 27 powers concern that I have. 28 You know, the Founding Fathers of wisdom who 9 1 had, in exercising their wisdom, sought to establish 2 the separation of powers for a reason, so that you 3 would have one government entity that would make 4 policy and set policy, and another government entity 5 that would do procurements and authorize procurements 6 and so forth. And then another government entity 7 that would oversee the payments. 8 The reason was that you would not give one 9 particular entity the complete autonomy to decide 10 whether it would be 2.5 million that is being spent, 11 6.8 million, or in the case as estimated by the Board 12 of Equalization, 250,000 to accomplish the same 13 objective. 14 MR. NANJO: Correct. 15 MR. HORTON: To make sure that we're making 16 fiscal decision, prudent decision with the 17 expenditure of these funds. And the constitution, in 18 my opinion, gave the Board of Equalization the 19 fiduciary responsibility over those funds. 20 MR. NANJO: Yup. 21 MR. HORTON: So I don't know if you can 22 create this lack of separation of powers via statute. 23 And I honestly don't believe that was the intent of 24 the Legislature to give that much autonomy to one 25 person; in this case, the Executive Director of 26 CDTFA, and partnership somewhat, I guess, with DGS. 27 So with that, let me just publicly say that 28 I totally disagree. And I think it's an 10 1 inappropriate use of the funds. I think it's 2 inappropriate. It's in violation of the separation 3 of powers doctrine. 4 I also believe that it's in violation of the 5 constitution relative to equal protection, due 6 process, and the whole transparency issue that seeks 7 to ensure that the public is engaged in this process 8 and aware that it occurs in the purview of the 9 public. 10 And so -- and -- well, let me ask another 11 question. If, in fact, I don't agree, what -- with 12 the process as well as the transaction itself -- and 13 I need to study it a little bit more -- but the 14 differential of spending 2.5 million versus spending 15 250,000, and then the establishment of a new Board 16 room when this one is virtually unused, even though 17 it may be used every now and then for training and so 18 forth, will be virtually unused. The establishment 19 of reoccurring expenses as far as security and 20 everything else associated with it, instead of shared 21 expenses that is accomplished when agencies work 22 together and they collaborate. They're able to take 23 advantage of the economy scale and minimize the 24 expenditure of public funds. 25 And in doing so -- but all of that just 26 seems to run a foul of the intent of the laws that 27 I've previously stated. So for those reasons, I'm in 28 opposition. 11 1 How would I express that -- or how would the 2 Board -- in fact, if the Board concurred and were in 3 disagreement, how would the Board express that to the 4 Legislature or the decision makers? 5 Second, is there any action that a Member of 6 the Board can take in order to -- I forget what the 7 legal term is -- but basically protect CYA as it 8 relates to our personal liability? 9 And, in my case -- and particularly in the 10 case of the Board as well -- is that false narratives 11 have been -- has been advanced to create Legislative 12 objectives, subsequently proven to be false, and, 13 yet, still where Members are blamed for things they 14 had no authority, no control, no governance over. 15 And I would not like to see that happen again. 16 And then 2.5 million, and when you add in 17 the reoccurring expenses, over a period of time that 18 could become hundreds of millions. And, quite 19 frankly, from my perspective, I would prefer to use 20 the least expensive that didn't create reoccurring. 21 And if policy-makers are willing to spend 22 that kind of money, I would recommend that we use it 23 for salary increases for our staff to bring parody 24 with other industries. 25 But, you know, that's my opinion, 26 Mr. Chair. 27 MR. RUNNER: Well, I think I concur in 28 regards to, I think, the concern of the unintended, 12 1 or maybe they were intended, consequences of the 2 legislation. 3 I think the reality is we were -- we have, 4 as the BOE, an executive role of which then was 5 paired away and put over into a new executive role 6 under the new governor. And so the accountability 7 aspect is basically moved from this Board that 8 operated in the public, to an executive branch that 9 does not operate in the public. 10 And so as a result of that, I mean, not only 11 do we talk about the issues -- in regards to this 12 particular issue -- in regards to decisions that were 13 made and how dollars would be spent, but as we, I 14 think, are all well aware, there are many policies to 15 which we put into effect policy-wise with public 16 discussion dealing with taxpayers and how taxpayers 17 are treated and whatnot, that are vastly being 18 changed without any public input with the new tax 19 agency. 20 So I think this is just another one of those 21 which then creates the more interesting issue for me 22 in the irony of a bill that had transparency in its 23 title. So I will end it with that thought. 24 MR. HORTON: Mr. Chair, if I may. Although 25 it was kind of lengthy, there was a couple of 26 questions in there. 27 MR. NANJO: Yes, Member Horton, I did hear 28 the questions. 13 1 So the proper channel, if you will, is to 2 probably -- one of the things the Board can do as 3 either an individual Board Member or together as a 4 Board, if you so vote, is you can write a letter to 5 the decision makers of this decision. 6 The decision makers are, as I understand it, 7 CDTFA, because they are the ostensible owner of those 8 funds; DGS, who is -- there's another provision that 9 AB 97, and in the more current Budget Act, was kind 10 of repeated. Which I believe the current Budget Act 11 is AB 840 for this year. That allows DGS to have 12 final say on where offices for this Board are, where 13 things are -- what is leased and procurements. And 14 DGS is a decision maker as well. 15 And the third decision maker is obviously 16 Department of Finance. Just as further -- 17 MR. HORTON: And the Legislature is the 18 ultimate -- or does this go before the -- well, they 19 don't, because they took -- and this is another 20 question. 21 These funds existed -- had -- these are 22 financial funds that were tied to the constitutional 23 duties of the Board of Equalization. They were also 24 tied to the fiduciary duties of the Board Members. 25 What transfers by statute to a Department? I mean, 26 perspectively I understand given that authority 27 perspectively. 28 MR. NANJO: Right. 14 1 MR. HORTON: But, in fact, the legislation, 2 without saying so, gave retrospective authority over 3 funding. 4 MR. NANJO: Well, what the legislation 5 did -- I'm using colloquialisms. But, essentially, 6 on June 30th, effective July 1st of 2017, the assets 7 property and much of the personnel of BOE 1.0 was 8 transferred on that date at the stroke of midnight, 9 so to speak, to CDTFA. 10 MR. HORTON: If I may interrupt you. 11 MR. NANJO: Sure. 12 MR. HORTON: If -- I don't know -- and I 13 don't know -- and I look forward to studying it -- 14 whether or not that included incumbent funds that had 15 a public restriction on it, if you will, to use a 16 previous term. Incumbent funds that were inherently 17 given a specific use by the public. Because the 18 elected Members actually represent the public. 19 So the public had inherently said, "Okay. 20 This is how these funds shall be used." And so 21 now it brings about another legal concern is the 22 referendum is -- basically took away the referendum 23 rights of the public to say, "We don't want that to 24 happen." 25 So if elected bodies says this is how these 26 funds can be used, the public has a right to go in, 27 and through the referendum process and say, "No, I 28 totally disagree." 15 1 So, in essence, if this is the case -- and 2 I've had conversation with many of the Legislatures 3 and Legislators, and they quite -- they don't 4 necessarily understand this in its detail. The 5 overall essence, they get; but the detail of it is 6 kind of confusing to a lot of people who may -- you 7 know, who are involved. 8 But -- so in taking away those referendum 9 rights brings about another constitutional concern. 10 And now giving it to a non-elected official. 11 MR. NANJO: Yeah. I just don't know, 12 Member Horton, because I wasn't able to find any 13 documentation whether those were encumbered funds or 14 what the mechanism was, or any, for lack of a better 15 term, strings attached to the deposit in the ARF. 16 So that's -- I know that for most state 17 agencies, from my history at DGS, that there's a lot 18 of flexibility in what is used, or what happens with 19 the funds in the ARF. 20 MR. HORTON: The flexibility is contingent 21 upon a decision. It's not -- flexibility isn't given 22 to DGS. That, DGS, now you can -- 23 MR. NANJO: Right. It's -- it's the owner 24 of the funds. 25 MR. HORTON: You know, the separation of 26 powers, again, says there's flexibility. But there's 27 also a constitutional requirement that the body that 28 is responsible for those funds now has to come in and 16 1 say, "You can use these funds for a different 2 purpose." 3 MR. RUNNER: I guess I have trouble 4 following that. Because in reality, this is all 5 transferred to the governor. So in the sense that 6 this was not transferred to an unelected body -- 7 MR. NANJO: Right. 8 MR. RUNNER: -- this was transferred to the 9 governor. 10 MR. HORTON: Well, it's not even one elected 11 body to another. It's the same rules would apply 12 if -- if -- if the Legislature had jurisdiction over 13 a funding source, and that jurisdiction was then 14 transferred to another legislative body -- 15 MR. RUNNER: Well, there is -- 16 MR. HORTON: But that's not really -- I 17 mean, that's -- 18 MR. RUNNER: They can do that through the 19 law, which is what they did. 20 MR. NANJO: One comment I want to get out on 21 the table. I think it's been mentioned before, but I 22 want to make sure we have a record of it, is your 23 Executive Director is on record requesting from DGS a 24 more cost-effective, if you will, or cost-efficient 25 method of consolidation. 26 My understanding is Mr. Kinnee proposed to 27 DGS consolidating on the 23rd and 24th floors. DGS 28 had, as I understand it, reasons that that was not 17 1 their preferred alternative. And they're the ones 2 who made the decision to consolidate at the Natomas 3 office at higher costs. So -- 4 MR. HORTON: Can I get -- 5 MS. STOWERS: Can I please speak to that? 6 MR. HORTON: -- a copy of that response? 7 MR. NANJO: I believe it was an e-mail, 8 right? We have letters. So -- 9 MR. HORTON: The second question, and then I 10 relinquish. I think I've said all I needed. The 11 second question was -- is that, how do we cover? 12 MR. NANJO: So that would be -- 13 MR. HORTON: Do you believe the letter that 14 Mr. Kinnee sent over disagreeing with the 15 appropriation and the utilization of those funds was 16 sufficient to protect the Members? 17 MR. NANJO: That -- that and the fact that 18 the position of DOF, DGS, and CDTFA is that we have 19 absolutely no say over those funds. 20 MR. HORTON: Okay. 21 MR. NANJO: As an alternative, if there's 22 something more that the Board wants to do, as I 23 mentioned, you can write a letter individually or as 24 a Board to the decision makers, you know, voicing 25 more emphatically, if you will, the objection. 26 But I think between those two factors, what 27 your Executive Director has already done, and the 28 fact that the position that I understand these 18 1 entities have taken, is that that we have no say over 2 those funds. 3 MR. HORTON: Yeah. 4 MR. NANJO: Makes it kind of moot. 5 MR. HORTON: Well, Members, just from my own 6 personal perspective, I totally disagree for not only 7 legal issues, governance issues, separation of powers 8 issues, the whole constitutional concerns. 9 And -- but primarily just the fiduciary -- 10 financial fiduciary responsibility as it goes to 11 protecting taxpayers funds and making sure that 12 they're utilized, not only by this agency, but any 13 other agency that has -- that is doing something for 14 the benefit of the Board of Equalization. 15 For example, if a -- if another state agency 16 decided to do us a favor and give us all new cars, 17 and that was a financial -- financially was 18 irresponsible, we can't just say, "Okay." We have to 19 say, "No. That that's not appropriate. We're not 20 going to accept that inappropriate financial 21 expenditure." 22 Any way, that's my view of the rule. I'm 23 not necessarily asking the Board to take a 24 position. 25 MR. RUNNER: Member Stowers. 26 MS. STOWERS: I just wanted a clarification. 27 You said that it's on the record that our Executive 28 Director spoke about the move. 19 1 Mr. Kinnee, can you come up, please? 2 I'm not really clear. I know you spoke to 3 the Board Members. Did you speak with DGS, DOF, 4 CDTFA? And did you express an opinion about the use 5 of the funds? 6 MR. KINNEE: No, I don't think into the 7 funds. I sent a letter in February of this year 8 proposing we use the 23rd and 24th floor. DGS 9 responded back with a letter indicating why that 10 wasn't the plan. We continued to have dialogue with 11 them. Ultimately, you know, their choice was to go 12 to Opus -- Natomas. 13 MS. STOWERS: But you didn't -- so you 14 just -- you asked -- 15 MR. KINNEE: And then we were thinking we 16 were going to do a budget change proposal, but 17 ultimately we did not have to. Because CDTFA's ARF 18 fund could be used. 19 MS. STOWERS: Okay. 20 MR. KINNEE: And that was a discussion with 21 DGS and DOF, I believe. We weren't really involved 22 in that. 23 MR. HORTON: Was -- do you -- May I? 24 MS. STOWERS: Go right ahead. 25 MR. HORTON: Do you have any knowledge that 26 the BCP process was abandoned because it couldn't 27 legally be done? 28 MR. KINNEE: No. 20 1 MR. HORTON: Okay. Did you sign the 2 original BCP making the request for the funding? 3 MR. KINNEE: Yes, it was submitted under my 4 signature. Correct. 5 MR. HORTON: Given the conferring powers 6 restriction of a million dollars and any real estate 7 asset, was that signature approved by the Board? The 8 approval of the signing of this BCP? 9 MR. KINNEE: In the conferring powers, it 10 specifically speaks of BCPs, and the authority 11 resides with -- 12 MR. NANJO: And that's part of the 13 legislation in AB 102. 14 MR. HORTON: And that language supercedes 15 the restriction placed by Member Ma, thousand dollars 16 in real estate? 17 MR. KINNEE: It -- that was before the 18 Board. They put the $500,000 in it, and the other 19 language was already specific in budget change 20 proposal. I believe perhaps -- 21 MR. HORTON: And the February letter was 22 also before the Board gave conferring powers to 23 authorize that? 24 MR. KINNEE: Pardon? I missed the first 25 part of your -- 26 MR. HORTON: I -- I -- I think what you said 27 was -- and please reiterate if that's not the 28 case -- that that was before the Board passed the 21 1 conferring powers agreement? 2 MR. NANJO: The BCP was after the letter to 3 DGS requesting consolidation on the 23rd and 24th 4 floor was -- 5 MR. HORTON: So the conferring powers 6 agreement governed the actions of the Executive -- 7 MR. KINNEE: It would have been in March. 8 The Board, in March of this year, did the conferring 9 powers. The budget change proposal deadline was, 10 like, September of this year. 11 MR. HORTON: Okay. All right. So is your 12 belief that you have the authority despite the 13 language in the conferring powers? 14 MR. KINNEE: No, the conferring powers, I 15 believe, did give -- 16 MS. STOWERS: Conferring powers. 17 MR. HORTON: Despite the restrictions of a 18 million dollars. 19 MR. KINNEE: Yes. Correct. That is 20 correct. 21 MR. HORTON: And despite a restriction of -- 22 MR. NANJO: Because the restriction didn't 23 apply to the BCPs. 24 MR. HORTON: And that said that in the 25 conferring -- what -- what legislative language is -- 26 MR. NANJO: That's in AB 102, I believe. 27 MR. HORTON: Well, AB 102 speaks to the 28 Board Members not necessarily participating in the 22 1 process. Did not restrict the Board Members from 2 approving whatever has been done. 3 MR. NANJO: I would have to look up the 4 language. But going from memory, the Board Members 5 couldn't interfere with the BCP process. 6 MR. RUNNER: That -- that -- we had an 7 ongoing discussion in regards to the role of the 8 Board Members and BCPs. 9 MR. NANJO: Right. 10 MR. RUNNER: There's a fundamental 11 disagreement that we have had -- that I have had, at 12 least, that the legislation speaks specifically of a 13 Board Member interfering with the BCP. 14 MR. NANJO: Correct. 15 MR. RUNNER: It does not, in my opinion, 16 deal with the Board acting on BCPs. 17 MR. NANJO: That is -- there is a 18 disagreement about that. But the point is moot 19 because the BCP was withdrawn. 20 MR. RUNNER: Yeah. 21 MR. HORTON: Yeah. Well, I get the -- 22 this -- you know -- the -- I do believe that at some 23 point there needs to be some clarity about the 24 authority of the Board of Equalization. 25 MR. RUNNER: Mm-hm. 26 MR. HORTON: And so I also believe that the 27 legislation cannot transfer the constitutional duties 28 of the elected Board to the Executive Director. 23 1 And I also believe that if the Board gives 2 direction that gives specific restrictions, that no 3 other language, unless it specifically impedes the 4 constitutional authority of the Board, can circumvent 5 that authority. And there's an inherent challenge 6 with that. 7 I mean, this is not -- this particular 8 transaction -- I'm really looking at this as a larger 9 issue. I mean, the larger issue is, is that without 10 the approval of the Board, that would give the 11 Executive Director the authority to sign off on BCPs 12 at any amount for any reasons whatsoever without the 13 Board Members' approval. And that just seems to be 14 inherently in conflict with the separation of powers 15 doctrine. 16 And so -- but I get it. We're trying to 17 figure all this out. My suggestion is that we figure 18 it out before someone makes an unintended mistake of 19 doing something with these funds. 20 And for myself, to the extent that you can 21 be helpful -- I don't know if you've been authorized 22 to do this -- but to the extent that you could be 23 helpful, I'd like your assistance in drafting a 24 letter that gives me cover pursuant to Government 25 Code 8314 as it relates to any personal liability. 26 MR. RUNNER: Okay. 27 MS. STOWERS: Just kind of -- 28 MR. RUNNER: Yes, Ms. Stowers. 24 1 MS. STOWERS: Just a little BCP and 2 approval. 3 Did we get an opinion? I know we had this 4 conversation several times, and I know there's a 5 disagreement on what that did. 6 So, Director -- Counsel, did you write a 7 legal opinion? Did you consult with the AG on it or 8 anything? 9 MR. NANJO: You know, I don't remember. I'm 10 going to have to look back in my notes to see if I 11 did contact the AG's office on that. I thought I may 12 have. But as I sit here today, I can't remember 13 that. I haven't looked at it in a while. 14 MS. STOWERS: I really -- direct -- I really 15 think we need to get this resolved -- and get it 16 resolved. 17 MR. RUNNER: Member Stowers -- 18 MS. STOWERS: I mean, I'm going to be here 19 next year. 20 MR. RUNNER: Yeah, I think you're going to 21 be here next year. So you're right. I think -- 22 MR. KINNEE: We'll provide you with a legal 23 opinion on that. 24 MR. RUNNER: There is an issue that needs to 25 be resolved in regards to the Board's role in regards 26 to the BCP. 27 MR. NANJO: We'll seek clarity -- with the 28 Executive Director's permission, I'll reach out to 25 1 the AG's office, and we'll seek clarity on that 2 issue. 3 MR. RUNNER: Okay. Any other discussion on 4 this? 5 Okay. Other items on the -- next item on 6 the agenda. 7 ---o0o--- 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 26 1 2 REPORTER'S CERTIFICATE 3 4 State of California ) 5 ) ss 6 County of Sacramento ) 7 8 I, Jillian Sumner, Hearing Reporter for 9 the California State Board of Equalization, certify 10 that on October 23, 2018 I recorded verbatim, in 11 shorthand, to the best of my ability, the 12 proceedings in the above-entitled hearing; that I 13 transcribed the shorthand writing into typewriting; 14 and that the preceding pages 1 through 27 15 constitute a complete and accurate transcription of 16 the shorthand writing. 17 18 Dated: March 29, 2019 19 20 21 ____________________________ 22 JILLIAN SUMNER, CSR #13619 23 Hearing Reporter 24 25 26 27 28 27