BEFORE THE CALIFORNIA STATE BOARD OF EQUALIZATION 450 N Street, Room 121 Sacramento, California REPORTER'S TRANSCRIPT JANUARY 27, 2010 ITEM P1.1 AND P1.2 OTHER ADMINISTRATIVE MATTERS EXECUTIVE DIRECTOR'S REPORT Reported by: Beverly D. Toms No. CSR 1662 1 1 2 P R E S E N T 3 4 For the Board Betty 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 Olson Chief, Board 14 Proceedings Division 15 Board of Equalization Staff: Ramon J. Hirsig 16 Executive Director 17 ---oOo--- 18 19 20 21 22 23 24 25 26 27 28 2 1 ITEM P1.1 2 Sacramento, California 3 January 27, 2010 4 ---oOO--- 5 MS. OLSON: Our next item is P1, Executive 6 Director's Report. 7 MR. HIRSIG: Madam Chair, Members, good 8 morning. The first item on the agenda here is to talk 9 about the development of the 2010 through '15 strategic 10 plan. But first I'd like to say our current strategic 11 plan covers 2007 through '11. We're entering the fourth 12 year of that plan, and I will say we've accomplished a 13 lot, a lot's changed, and we learned a lot. 14 I'd like to take a moment just to touch on each 15 of those because it's hard to imagine four years have 16 passed already. 17 Accomplishment-wise in 2007 we began our 18 e-filing with 50,000 taxpayers. Last year we had 1.1 19 million taxpayers filing. And for the fiscal year 20 '09-'10 we're expecting 2.5 million taxpayers to file. 21 Web services was just in its infancy when we 22 first started our strategic plan. In '07 we started 23 web streaming. It's a tremendous way to provide 24 transparency to the Board of Equalization's transactions 25 and Board meetings. Currently we have over 500 people 26 viewing these meetings in Sacramento each day. 27 Our web site has gone from 4.5 million hits in 28 2006 to 7.8 this year. We're receiving a 25 percent 3 1 increase in people accessing our web site. This has 2 become our new means of communicating with the 3 taxpayers. Although it's not new in the sense of 4 technology, our ability to leverage that is going to be 5 critical in the future. 6 In addition, the Board received national 7 recognition with our pro bono program. In 2007 we had 8 one law school and five students. We now have five law 9 schools and 35 students providing services without 10 charge to taxpayers in need of areas in Franchise Tax 11 and we're moving into Business Taxes. 12 And, lastly, the vision of BOE and its future 13 has taken on new clarity. Through the use of our 14 business plan and the 2020 plan, our technology plan, 15 we're looking at the ways we're going to be doing 16 business in the year 2020. And while it's extremely 17 difficult to do so, it's important that our staff and we 18 look at that process. 19 What's changed? A lot. The State's in a 20 serious budget crisis. That goes without saying. Our 21 headquarters building we've outgrown. We've been living 22 with disruptions and -- and work issues for the last two 23 and a half years. 24 Job security issues are not only prevalent in 25 our mind but all State employees. We've been in a 26 hiring freeze since July of last year. It's impacting 27 to a great extent on our ability to do our job and our 28 mission. We've learned the importance of prioritizing 4 1 what we do and doing it well. 2 What's been learned? It's not business as 3 usual. We can't say that enough. But what I also 4 learned is our BOE staff is incredibly resilient. 5 Last year they stepped forward, voluntarily took leave 6 to the extent of $3 million in savings, over 1300 7 employees. Our employees were number one in the State 8 in giving over the Christmas season for the holiday food 9 drive last year. Out of 96 State agencies the BOE staff 10 stepped up forward and got first place. 11 And I understand this year is similar. So I'm 12 looking forward to the results of that. 13 We now have the opportunity to build on those 14 experiences. It's our goal over the next four months to 15 lead the organization in the development of that plan 16 from 2010 to '15. The focus will be really three-phased 17 as far as the plan, itself. Once again improving 18 taxpayer and stakeholder experiences. Investing in a 19 skilled and motivated work force. And of course 20 enhancing our operational efficiencies. 21 An action plan and time line for the 22 accomplishment of this is attached. It's my goal to 23 return to the Board with a fully vetted plan in late 24 Spring. Our outreach will include working with -- I'm 25 planning on putting together a symposium to invite 26 industry, taxpayers and staff to participate. We'll be 27 vetting it through our staff. We plan on doing some 28 surveying and are excited about the opportunity to 5 1 really look ahead to see where we're going to be in 2 the -- in the future. 3 This -- this plan really does set the stage for 4 the long-range goals of the BOE and we look forward to 5 that. 6 So if you have any questions I'd be happy to 7 answer that or I'll move to the next item. 8 MS. YEE: All right. Thank you, Mr. Hirsig. 9 Questions, Members? Comments? 10 I guess let me just add a comment, if I could. 11 And I want to just applaud you and the Executive team 12 for really all that has been put into place pursuant to 13 our current strategic plan. I think we have done a lot 14 to move this agency forward. 15 I would say that given the challenges with 16 respect to the State budget and also with the challenges 17 posed by our building issues that I really would like to 18 see a lot of focus with the development of the next 19 strategic plan with getting input from our internal 20 stakeholders. 21 This is really a time to think about how we as 22 an agency can be doing our business differently. I'm 23 not so sure that we need to be housed in a high rise 24 building here. And even more importantly I'd like to 25 think about whether we need to continue to have the 26 capacity that we currently have in our District offices 27 with the fiscal space that we got, and hope that we will 28 continue to look at enhancing the work that we all do 6 1 with the increased use of technology. 2 And it's one of the things I think I really 3 want to applaud about the current strategic plan, was 4 that technology was not an afterthought, it really was 5 built into how we do business here. 6 So I just want to encourage that to be thought. 7 Mr. Leonard. 8 MR. LEONARD: Well said. And I should have 9 asked Mr. Way if he'd sublet when the FTB General 10 Counsel was here. 11 MS. YEE: Okay. Thank you. 12 MR. LEONARD: I -- I guess just to add is to 13 underscore the -- the dedication and sacrifice of the 14 BOE employees in both helping on the State budget and 15 helping on the food drive for the hungry. It's -- 16 I'm -- that's -- that's something to be proud of. 17 MS. YEE: Absolutely. Thank you. 18 ---oOo--- 19 ITEM P1.2 20 MS. YEE: Okay. 21 MR. HIRSIG: Thank you. The next item is to 22 discuss the concept of functional organization. Once 23 again, to reiterate, it's not business as usual. As 24 California looks for innovative ways to address the 25 State's economic crisis, there's a growing need for us 26 to optimize. 27 I believe the BOE is in an obliga -- has an 28 obligation to explore those ways to improve our work 7 1 flow, and this would benefit not only our taxpayers and 2 stakeholders but our employees. 3 It was back this time last year in February 4 that I brought to the Board the planned future of BOE. 5 And embedded in that plan were two concepts which I'd 6 like to talk about briefly today. 7 The first one was functional organization and 8 the opportunities which it would bring. The second one 9 really is to talk about the development of possibly 10 regional taxpayer centers. 11 With regards to the functional approach to the 12 organization a perfect example would be to talk about 13 our special taxes area. As the programs have grown over 14 the years there's 26 individual tax programs 15 administered in that group. And as those programs have 16 been developed, each one has its own registration, 17 auditing and collection function. 18 A functional organization by example would take 19 and align those similar functions, and there's a lot of 20 advantages and some disadvantages which we need to talk 21 about related to that. 22 For example, we would have a return processing 23 and collection and auditing section within Special Taxes 24 rather than individual units. 25 Possible advantages and benefits include the 26 elimination of that duplication, reductions in cost and 27 efficiencies. I do believe there would be improvements 28 in customer service. We see this at Board meetings 8 1 here, and periodically where taxpayers aren't getting 2 all the information they need to do their job. Our goal 3 would be to make sure when they register and when we're 4 auditing them we're able to cover underground storage 5 tank or cigarette taxes and those things that are 6 important for them to know. 7 A functional organization in the concept would 8 help us to achieve that. 9 Also it would help us to do some great things 10 in the area of succession planning, staff training and 11 manager training. Now we'd have staff that's able to 12 learn across all tax programs in a more efficient way. 13 It would allow us to balance our staff to the extent 14 that the statute allows those under those programs to -- 15 to learn and do a better job. 16 The second area is the concept of regionalized 17 office, and the BOE has been doing what it's been doing 18 for decades. Not to say that it's bad. In fact, it's 19 worked well. But I think there's new opportunities out 20 there. Now more than ever there's an opportunity to -- 21 time to take a look at those kind of things. 22 For example, field offices could be down-sized. 23 We could leave the front end operations where they 24 always are because they're situated where they are for 25 customer service, yet the auditor and collectors who are 26 also part of that office could be housed in different 27 areas, perhaps at lower cost, even perhaps more 28 specifically located where the center of audits and 9 1 collection activities are. 2 Also we can change the way we deliver services. 3 Clearly, one of the options would be to move towards, 4 again, electronic services in providing taxpayer access 5 to BOE. Let's say you go down and get a business 6 license at a city; we could clearly have a kiosk with 7 web streaming there and taxpayers could get on line with 8 us there. They could set up appointments. They could 9 have one-on-one interaction. 10 Skype, if you've used it, it's kind of a new 11 experience for me, but it really does allow limited to 12 no cost the ability to communicate face to face yet at 13 remote locations. 14 I think there's opportunities there. There's 15 really a chance to kind of be a leader of an 16 organization in this area and our goal would be to test 17 that in the future. 18 One other area I'd like to talk about briefly 19 would be the -- the time line for such a process. 20 Clearly, this would not happen overnight. Clearly one 21 of the things we need to consider is the way we have our 22 properties leased, and the Board's vision of where you 23 see us being, as well, out in five, six, seven -- eight 24 years out. 25 I'd say this is a phased-in approach. By that 26 I mean Special Taxes clearly is the first area, and Mr. 27 Gau will be up here briefly to talk about that more 28 specifically. But here's a chance to kind of pilot -- 10 1 pilot this. Let's see what it does. Let's see what we 2 learn. 3 There will be efficiencies, yet there's some 4 accountability issues we need to talk about. And 5 treating this as a pilot program if the Board approves, 6 would allow us to not only look at that but look at the 7 organization as a whole. 8 And as we learn from that process we, as an 9 executive team and you, as the Board, and our 10 stakeholders have a better opportunity to -- to take a 11 look to how do we want to be looking in the next 10 to 12 15 to 20 years out. It's a tremendous opportunity for 13 us. 14 So, having said that, I'd be happy to answer 15 any questions. I see the first step really is Mr. Gau's 16 presentation and we'll be learning from that activity. 17 So if you have -- 18 MS. YEE: Thank you, Mr. Hirsig. 19 MR. HIRSIG: -- any questions -- okay. 20 MS. YEE: Any questions at this point, Members? 21 Okay. Why don't we hear from Gau. 22 Good morning. 23 ---oOo--- 24 25 26 27 28 11 1 REPORTER'S CERTIFICATE. 2 3 State of California ) 4 ) ss 5 County of Sacramento ) 6 7 I, BEVERLY D. TOMS, 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 11 13 pages constitute a complete and accurate transcription 14 of the shorthand writing. 15 16 Dated: March 10, 2010. 17 18 19 20 ____________________________ 21 BEVERLY D. TOMS 22 Hearing Reporter 23 24 25 26 27 28 12