By Dave Roberts

It hasn’t been a great year for the California Department of Forestry and Fire Protection. In January, the Los Angeles Times revealed that for seven years Cal Fire has been hoarding a slush fund that grew to $3.66 million. In February, the Sacramento Bee reported that Cal Fire fees that were supposed to be used for fire prevention measures had instead been used to investigate wildfires, according to the legislative counsel.

And earlier this month, the Howard Jarvis Taxpayers Association served Cal Fire and the state Board of Equalization with a lawsuit seeking to nullify Cal Fire’s $150 annual fee (or tax) on homeowners in mostly rural California for fire prevention. In addition, three bills have been introduced by Republicans in the Legislature seeking to do likewise.

The slush fund was a major black eye for Cal Fire. Instead of following the law by depositing money from legal settlements into the state General Fund, fire officials put it into the care of the California District Attorneys Association. In addition to paying CDAA a fee to hold the money, fire officials spent it on digital cameras, evidence sheds, GPS equipment, metal detectors and a conference at a Pismo Beach resort, among other expenditures.

Cal Fire faces bipartisan fire over slush fund

Coming on the heels of the revelation of the state Department of Parks and Recreation’s secret $54 million slush fund, Cal Fire was pilloried on editorial pages up and down the state:

— “Once again, California residents have been asked to pay higher taxes to help revenue-challenged state agencies fund important services — only to learn that those agencies had hidden large sums of money in secret accounts to keep it away from public scrutiny,” editorialized the Orange County Register.

— “Its arrogance underscores the larger issue: The money doesn’t belong to some bureaucrat with a badge. It belongs to the people,” lectured the Sacramento Bee.

Gov. Jerry Brown was quoted in the Bee calling the slush fund “a relatively boring story, to tell you the truth.” But the governor added that he would look into it. Senate Republican Leader Bob Huff, R-Diamond Bar, responded that “’boring’ is the last word I would use to describe these very disturbing revelations of hidden funds.”

Cal Fire spokesman Dennis Mathisen said in an interview that there was no effort to conceal the fund.

“The reality is that the fund had been publicly known,” he said. “We initiated our own audit of the fund a few years ago. The audit tried to determine the appropriate way of administering the fund. We are going through the process of re-evaluating it and determining the correct method of administering the fund.”

Scathing audit was three years old

Apparently that re-evaluation process has been going on for more than three years. The 26-page audit report, which was issued in November 2009, contains numerous criticisms of the way Cal Fire was handling the money:

— The funds collected from legal settlements were not reported to the Cal Fire Departmental Accounting Office or the Law Enforcement Program, and did not become part of the state’s accounting system.

— The money was dubbed a “Fire Investigation Trust Fund” — but was never placed in a trust account — in order to ensure it wouldn’t go into the state’s General Fund. “It is not clear what authority Cal Fire has to separate the Fund money from State money,” the audit states.

— There was no documentation of how the fund committee made its decisions on spending the money.

— State purchasing guidelines were not followed for hundreds of thousands of dollars spent on equipment.

— Travel expenses for training conferences were improperly documented, including numerous overcharges for lodging and unapproved travel to conferences in other states.

Slush fund depicted in benign light

Mathisen defended the expenditures, saying, “The sole purpose of that fund is to help support fire investigation-related things such as equipment and training. That involves Cal Fire investigators, local agency investigators, district attorneys.” The Pismo Beach conference focused on fire investigation training, he said, adding that “the hotel charged the typical government rate, which is lower than the standard rate.”

Mathisen also disputed the Bee’s report that fire prevention fees were not supposed to be spent on wildfire investigations.

“One of the fire prevention activities that’s mentioned in the law, it’s very clear that it includes the activities involved in fire investigations,” he said. “We look at the act of investigating fires and determining the cause, whether negligence or a crime such as arson. [If arson is suspected] we go through case development and district attorneys to prosecute. In the case of accidents, [investigation] helps us educate the public on how to prevent those things from happening in the future.”

The enabling legislation for the fire prevention fee, ABX1 29, does not specifically cite wildfire investigation as one of the uses for the funds. Money can be spent on public education, fire prevention projects and activities as well as fire severity and hazard mapping.

But there is no definition for what constitutes a “fire prevention project.” The legislation leaves it up to the Cal Fire board to determine that. In essence, the fire prevention fee, which was projected to total as much as $89 million annually, is potentially another slush fund for Cal Fire officials to use as they see fit as long as they can call it a fire prevention project or activity.

The goals of the Howard Jarvis lawsuit

And that’s what concerns the HJTA, which filed its class-action suit in Superior Court in Sacramento in October.

“This tax was dreamed up by politicians in Sacramento who are so desperate for revenue that they were willing to ram this through the Legislature without the proper two-thirds vote,” said HJTA President Jon Coupal in a press release. “The fire tax is a direct violation of Prop. 13. It is our goal to overturn this tax, prevent the politicians from taking more money from hardworking people for a program they were already paying for, and help taxpayers to get a refund from the government.”

The suit argues that the fire prevention assessment does not fall under the state constitutional definition of a “fee.” Therefore, it’s a tax requiring two-thirds approval in the Legislature, which it did not receive due to strong Republican opposition.

Article 13 A, section 3, subdivision (b) of the California Constitution defines a tax as “any levy, charge, or exaction of any kind imposed by the state” unless it’s imposed for a specific benefit, privilege, service or product provided directly to the payer that is not provided to those not charged, and which does not exceed the reasonable costs to the state of providing the benefit, privilege, service or product.

It’s likely that state attorneys will argue that fire prevention fits the definition of a fee instead of a tax, because it’s: 1) a specific service provided directly to people living in the mostly rural 31 million acres of California that are in Cal Fire’s State Responsibility Area, 2) that it is not provided to people outside of that area who are not charged a fee, and 3) it does not exceed the cost of providing that service.

A version of that argument was made by the author of ABX1 29, Assemblyman Bob Blumenfield, D-Los Angeles, on the Assembly floor just before the bill was approved on June 15, 2011.

“This approach has long been supported by the LAO [Legislative Analyst’s Office],” he said. “It reduces the financial exposure of the state to fight fires in the State Responsibility Areas, especially at a time when local governments continue to approve developments that increase fire risk. … We worked very closely when the Senate sent this over with leg[islative] counsel. And the key distinction here [making this a fee instead of a tax] is that it deals with prevention rather than protection. And so it’s not replacing existing services. But there’s a direct nexus. And that’s why this is an acceptable bill.”

Prediction of fire tax’s demise

Blumenfield was responding to then-Assemblyman Kevin Jeffries, R-Lake Elsinore, who predicted the fire assessment would soon be doused.

“We’ve seen this bill before,” he said. “At least I have over previous terms here. A funny thing happened: it failed in previous versions. When it was a $50 tax — you can call it a fee — but when it was a $50 tax it required a two-thirds vote. Now that it has moved to a $150 tax, somehow it’s been changed to a majority vote. I’m wondering if the leg[islative] counsel has issued a new opinion reversing their previous opinions that said this was a tax. It clearly violates Proposition 26 [requiring two-thirds support for tax hikes], and will last maybe a week at best until any number of interest groups, property rights proponents, any group out there who just happens to have a spare moment, and this bill will be dead. This tax will die a fast, quick death.”

Despite Jeffries’ assurance, the assessment is very much alive and well nearly two years later. The first billing for about 750,000 habitable structures was sent out from August through mid-December last year (in alphabetical order by county). A little over $73 million has been collected so far.

That’s short of the estimated revenue because 20 percent of respondents have declined to mail back their payments. More than 87,000 have filed an appeal. About 71 percent of the appeals, which were based on the fee being an illegally passed tax, were denied, according to Mathisen. More than 12,000 appeals were granted, however, as those assessments were based on misinformation from incorrect records.

“When this law was created there was no database in existence that identified all habitable structures in the SRA,” said Mathisen. “That was a significant task to put together that database. So we knew that there were going to be some inaccuracies. We are making those corrections as we move along.”

Fighting fire tax: The big picture and at individual level

The second round of billing for the current fiscal year was due to start in April. But it will be delayed, according to the Associated Press, to allow more time to sort through the thousands of complaints stemming from the initial billing.

In the meantime, three bills seeking to kill the fire prevention assessment are due to be heard in committees this legislative session: AB 23, AB 124 and SB 17. Click here for more information on the assessment from Cal Fire’s perspective. For the HJTA’s take, including instructions on filing an appeal, click here.

By Katy Grimes

California Assembly leaders enjoy an annual slush fund of $38 million. It’s money they can do with however they please.

The Assembly’s operating budget was $112 million for the 2011-12 fiscal year that ended June 30, 2012. But $150 million was appropriated. The remaining $38 million was spent at the discretion of Assembly Speaker John Perez, D-Los Angeles. 

It’s like a giant, sugary slushy.

In 2011 and 2012, I reported on the Democratic stonewalling done to then-Assemblyman Anthony Portantino, D-La Canada, when he tried to get Perez to release the entire Assembly budget, including the “discretionary” spending, in a move toward transparency. Portantino was stonewalled and punished.

Task force

I just spoke with Phillip Ung, California Common Cause policy advocate, about this gigantic fund of unaccountable millions, and how this happens every year without intervention, exposure or accountability. Ung said that the Assembly has no oversight other than itself.

Assembly Rule 15.7 requires an annual performance audit in addition to a financial audit. But Assembly leaders have historically ignored this rule.

Perez formed a legislative records task force late in 2011 after the Sacramento Bee and the Los Angeles Times filed a lawsuit demanding the operating records. In a move which can only be described as the fox guarding the henhouse, Perez named Assembly Rules Committee Chairwoman Nancy Skinner, D-Berkeley, as its leader. Assembly operations are controlled by Perez and the committee.

The task force did nothing in 2011 other than release doctored records of Assembly members’ office spending, specifically targeting Portantino.

Early in 2012, Portantino demanded the release of all Assembly records to the public. But Skinner’s committee denied his request, saying the Assembly’s letters and correspondences are exempt from transparency under the law.

As of April 2012, when I wrote my last story about the task force, there were still no records available of any meetings. To date, finding any information about the task force is difficult. I contacted Skinner’s office for a status update of the task force. The two staff members I spoke with said they couldn’t locate any information about the task force, and referred me to Perez’s office.

“The Speaker’s committee on transparency is secret,” Portantino told me in April 2012. “The minutes on the committee…secret. We don’t know if they’ve ever even met. Members should be embracing transparency. It’s not a radical concept.”

The Assembly Rules Committee then killed Portantino’s AB 1887, which would have required the state controller to audit the spending by the Legislature for the next two years.  Thereafter, an independent firm would perform the annual audits.

“We celebrate when the auditor audits Bell, CA,” Portantino said. “We are an agency which budgets more than we need for a slush fund.”

AB 1887 also would have required the Legislature to return any of the $146 million not spent. However, without that law, Perez gets to decide where and how the money gets spent.

In 2011, leaders in the Assembly and Senate authorized $200,000 for lawyers to keep the information secret in the fight over records, according to Portantino.

Violating its own rules

One of the Standing Rules of the Assembly calls for an annual performance audit of the Assembly. But in 2011, Trent Hager, Portantino’s chief of staff, told me the Assembly has never actually complied with this rule. And Hager ought to know because he worked for the Rules Committee for many years.

The rule reads:

“Performance Audit — 15.7. In addition to the annual financial audit required by Rule 15.6, the Committee on Rules shall contract for an audit of the administrative operations of the Assembly. The administrative departments to be audited shall be determined by the Committee on Rules. An organization performing an audit pursuant to this rule shall be selected by a majority of the membership of the Committee on Rules. A contract for an audit shall be awarded through a competitive bidding procedure. Audits shall be prepared in a manner and form to be determined by the organization performing the audit, and shall be consistent with generally accepted accounting principles.

“All findings and recommendations reported by an auditing firm shall be made available to Members and to the public.”

One of the reasons for secrecy may be the worst kept secret in the Capitol — the numbers of Capitol staffers on the payroll of the Legislature who actually work on political campaigns, something banned by law.

Where’s the slush?

Ung explained that most of the slush fund money goes to pet issues of the Assembly leaders. Rules governing the slush fund, which is contained in the Assembly operating budget, are “vague and ambiguous,” making it easy for abuse. And Ung said it’s highly questionable to send money from the slush fund to various state agencies without an Assembly vote.

That’s just how the Assembly obtains its surplus, according to a 2011 signed court declaration by Gus Demas, then fiscal officer for the Assembly Rules Committee. The details of the budget on the state website do not include the slush fund. But some expenditures were reported by the Daily News, which got ahold state budget documents:

The California Commission on the Status of Women ($150,000);

The California Conservation Corps ($680,000);

The California Military Department ($800,000);

The California State University system ($400,000);

The Department of Education ($8 million); and

The Department of Parks and Recreation ($1.5 million).

Other recipients were the Secretary of State’s Office and the Joint Legislative Budget Committee.

Assembly leaders have spent more than $73 million of the slush fund since December 2009.

According to Demas’ court declaration, Assembly leaders gave $55 million to state agencies between December 2008 and August 2011. Perez spent another $21 million between December 2011 and Aug. 31, 2012, according to state budget documents.