The Health-Care Spoiler in California’s Rosy Budget

◼ Despite a 30 percent increase in the top income tax rate, higher sales taxes and fees, and greater total revenue, the state is spending less on education, transportation, courts, welfare and parks than it was six years ago. The reason: State spending on health care, employee compensation and benefits, interest, and prisons is greater than it was six years ago. - Bloomberg

The largest spending growth is in Medi-Cal, which is California’s version of Medicaid. The program is the state’s second-largest and fastest-rising expenditure, and accounts for most of the Department of Health Care Services’ outlays, which grew 65 percent over the six-year period, to $24 billion a year, from $14 billion. (See chart.)

Worse, the increase in Medi-Cal costs occurred before implementation of the Patient Protection and Affordable Care Act. The law is expected to cost the state budget an additional $2 billion to $4 billion in health-care spending a year, according to the Rand Corp. That means even less money for California’s colleges and universities, parks, courts, transportation, environment, and welfare, and even more pressure for fee and tax increases.

...Politicians love to make promises, but they don’t like to tell citizens about the costs of those promises or to challenge powerful lobbies funded in part by expenditures approved by those politicians. To protect its public services and residents, California’s leaders will sooner rather than later have to face down the elephant in the budget, Medi-Cal.

$54 million: California parks officials deliberately hid money, report says

◼ Fear of embarrassment and budget cuts led California parks officials to intentionally conceal millions of dollars in a department account, according to an investigation conducted by the state attorney general's office. - LA Times

The report, released Friday, is the most detailed official narrative yet regarding the root of the accounting scandal at the parks department.

The scandal broke last summer when it was revealed that the parks department had a hidden surplus of nearly $54 million even though it was threatening to close dozens of facilities.

About $20 million was found in an account where entrance fees and other revenues are deposited. Accounting discrepancies appeared to begin innocently more than a decade ago, leading to fluctuating reports on how much money was in the fund, investigators said.

But in 2002, when the problems were identified, parks officials made a "conscious and deliberate" decision not to reveal the money to officials at the Department of Finance, which plans the state budget.

Multiple high-ranking officials were involved, including the former chief deputy director, Michael Harris, who later lost his job over the scandal. However, the report said it remained unclear whether ousted director Ruth Coleman knew about the accounting problems. Coleman declined to be interviewed for the investigation.
Parks officials didn't report the money because they were concerned that their already reduced budget would be cut even further if the state's number-crunchers knew they had more money in a department account, the report said. Interviews conducted by investigators also showed that officials feared embarrassment if the accounting problems were revealed.

"Throughout this period of intentional non-disclosure, some parks employees consistently requested, without success, that their superiors address the issue," the report said. It wasn't until a new deputy director was installed at the parks department in January 2012 was the issue reported.

◼ Discussion at Lucianne

CA parks officials apparently used 'Katrina' code in vacation cashout

◼ California parks officials apparently used obscure payroll codes intended for emergencies such as wildfires and disasters like Hurricane Katrina to turn vacation time into overtime pay, the State Controller's Office testified Wednesday. - Sacramento Bee

State managers are generally not allowed to earn overtime, and California's payroll system is designed to block them from receiving it, said John Hiber, chief operating officer with the Controller's Office, at a Senate oversight hearing. But the system has codes that managers can enter for overtime in rare cases such as Cal Fire employees fighting wildfires or emergency workers providing relief in natural disasters as they did in 2005 after Hurricane Katrina.

"It appears that because those codes exist that this wasn't picked up (and) that those codes were manipulated to allow this to occur," Hiber testified.

It undermines public faith in the entire state system of government. If the parks department could hide all of that money for all of that time, what are other departments doing?

◼ Losing trust because of found money - SF Chronicle

The California Department of Parks and Recreation found $54 million and lost something far more valuable - the public's trust.

That's the upshot of last week's unsettling revelation that the Parks Department hid $54 million in special funds for more than a decade.

Over the past four years, the cash-strapped state slashed the department budget by more than $50 million. The parks' many supporters responded to the department's desperate pleas for funding under the threat of closure. By beating the bushes, supporters were able to raise just enough money to keep the parks open.

Or so they thought. Now it turns out that the department had money all along, even if $33.5 million of it is part of the Off-Highway Vehicle Fund and can't be used for general operations. This is terrible news for two reasons: First, because the public will be loath to do further fundraising for the park system, and second, because it undermines public faith in the entire state system of government. If the parks department could hide all of that money for all of that time, what are other departments doing?

The state must immediately address this matter with greater transparency. No department should be allowed to hide money from either the Department of Finance or the public.

◼ California parks scandal: Honor system used to keep track of $37 billion in public funds - Santa Cruz Sentinel

With state leaders scrambling to find out how state parks officials kept tens of millions of dollars hidden for more than a decade, California's top finance officials Tuesday acknowledged what could be a far bigger problem: They have no system in place to account for $37 billion in "special funds'' scattered throughout state government.

Instead, finance officials revealed, they rely on an honor system to track money that could be stashed away in untold accounts similar to the funds that turned up last week, sparking a scandal in the state parks department.

Each year, dozens of state departments report how much money they have in more than 500 special-fund accounts, which are separate from the general-fund budget and mostly tap into user fees to make up more than a quarter of all state spending. But no one checks to ensure that the special-fund figures being reported match the actual cash left in the accounts....

The scandal has been a huge embarrassment for the Brown administration, which in campaigning for a November tax initiative had argued that the state was so broke it needed to close dozens of parks.

◼ Hidden Funds, Unaccounted Funds and Tax Increases—Oh My! - Joel Fox/Fox&Hounds

California State Parks Director Ruth Coleman resigned this morning and her second in command has been fired after officials learned the department has been sitting on nearly $54 million in surplus money for as long as 12 years

◼ The department sat on the money for unknown reasons even as it carried out, over the past year, the unprecedented closure of 70 parks to satisfy state budget cuts. - Matt Weiser/Sacramento Bee

The Bee began inquiring about rumors of a surplus when it learned about the buyout, and submitted a Public Records Act request for the fund data on Wednesday.

John Laird, secretary of the state Natural Resources Agency, which oversees State Parks, told The Bee that investigations have been launched by both the Attorney General's office and the Department of Finance to figure out how -- and why -- the Department of Parks and Recreation squirreled away so much money for so long....

The surplus money consists of $20.3 million in the Parks and Recreation Fund, and $33.5 million in the Off Highway Vehicle Fund, which are the two primary operating funds at the agency. This money was not reported to the state Finance Department, in contrast to normal budgeting procedures....

◼ Ruth Coleman's resignation letter (.pdf)
◼ Capitol Alert: Jerry Brown appoints interim parks chief in wake of scandal
◼ Editorial: Parks officials evaded rules, insulted public
◼ Unauthorized vacation buyouts secretly pushed through at state parks department, audit says
◼ Assemblywoman Gaines calls for fiscal probe of California parks agency
◼ Interactive: A guide to California state parks