The State Worker

Tempers flare as troubled California tax board weighs audit reforms

The Board of Equalization is a unique tax agency that collects $60 billion a year in taxes and fees and is led by elected members.
The Board of Equalization is a unique tax agency that collects $60 billion a year in taxes and fees and is led by elected members. Sacramento Bee file photo, 2014

Tempers flared at a testy Tuesday meeting where elected members of a troubled state tax board began restricting their own powers while they braced for changes that may be forced on them by the governor and Legislature.

The Board of Equalization adopted two policies that push elected members away from the organization’s daily decisions, but struggled with an outline for a new governance model that would define how its elected representatives lead an agency that collects $60 billion a year in taxes and fees.

The board has been under scrutiny by lawmakers since a March audit drew attention to accounting failures and the alleged misuse of civil servants by elected members. It described flashy promotional events, including ones with a women empowerment theme, that were staffed by employees with tax-collecting responsibilities.

Gov. Jerry Brown has restricted its spending and called for the Legislature to adopt a response to the audit by next month.

The board unanimously adopted two policies suggested by member George Runner. They:

▪  Remove elected members from any Board of Equalization hiring decisions, except for choosing an executive director and a chief counsel.

▪  Demand new annual training for employees on how to comply with a budget law that bans so called “revenue-generating” employees – tax collectors – from working on projects that are not directly related to the collection of taxes and fees.

The board has 30 high-level employees in a state classification called career executive assignment. In practice, board members have participated in hiring decisions for all of those employees. The recent audit described a climate of fear among those employees, some of whom worry about losing their job if they displease a board member.

“It’s been an inconsistent policy,” said Board of Equalization spokesman Mark DeSio. “That’s why it was before the board today.”

But the unanimous votes masked some of the frustration board members showed with one another as they weighed their responses to the audit.

On one side, board members Jerome Horton and Diane Harkey wanted open discussions on the audit, potentially setting up a series of votes on governance questions.

Horton, who worked for the agency for 22 years before being appointed to it in 2009 by Gov. Schwarzenegger, faulted “misperceptions” and “misinformation” for the scrutiny the board has been facing. He argued the agency had policies that if followed correctly would lead to good government.

On the other was a group of board members who stressed that the audit demonstrated those policies were misunderstood or ignored entirely by civil servants and political staff.

“I don’t give a crap what these policies are; we are putting them in a single document now for transparency,” State Controller Betty Yee said.

She advanced a governance policy that set provisions for board members to discipline each other, evaluate the performance of the agency’s executive director and interact with employees.

The board did not adopt the full policy, but requested that its executive director return in August with a plan based on her framework.

Also Tuesday, Board of Equalization member Fiona Ma requested another outside investigation into the agency. She announced that she has asked State Auditor Elaine Howle to open a new review of the tax board.

David Gau, executive director of the California Board of Equalization on April 20, 2017 told a Senate budget subcommittee that his job had been threatened, presumably by an elected official. Video courtesy of the California Senate.

At an April 6, 2017 Assembly budget hearing, Phil Ting of San Francisco said he had "zero faith" that California's Board of Equalization can correct misuses of public resources that a recent audit identified.

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

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