The State Worker

Jerry Brown’s budget aims to end California personnel shell game

This graphic illustrates how one Department of Food and Agriculture employee was shuffled between positions in an apparent scheme to keep the job slots and the funding tied to them from being lost.
This graphic illustrates how one Department of Food and Agriculture employee was shuffled between positions in an apparent scheme to keep the job slots and the funding tied to them from being lost. The Sacramento Bee

For decades, California state bureaucrats have played an illegal shell game to inflate their salary budgets and then use the money to cover other expenses.

Now, following a Sacramento Bee investigation and subsequent state audit, Gov. Jerry Brown wants to abolish a toothless law often blamed for departments’ deceptive personnel practices. The governor has also proposed overhauling how the government budgets for its employees.

“By going this route you’re improving government transparency,” said H.D. Palmer, Brown’s Department of Finance spokesman.

The proposals outlined in the revised 2015-16 budget plan Brown released Thursday would erase a law that requires departments to eliminate state positions that go empty for six months. The Bee’s investigation last year revealed how state personnel officers routinely transfer employees between positions through complex clerical manipulations to keep empty job slots from crossing the elimination threshold.

The practice is illegal, but departments do it anyway to keep the budgeted salary funds. Managers who have used the tactic say it is a necessary workaround for inadequate budgets foisted on them by the Legislature and governors – both Republican and Democratic.

Illegally shuffled employees aren’t breaking the law and may not know they’ve been used for an illegitimate transaction because their pay, duties and job titles remain the same. Only the serial numbers attached to their job positions change.

State officials have known for years that departments manipulated transfers to hoard funds, but until The Bee’s analysis last year, no one had ever taken a statewide view of the shell game. The Bee looked at employee transfers in 110 departments and discovered at least $80 million had been shielded via faux transactions in a given year – and probably much more.

In one case, a Department of Food and Agriculture employee was “transferred” 14 times through nine positions in one fiscal year, although her title and workplace never changed. In another instance, a Department of General Services executive was “transferred” 11 times over the course of 18 months. Roughly 5,200 state employees shuttled between three or more job positions without changing departments or job titles, according to state Controller’s Office records for the last three fiscal years.

A Department of Finance audit sparked by The Bee’s probe found “a culture ... where circumvention of the code was commonplace and even encouraged by management.”

But the law has no bite. There’s no consequence for department managers or their subordinates who break the law and the money they keep can legally be used on other operating expenses – everything from office supplies and rent to cellphone bills and employee-leave cashouts.

Bruce Blanning, executive director of the state engineers union, said the law is “nonsensical” and needs to be abolished, since jobs take longer than six months to fill and others may go empty by design.

“Getting rid of the rule, it’s more than overdue,” Blanning said.

Brown’s proposal also would eliminate the state’s long-standing practice of budgeting jobs separately from a department’s other operating costs.

The Legislature will continue to authorize a ceiling on how many employees the state can employ, Palmer said, and attach a maximum dollar amount to those costs. But the departments’ actual compensation allocations from the Department of Finance would be less, based on a rolling three-year average of their employee costs. Finance would review the average biannually and reset the funding levels.

If managers wanted to hire more employees than their three-year average allowed, they would have to take money set aside for department travel, office equipment or other operations. And they could make a case to the administration and the Legislature for more money or more positions, just as they do now.

The change in the law and budgeting, the administration hopes, will end the obsession with manipulating positions that has become so extreme, according to the state audit, that some departments devote full-time employees to the task.

“We’re focusing on the dollars it takes to run a department,” Palmer said, “not on the number of positions that may not truly reflect a department’s workload.”

Mike Genest, who retired as Republican Gov. Arnold Schwarzenegger’s finance director, said Brown’s proposal is “the right thing to do. It makes sense to me.”

But as a longtime state employee who rose through the ranks, Genest said changing the law and budgeting policy won’t alter the departments’ designs on growing their budgets. Some other scheme will surface, he predicted.

“Budgeting is always a game,” Genest said. “Whatever you do to control it, people do whatever they can to get where they want to be.”

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