State Oversight of Local Finances

SB 186 (Kehoe) – Concerns
As Amended on March 10, 2011

SB 186, by Senator Christine Kehoe, would give the State Controller broad authority to audit local agencies’ compliance with state financial laws, grant agreements, and local ordinances. Counties are concerned that the discretion SB 186 would grant the State Controller is too great and the source of funding for the allowable activities improper.

SB 186 gives the Controller discretion to audit local agencies when there is merely a “reason to believe” the local agency is not complying with state financial laws, grant agreements, or local ordinances. Furthermore, the source of funding the Controller’s actions as contemplated in SB 186 — the audited agencies — is improper. If the Controller can force the affected local agencies to pay for these audits, then there is no incentive to make the program or its administration efficient and effective. Moreover, the way the bill reads now it clearly would impose a reimbursable, state-mandated cost to local agencies, which the bill does not acknowledge.

The Senate Governance and Finance Committee passed SB 186 at its hearing on Wednesday, March 16. All five Democrats present voted for the bill (Sen. Kehoe was not present), and all three Republicans did not vote. The bill now moves to the Senate Appropriations Committee.

AB 229 (Lara) – Concerns
As Amended on March 14, 2011

AB 229, by Assembly Member Ricardo Lara, would give the State Controller greater oversight of local agencies’ audits and auditors.

Audits are an important way for citizens to know that local agency officials are spending their funds wisely and legally. The great majority of audits work as intended, exposing any weaknesses in control systems and helping agencies become aware of unsound practices. However, counties are concerned that AB 229 could have unintended consequences and may result in greater inefficiencies than intended.

Specifically, one provision of AB 229 prohibits local agencies from using the same audit firm for more than five consecutive years; the State Controller can waive this prohibition with a finding that “no qualified auditor is otherwise available.” But there are other reasons this should be waived other than no other available auditors. For a price, there is always another auditor available. Rural and remote agencies with few residents living in or near the jurisdiction often have fewer resources, and it would be wasteful for them to spend thousands of dollars to bring an alternate auditor from far away, especially if they find their choices narrowed by a new, possibly restrictive list of allowable public agency auditors, another provision of AB 229.

On the other end of the spectrum, the finances of Los Angeles County are so complex that the last time they went out to bid only two audit firms bid for the contract. Requiring the county to change auditors after a set period could allow the two companies to raise their rates for performing the service, potentially creating a duopoly.

Another provision of the bill requires the State Controller to maintain a list of all allowable auditors. This task is enormous counties worry that it has a high potential for accidentally excluding qualified auditors. Within this list, the Controller would also have the authority to investigate the auditors and audit their audits, removing from the list if their performance was insufficient. These provisions appear to be an attempt to eliminate risk. Since eliminating risk, even with this dramatic measure, is not possible, CSAC has suggested that the Controller could be given the authority to audit auditors, but instead keep a list of auditors local agencies are prohibited from using. This seems a more manageable task and a more efficient use of government resources, while retaining the purpose of the bill.

Election Reimbursement

SB 106 (Blakeslee) – Support
As Introduced on January 13, 2011

SB 106, by Senator Sam Blakeslee, would change statute to say that the state shall pay the costs of legislative vacancy special elections. The bill does not make an appropriation. These costs come to counties unexpectedly, after their budgets have passed, and put additional load on already strained county general funds.

A statute to this effect was in effect for many years up through the end of 2008. Since the beginning of 2009, counties have spent at least $20 million to fill eleven vacancies, and more vacancies will need to be filled later this year. SB 106 would cover elections held between January 1, 2009, and April 19, 2011.

The Senate Elections and Constitutional Amendments Committee passed SB 106 on a bi-partisan 4-1 vote at its hearing on Tuesday, March 15. It now moves to the Senate Appropriations Committee.

SB 141 (Price)
As Introduced on January 31, 2011

SB 141, by Senator Curren Price, is exactly like SB 106, above, except that it is not limited to the period from January 1, 2009, to April 19, 2011.

The Senate Elections and Constitutional Amendments Committee passed SB 106 unanimously at its hearing on Tuesday, March 15. It now moves to the Senate Appropriations Committee.

Presidential Primary

AB 80 (Fong) – Support
As Amended on March 3, 2011

AB 80, by Assembly Member Paul Fong, would move the presidential primary from February to June and in doing so reconsolidate it with the statewide direct primary.

In the wake of the last presidential primary season, in which many states — including California — moved up their elections to influence the nation’s candidate selection, the major national parties imposed rules about just how early they could be. Under those rules, California must either move its election later in the year or risk the parties excluding its decision entirely.

Reconsolidating the presidential primary with the statewide direct primary increases voter participation and decreases costs. Holding the primary election in June instead of earlier in the year ensures that state and local redistricting processes can run as planned, and it gives candidates time to determine the seats for which they are eligible.

The Assembly Elections and Redistricting Committee passed AB 80 unanimously at its meeting on Tuesday, March 15. The bill now moves to the Assembly Floor.

Inverse Condemnation

AB 328 (Smyth) – Support
As Introduced on February 10, 2011

AB 328, by Assembly Member Cameron Smyth, would apply the principle of comparative fault to inverse condemnation cases, as well as Civil Code of Procedure Section 998.

The state of the law on the issue of comparative fault has been uncertain for years. Because of the uncertainty, public agencies in inverse condemnation cases are at risk of being found liable for the full cost of a property, even when the agency only had a small part of the fault. AB 328 would settle this area of law reasonably and fairly.

The other provision of the bill would encourage property owners in inverse condemnation cases to accept reasonable settlement offers from the public agency. Under current law, if the property owner recovers anything, they are entitled to their full attorney fees and costs. AB 328 would specify that if the plaintiff rejects an offer and fails to obtain a more favorable judgment, the plaintiff pays the attorney fees from the time of the offer. This is not only favorable to counties, but it also helps to ease the burden on the courts.

The Assembly Judiciary Committee unanimously approved AB 328 at its hearing on Tuesday, March 15. The bill now moves to the Assembly Floor.

Validating Acts

SBs 191, 192, and 193 (Senate Governance and Finance Committee) – Support
As Introduced on February 8, 2011

SBs 191, 192, and 193, introduced by the Senate Governance and Finance Committee, would retroactively cure the minor errors and omissions that public officials make throughout the year. In turn, this will give investors confidence in public agencies’ securities and therefore lead to lower interest rates for state and local bonds. They do not correct fraud, corruption, or unconstitutional acts. These “validating acts” traditionally receive “aye” votes from all legislators, since with their passage everyone wins.

The Senate Governance and Finance Committee passed these three bills unanimously at its hearing on Wednesday, March 16.