The State Worker

In chaotic hearing, lawmakers skeptical that California tax agency can fix itself

At a chaotic budget hearing for an agency that collects a third of California’s taxes, two lawmakers said late Wednesday they don’t believe the Board of Equalization can be trusted to fix the accounting deficiencies and misuse of public resources that a recent audit described.

The comments from Assembly Democrats Phil Ting and Shirley Weber follow a call from State Controller Betty Yee to overhaul the agency by stripping it of much its authority.

In both cases, the lawmakers expressed doubts about the tax board’s ability to correct its shortcomings after executives from the agency told them they were devising policies to address the audit.

“I have no faith in the organization to adopt practices,” said Ting, a former San Francisco assessor who leads the budget subcommittee that discussed the audit on Wednesday. “You can adopt all the policies you wish. But I have zero faith that you will practice your polices because you have not demonstrated that.”

“I question their ability to even self-regulate,” said Weber of San Diego.

Their remarks came at a meeting in which the Board of Equalization’s executive director refused to answer questions because he said he feared a lawsuit, Ting asked five state employees whether they leaked a copy of a critical audit to The Sacramento Bee and Ting read an anonymous email that accused the agency’s top lawyer of misleading him during the hearing.

Lawmakers centered their questions on a report from the Department of Finance that found the Board of Equalization had allowed its elected members to “redirect” staff for promotional events and that the agency could not explain how it corrected accounting failures Yee identified in a 2015 audit.

The audit suggested that redirection of staff violated state law. It included eye-catching details describing a “connecting women to power event” that 113 agency employees attended on a workday, with some pulling “parking-lot duty.”

Echoing Yee’s call for changes at the start of the hearing, Ting said “I found an agency that is not fulfilling its fiduciary responsibility, not able to answer the simplest questions in a consistent and clear way. It is clear it is eroding the trust of the public and the taxpayers it has to serve.”

In a brief statement, Executive Director David Gau told Ting’s committee that he took the audit seriously and that he was working to improve the agency’s governance structure.

Ting asked him whether he leaked the audit to The Bee, and Gau surprised a crowded legislative hearing room when he declined to answer.

“Because of the potential for litigation, I’ve been advised to refrain from answering any questions today,” Gau said.

He left three deputies to answer pointed questions from a group of lawmakers who wanted to know how the Board of Equalization approves large events that seem to promote elected members while providing debatable benefits to taxpayers. Some questions drilled in on promotional billboards that feature an elected Board of Equalization member; others focused on recent online videos showing members interacting with taxpayers.

Amy Kelly, the agency’s acting chief counsel, acknowledged that the Board of Equalization had “lost control” of some events.

She and two of her colleagues sought to reassure lawmakers that the Board of Equalization was taking steps to rein in some of the promotional activities. According to the audit, spending on those events and other promotional materials has tripled in recent years.

The board in December voted to restrict its participation in free income tax preparation events they had sponsored in the past; in March, the board for the first voted to give itself a budget for “education and outreach” activities within their districts.

“It goes to the root of what needs to happen at Board of Equalization – a strong central management vetting policies,” Kelly said. “I’m kind of excited about the changes,” she added later.

But lawmakers seemed skeptical. They noted that the agency had asked for 100 additional employees in its most recent budget request even though it has 600 open positions among its staff of 4,800. Agency executives pledged to revise the budget request.

Adam Ashton: 916-321-1063, @Adam_Ashton. Sign up for state worker news alerts at