Over and again, budget officials at the California Department of Parks and Recreation struggled to understand why every fiscal year ended with millions of dollars in surplus cash on hand.
At least since 2009, budget reviews conducted by the department each January showed a multimillion-dollar surplus, according to hundreds of pages of witness testimony reviewed by The Bee. Budget officials turned over regularly at state parks headquarters amid what one called a "hostile work environment," and each seemed powerless to figure out why the mystery money kept piling up.
The department's beleaguered deputy director of administration, Manuel Thomas Lopez, appeared angry and confused about the surpluses, according to staffers' testimony. One year, he ordered a budget manager demoted, saying he simply didn't believe her estimate of a $25 million surplus – even though she later was proved correct.
"When I saw the numbers, I said holy crap," David Saxby, assistant deputy director under Lopez, said in an April 25 interview with a deputy attorney general. He was referring to a budget estimate in the 2009-10 fiscal year. "There was another big balance, not as big as the year before, but another big balance."
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The puzzle of the recurring surpluses goes to the heart of a scandal in which state parks was found in July to have hidden $54 million in two park operating funds. For reasons that remain under investigation, the parks department kept the money secret for years by reporting false balances to the state Department of Finance.
So far, there are no indications the money was misused or embezzled. It was simply kept hidden, state officials said, even as the department carried out a plan last year to close 70 parks to achieve $22 million in state budget cuts.
Parks director Ruth Coleman resigned as the scandal unfolded. Numerous other parks officials were either fired or demoted. Separate investigations are under way by the state auditor and attorney general's office.
These events followed an earlier scandal, first reported by The Bee, in which Lopez was found to have carried out an illegal vacation buyout program for parks headquarters employees in 2011 that resulted in payouts of more than $271,000.
In response to numerous Public Records Act requests, the state last month released more than 1,000 pages of investigative interviews on the covert vacation buyout program. These deal mostly with the mechanics of the program, which allowed employees to sell unused vacation time back to the state. But in their interviews, many parks officials tried to explain why the department had money to spend on the buyouts in the first place.
"There was a lot of concern that we were going to leave a lot of general fund money on the table, which was not going to be a good thing because they were threatening to close parks," said Cheryl Taylor, the department's former budget officer, in an April 12 interview with a deputy attorney general. "They couldn't understand why we had so much surplus money sitting around."
Taylor was describing a meeting in February 2010 with Saxby and Lopez. Similar confusion occurred in 2009 and 2011, according to Saxby, who oversaw the budget staff.
"There was still a big number (in 2011) that we were going to leave on the table," Saxby said when interviewed April 25. "I demanded that they get to the bottom of the allocation file, go through it and truth it and figure out what went wrong because there's something wrong in there."
When Lopez conceived the vacation buyout in June 2011, he justified it as necessary to spend down the unexplained surplus, according to a transcript of his April 3 interview with a deputy attorney general. He also spent $1 million on new communications equipment for the department's law enforcement dispatch centers, according to testimony, and new personal computers for the entire department that may have cost another $1 million.
Lopez was asked if he thought about consulting his supervisor or Coleman about where the surplus money could best be used to help parks. He said he did not.
"I was looking at it from just the Admin Division budget," he said. "Obviously, I was wrong."
Lopez was demoted in October when Coleman and other department executives learned about the vacation buyouts. He resigned in May, just days before the state planned to fire him, according to the documents. Lopez, a Granite Bay resident, has not responded to recent requests for comment.
Part of the confusion over the recurring piles of cash may have been a lack of deep experience with parks-specific budgetary issues.
Rusty Areias, Coleman's predecessor as state parks director, told The Bee that he inherited a number of "spectacular" executives with long experience at parks when he arrived at the department in 1998. Many were near the end of their careers and retired shortly after he left in 2001.
"No question, there was a huge brain-drain when all those people left," Areias said. "I think at some point, the administration at parks lost their way."
Many employees also cite repeated conflicts with Lopez, whom they describe as a volatile personality.
"I was exposed to his process, and he was frustrated and angry and dysfunctional really as a team builder," Saxby said in his testimony. He was considered a "mentor" to Lopez dating back to the years they worked together at the Department of Transportation. "Most people were scared of him, wouldn't tell him the truth."
The testimony makes clear that a succession of parks budget officials had trouble tracking revenues. Though most had budget experience at other agencies, they were new to the parks department, which is unique in that it doesn't just spend money allocated from the state's general fund but collects significant revenue from visitor fees paid at parks.
This revenue can be unpredictable, because it depends to some extent on how much people use the parks. A heavy winter, for example, can delay the opening of campgrounds, which are a primary source of revenue at parks.
In Saxby's testimony, he reports that a former budget officer had a "breakdown" while working for Lopez because he "couldn't take the pressure" and "didn't have the experience."
Taylor joined state parks as budget officer in January 2008 after 17 years in the budget office at Caltrans. But she states in the interview that tracking revenue was a new responsibility for her.
She went on an extended medical leave at the end of 2009. When she returned late in February 2010, her budget manager had prepared revenue projections that showed the department was likely to see $25 million in surplus cash by the end of the fiscal year in June.
Lopez became "angry" about this projection, according to Taylor, and demanded that she demote the manager and prepare a new projection herself. During that review, Taylor told investigators, she was forbidden by Lopez to talk with the manager she had demoted.
"So now I got this huge database that I don't know anything about and I have to do allocations for the next year," Taylor said. "And my manager who does it and (had) been doing it for the last two years, I can't even talk to her about it."
It took Taylor two months, she said, but her own projection showed the manager's original estimate was correct.
By now it was March, which Taylor said was too late to spend much of the surplus cash, for instance by hiring more seasonal employees to staff parks for the busy summer ahead.
Taylor quit 10 months later and returned to Caltrans. She blamed Lopez for creating a "hostile work environment," according to a declaration she submitted on behalf of another employee who is suing Lopez and the department for sexual harassment and wrongful termination.
Special accounts created
One hint of an explanation about the mystery money comes from Dorothy Kroll, the department's accounting chief, who has been at parks for 11 years. She testified that Lopez often set up special accounts to collect particular park fees.
For example, Kroll said, when several parks experimented with automated fee payment machines, Lopez ordered 20 percent of the revenue set aside in a special account to maintain the machines. She said he told her he had approval from the Department of Finance to do this. She demanded proof, she said, but never got it from him.
Six years later, she said, the special account held $600,000 that was never spent on any maintenance.
A similar account was arranged to collect money from coin-operated showers at state parks. "I was ordered by him to do certain things and, you know, look the other way," Kroll said.
The department's current budget officer is Elsie Brenneman, who has been with state parks about 18 months. She was recruited by Saxby to replace Taylor.
Brenneman has 16 years of prior budget experience, including at the Department of Personnel Administration and Department of Toxic Substances Control, but again without experience overseeing the sort of revenue accounts that define the parks operation.
In her interview, Brenneman revealed that in April 2011 she projected an $11 million surplus between the department's general fund allocation and the State Parks and Recreation Fund balance.
"We realized not everything was allocated the way it should have been," she said in her testimony.
This happened to be exactly the amount of expenses the department had to cut that year as a result of a reduction in its general fund subsidy ordered in the governor's budget. Department leaders chose to achieve the cut by closing parks.
The possibility of using surplus funds to avoid closures was not revealed by department leaders who testified at a legislative oversight hearing Nov. 1. They maintained at the hearing that closing state parks was the only option.
The new deputy director of administration at state parks is Aaron Robertson. He is credited by the administration of Gov. Jerry Brown with discovering the nearly $54 million in surplus money after being hired in January to replace Lopez.
Before that, Robertson worked at the Department of Toxic Substances Control for two years and the city of Rocklin for five years. Before that, he was in the U.S. Marine Corps for six years, including a deployment in Operation Desert Storm in 1991. He then worked for the CIA.
Robertson is a lieutenant colonel in the U.S. Marine Corps Reserve. He served two tours of duty in the Iraq war, both involving military intelligence, and he maintains a high-level federal security clearance.
"We cannot speak to past employees or turnover," said Richard Stapler, spokesman for the Natural Resources Agency, which oversees the parks department. "However, we have great confidence in the new administrative services chief's background and experience. In addition, additional checks and balances have been put into place to ensure accurate reporting and accounting."