1 BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 2 450 N STREET 3 SACRAMENTO, CALIFORNIA 4 5 6 7 REPORTER'S TRANSCRIPT 8 JANUARY 27, 2010 9 10 11 ITEM P 12 OTHER ADMINISTRATIVE MATTERS 13 ITEM P1.3 14 PROPOSAL TO REORGANIZE THE 15 SPECIAL TAXES DIVISIONS 16 17 18 19 20 21 22 Reported by: Juli Price Jackson 23 No. CSR 5214 24 25 26 27 28 1 1 2 P R E S E N T 3 4 For the Board Betty T. Yee of Equalization: Chair 5 Jerome E. Horton 6 Vice-Chair 7 Bill Leonard Member 8 Michelle Steel 9 Member 10 Marcy Jo Mandel Appearing for John 11 Chiang, State Controller (per Government Code 12 Section 7.9) 13 Diane G. Olson Chief, Board 14 Proceedings Division 15 16 For the Property and David Gau Special Taxes Department: Deputy Director 17 18 19 ---oOo--- 20 21 22 23 24 25 26 27 28 2 1 450 N STREET 2 SACRAMENTO, CALIFORNIA 3 JANUARY 27, 2010 4 ---oOo--- 5 MS. YEE: Why don't we hear from Mr. Gau? 6 Good morning. 7 MR. GAU: Good morning, Chairwoman Yee and 8 Members. For the record, I'm David Gau, Deputy Director 9 of the Property and Special Taxes Department. 10 I'd just like to provide you with a little bit 11 more detail regarding the proposal to reorganize the 12 Special Taxes Division within Property and Special 13 Taxes. 14 As Mr. Hirsig explained, the reorganization 15 would move the Special Taxes Divisions from being 16 situated by tax or fee program to being grouped along 17 functional work lines. As Ray mentioned, I believe the 18 timing's right to propose such an undertaking, in part, 19 obviously, due to some recent retirements we've had, the 20 current budget situation, as well as the planned 21 expansion of e-services for the Special Taxes programs 22 and the technology areas that we plan to advance. 23 Reorganizing or grouping staff by functions 24 they perform, obviously, allows for the sharing of 25 resources, thereby, eliminating some of the duplication 26 of efforts that we see sometimes in Registration, Return 27 Processing, Collections and, perhaps, even in the audit 28 area. 3 1 I think it also enables us to have greater 2 consistency among staff in the application of policies 3 and procedures as well. 4 Hopefully, it will allow for some quicker 5 decision making process. Currently, you know, with 6 three divisions sometimes when we're looking at a 7 project or a change in our infrastructure, we have to, 8 you know, get clearance or check with three different 9 divisional areas. This would allow us to make that one 10 functional area that's impacted -- go to that group for 11 the decision making. 12 I think it also does provide staff with some 13 opportunities for career advancement. I think that they 14 would have greater opportunity to have training in 15 multiple programmed areas, where it's appropriate. 16 And, then, I think it also positions us for 17 whatever kind of functional structure that -- or any 18 other changes that may be proposed in the future for the 19 agency as a whole. 20 We also anticipate that this could prevent 21 us -- excuse me, present us with an opportunity to 22 develop some legislative suggestions that would allow us 23 to have our programs more uniform. And, hopefully, we 24 can develop some of these proposals as we go through 25 this process of identify those areas where we would like 26 to be more consistent, if we're not. 27 Basically the reorganization, as we envision 28 it, would follow along six primary lines. And those are 4 1 that of Registration, Return Processing, Collections, 2 Program Policy and Support, Field Audit and then also 3 Headquarter Operations. 4 While I believe these groups are the key 5 workload areas to accomplish the reorganization, I also 6 realize that there are some areas within each division 7 that are so specialized that special consideration would 8 have to be given before we would be able to determine 9 what functional group they would best be situated to fit 10 in. 11 So, during the planning process what we're 12 planning to do is consider -- we want to make sure that 13 the importance of establishing -- maintaining -- that 14 global program expertise is maintained and retaining 15 points of contact, or what I call point of ownership or 16 ownership program. 17 We want to make sure that our stakeholders -- 18 and that includes the industry representatives, the 19 legislature, other State agencies and your offices -- 20 know specifically who to contact when there are 21 questions in specific program areas that need to be 22 addressed or resolved. 23 So, obviously, these proposals need to be 24 thoughtfully and carefully considered. So, part of the 25 process we will be doing is meeting not only with the 26 Special Taxes staff -- I've already sent out an e-mail 27 in advance of the meeting for all of the employees to 28 kind of give them a heads up that we were thinking along 5 1 these lines. We plan to meet with them. I've already 2 met with a couple who responded to my e-mail. 3 You know, we'll welcome the opportunity to talk 4 to these people, to hear the experiences that they have. 5 We -- we -- obviously, it's something new. It's a -- 6 it's a big change and I want to do that in a 7 collaborative effort. 8 We also want to reach out to the unions and 9 discuss these things with them to address any concerns 10 they may have. 11 We are also planning to reach out to industry. 12 I've heard from one association that's a stakeholder 13 already who wants to participate with us. And I welcome 14 that opportunity. 15 And then we also want to check internally with 16 some of our own other program areas to make sure that 17 whatever we do is very thoughtful, planned and if 18 there's any unique considerations that we address those. 19 So, that, you know, we're looking to develop 20 this for a -- with a long-term vision in mind. It's 21 something that we feel is -- the timing is very 22 appropriate. 23 We'll also consider other areas where 24 streamlining and sharing of information within the Board 25 right now that we can -- Data Analysis, Data 26 Warehousing, things like that where we can cross program 27 lines, share that information better. 28 So, once this structure is developed, I 6 1 envision that implementation, I think, as already 2 mentioned, would be occurring in phases, over time and 3 including, you know, locating staff and equipment -- 4 either within this building or remotely as buildings and 5 different space become available. 6 I believe this proposal's consistent with the 7 Board's strategic and business plans and we intend to 8 use best practices as we develop this functional 9 reorganization. 10 So, during the next several weeks, as I had 11 mentioned, I'll be discussing this with all of the 12 parties that were previously mentioned. 13 And I would hope to come back -- I plan to come 14 back to you at the March 2010 Board meeting on a 15 progress update, with, hopefully, more detail and some 16 of the feedback and reaction that we've got to this 17 point. 18 So, at this time I'd be happy to answer any 19 questions that the Members may have. 20 Thank you. 21 MS. YEE: Thank you very much, Mr. Gau. And 22 thank you for really stepping up and taking the lead in 23 moving us in this direction. I really appreciate it. 24 And I want to just acknowledge, I think, some 25 of e-mails that my colleagues and I have been receiving 26 from some of the staff who've expressed concerns about 27 this functional reorganization. And I think you've 28 addressed many of the issues that have been raised. 7 1 And what I would say to relay the staff is I 2 really anticipate that this will be a collaborative 3 consultative process with the employees here. 4 Change is never easy and -- but I do think the 5 intent here is certainly not to defuse the terrific 6 expertise that we have in many of your programs right 7 now. But more importantly, I just see this as a really 8 important step for this organization to take. 9 From my perspective, having looked at, 10 certainly, budgets for -- all across the State 11 government, functional organization, I think, really is 12 able to weather fiscal challenges a lot better. And 13 it's not about then having to, you know, over time, you 14 know, decimate the capacity of individual programs but 15 you actually have a little bit of cushion, to the extent 16 that you've got your employees working across different 17 programs. And, so, I really welcome having, you know, 18 that flexibility going forward. 19 And the other thing I would say too, related to 20 this, is -- and it speaks to the timeline -- is there 21 any contemplation about sharing this plan with either 22 the legislature during our budget hearings or with the 23 legislative analysts with Department of Finance that 24 we're moving in this direction? 25 MR. GAU: There certainly can be. There has 26 been some initial discussions with the Department of 27 Finance because one of the issues that we wanted to make 28 sure were initially that there weren't any institutional 8 1 barriers or barriers at Finance that would prevent us 2 from doing this. 3 Our initial reaction is no, there is not. 4 However, you know, the redesign of our budget, 5 obviously, wouldn't appear until probably as early the 6 fiscal year '11-'12, but we have, at least to Finance, 7 had some initial discussions, more along the lines of, 8 you know, is it something we can do or do we need to 9 come and get -- and we would be glad to, certainly, 10 share our progress and plan with any of these control 11 agencies and will do so. 12 MS. YEE: Okay, yeah. And then, I guess the 13 other -- last thing I will say, with respect to our 14 employees, I feel very badly there is very little we can 15 offer to our employees right now, but I am excited about 16 the prospect of broader skills development as we look at 17 a functional organization for our employees. 18 Other comments, Members? 19 Questions? 20 MR. LEONARD: I just -- one of my first 21 questions were why -- why do we have such -- 22 particularly in Special and Excise taxes -- such tiny 23 tax collections but whole separate units to do that when 24 they're all doing the same function? 25 And I really like what you're doing because 26 that will, I think, let us better analyze the cost 27 effectiveness. 28 And, as the Chairwoman said, be able to absorb 9 1 shocks to the system better, that we can put our people 2 on the -- on the most cost effective side of the project 3 at any point in time because they're already trained in 4 each of those tax areas. I like that. 5 MS. YEE: Thank you, Mr. Leonard. 6 Other comments? 7 MS. MANDEL: No, I think that Mr. Gau addressed 8 the concerns that I had expressed to him earlier, which 9 was making sure we didn't lose or dilute technical 10 expertise. Because even though they may be just 11 collecting on a tax bill sometimes, it's the underlying 12 substance of the tax or fee that comes up in that and 13 also that responsiveness to all of the stakeholders and 14 industry that it, you know, and the legislature and BOE 15 Members and everyone else from the public that those 16 were sort of the two risks. 17 But you're going to proceed in a way that takes 18 all of that into account is my understanding. 19 MR. GAU: That's correct. 20 And I think regardless of whether you're 21 organized functionally or by program, each has its pros 22 and cons. 23 MS. MANDEL: Right. 24 MR. GAU: Obviously, a functional one with this 25 many programs as we have, that is the concern, how do 26 you maintain that program expertise? 27 So, that is one of the things I've been talking 28 about since Day 1 with this effort and have a very clear 10 1 focus on is to make sure that we have that -- that we 2 are able to maintain that ability and expertise and 3 knowledge. 4 Thank you. 5 MS. YEE: Thank you very much, Mr. Gau. 6 Any other comments, Members? 7 Great, thank you for the report. 8 MR. GAU: Thank you. 9 ---o0o--- 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11 1 REPORTER'S CERTIFICATE. 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, JULI PRICE JACKSON, Hearing Reporter for the 8 California State Board of Equalization certify that on 9 JANUARY 27, 2010 I recorded verbatim, in shorthand, to 10 the best of my ability, the proceedings in the 11 above-entitled hearing; that I transcribed the shorthand 12 writing into typewriting; and that the preceding pages 1 13 through 11 constitute a complete and accurate 14 transcription of the shorthand writing. 15 16 Dated: February 20, 2010 17 18 19 20 ____________________________ 21 JULI PRICE JACKSON 22 Hearing Reporter 23 24 25 26 27 28 12