MOORLACH UPDATE — Oversight Hearing — December 10, 2015

The Senate Committee on Governance & Finance’s Oversight Hearing yesterday was well run by Chair Robert M. Hertzberg. The Senator did a thorough review of the areas that needed improvement and honed in on key issues like someone who has conducted his share of depositions. The topic was “California’s Tax Check-off Program: Room for Improvement?” See MOORLACH UPDATE — Check-Off — December 9, 2015

December 9, 2015December 9, 2015 John Moorlach.

Senator Hertzberg and I were the only two members of the Committee to attend. This gave us a more informal opportunity to engage with those that appeared as witnesses. Those representing the two key players, the Franchise Tax Board and the State Controller’s Office, were Legislative Affairs personnel. Instead of sending top management, those with first-hand accounting knowledge, legislative relationship staff were the lucky ones to draw the short straws. Instead of getting accounting professionals, we received individuals who were probably former staffers to former legislators.

I voted for three bills this Session to add more “check-offs:”

AB 485 (Williams) Prevention of Animal Homelessness and Cruelty Fund

AB 924 (Cooley) State Children’s Trust Fund

SB 17 (Monning) Sea Otter Fund (Renewal)

Who opposes efforts to support worthy causes? But, it brings up interesting questions. Why is the Legislature picking winners and losers? Who gets to be first on the list of choices? What happens when there are so many new opportunities to select from? Does it hurt the contributions to the existing options? Why have sunset clauses and escalating minimum contribution levels? Why not have a qualification process for all nonprofits and have their names and codes listed on the Franchise Tax Board’s website and allow universal participation in this “check-off” methodology, similar to United Way?

The bigger subject was, “how can you screw this up?” It’s not the State’s money! It’s a restricted gift and the donor’s wishes must be observed or the funds should either be returned or the donor should be notified of an option to redirect his or her contribution. Otherwise, get out of this business. It confounds me that the details of the “check-offs” can be broken down by specific zip codes and posted on the State’s website (see, but consummating an electronic cash transfer becomes a bureaucratic nightmare.

I found it ironic that the State Controller has no compunction about recently calling out others for mishandling state funds, see “California tax board mishandled money, state controller’s audit finds,”

The Hearing is covered by the Associated Press and was published in the OC Register, CBS-Sacramento, and the Denver Post, to name a few, and is provided below. (The OC Register has the full piece on its website, but did not print it in its dead tree version in its entirety.)

In my closing remarks, I emphasized that I was not trying to poke a finger in someone’s eye or beating up on government. But, accountability can be uncomfortable. Since government has no competition, like the business and nonprofit sectors, it needs to step it up in being just as efficient. For when one department receives this type of scrutiny and comes up wanting, it hurts the reputation of every state department.

BONUS: You are invited to attend our Christmas Open House on December 17th. Details are provided below.



SACRAMENTO – Lawmakers and state agencies on Wednesday began exploring ways to make sure that millions of charitable dollars donated annually by California taxpayers aren’t stalled for years and don’t wind up in state coffers.

Among the ideas raised at a legislative hearing were requiring speedier notices to state agencies that funds are available for distribution and requiring that agencies publicly report how they spend – or fail to spend – the money. Others suggested giving back unspent funds that have since been dumped into the state’s general fund.

Sen. Bob Hertzberg, chairman of the Senate Governance and Finance Committee, called the hearing in response to an Associated Press report in August that found California agencies failed to spend nearly $10 million in taxpayers’ charitable donations over 10 years.

Hertzberg, D-Van Nuys, also cited delays that in one case stalled a donation for three years before it finally went to the charity.

The money is part of the $35 million collected since 2005 for 29 funds through the nation’s largest voluntary tax contribution program. The tax check-offs typically bring in more than $4 million each year.

“Sometimes the money has fallen through the cracks,” Hertzberg said at the hearing in Los Angeles. “Does the money get there and how long does it take?”

The Franchise Tax Board currently notifies the state controller once a year that money designated for charities by taxpayers is available for distribution. Hertzberg said that notice should be sent monthly.

The controller then notifies state agencies that the money is available for distribution to the charities themselves. If the funds are untouched for four years they can be returned to the state’s general fund.

Among the unspent money the AP found, $237,000 was raised to fund colorectal cancer screenings, enough to pay for more than 200 colonoscopies. But officials with the Department of Public Health testified that they never were authorized to spend the money.

Sen. John Moorlach, R-Costa Mesa, blamed the office run by Democratic Controller Betty Yee for not doing more to make sure the money is actually spent.

Lawmakers last year stalled SB1207 by Sen. Lois Wolk, D-Davis, that would have tapped one agency to oversee distribution of the money and required more reporting by charities. Moorlach said the bill should have sounded “an alarm bell” for the controller that something was wrong.

“Or do we wait for a reporter to figure it out?” Moorlach added.

Hertzberg said the controller may not have that authority over state agencies, but should require agencies to post brief summaries on their public websites on how much charitable money is available and why any balance hasn’t been distributed. He noted that some of the delay is because in most cases the Legislature must allocate the money in the annual budget, which delays the distribution by a year.

Moorlach said if taxpayers’ gifts were funneled directly to charities, “we can give checks to these nonprofits within minutes of receiving these funds.”

The AP found that nearly $280,000 that was supposed to be spent on asthma and lung disease research was never allocated by legislators or public health officials. Education officials said nearly $90,000 went back to the state’s general fund because there wasn’t enough money for the intended program to aid disadvantaged youth.

At Wednesday’s hearing, education officials disputed that nearly $90,000 went back to the state’s general fund. The department still hopes to distribute the money.

Lawmakers should consider giving money to similar programs in next year’s budget to make up for the lost funds, Hertzberg said: “Let’s be fair to the taxpayers who wrote the checks.”

Moorlach said the state may need to give the unspent money back to taxpayers.

“The state is sort of guilty of taking funds from taxpayers and misapplying them,” he said.


This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District.

If you no longer wish to subscribe, just let me know by responding with the request to do so.