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Chiang urges CalSTRS to divest from gun maker

California Treasurer John Chiang is concerned that the state’s teachers’ pension system still has investments managed by a firm that hasn’t kept its promise to sell off its firearm-manufacturing holdings.

This all started with the December, 2012 schoolhouse massacre in Newtown, Conn., in which a Bushmaster AR-15-type semi-automatic rifle – which fit California’s definition of an assault weapon – was used to kill 20 children and six adults. Bushmaster – along with Remington, Marlin and several other firearm brands – belongs to the Freedom Group, which in turn is owned by Cerberus Capital Management.

Bushmaster XM15

Soon after the Newtown shooting, the California State Teachers’ Retirement System (CalSTRS) issued a statement expressing concern that Cerberus – which manages some private equity funds in which CalSTRS is invested – owned Freedom Group. But Cerberus had just announced that it intended to sell Freedom Group, so CalSTRS was satisfied.

Yet Cerberus still owns Freedom Group today.

“Two years ago, I was proud to support the effort of CalSTRS to divest from assault weapon manufacturers,” Chiang wrote this week CalSTRS investment committee chairwoman Sharon Hendricks. “I am frustrated that two years have passed and the Freedom Group remains in their portfolio, indirectly financed by the pension contributions of California teachers.”

Chiang acknowledged the pension fund is obliged to find sound investments, but “it must consider how those investments may be used to finance business interests that run counter to the beliefs of CalSTRS and its members.”

“We rightly determined that there is significant risk in investing in the Freedom Group, a business that manufactures weapons that are susceptible to sanctions, regulations, and actions that could be detrimental to the fund,” he wrote, urging the CalSTRS board to do whatever is necessary to fully divest from the Freedom Group.

Chiang also asked that Cerberus’ leadership attend the CalSTRS board meeting this Friday “to explain why the Freedom Group remains in its portfolio despite agreeing to remove it more than two years ago. It is vital that Cerberus understand the strong desire of CalSTRS, its Board, and teachers in California, that none of its funds be used to fund the manufacturing of weapons used to commit such terrible atrocities.”

Posted on Wednesday, April 1st, 2015
Under: gun control, John Chiang | 5 Comments »

State oversight avalanche bears down on ABAG

State officials are rushing to put new oversights in place following the embezzlement of almost $1.3 million by an Association of Bay Area Governments official from a bond-funded San Francisco development account.

State Treasurer John Chiang on Thursday announced a partnership with Senate President Pro Tem Kevin de León, D-Los Angeles, to conduct legislative oversight hearings to make sure money raised through government bond sales is safe from fraud, abuse, and mismanagement. Chiang also said he has created a special task force to develop best-practices guidelines on the care of bond proceeds that will be issued to all state and local governments.

California and its local governments over the past decade have issued more than $700 billion in public debt, Chiang noted in a news release.

“We rely on these borrowed moneys to build and maintain the critical infrastructure upon which our communities and economy depend – from schools and roads to levees and libraries,” Chiang said. “The ease in which one of ABAG’s leaders allegedly fleeced more than a million dollars in bond funds raises concerns regarding whether there are sufficient safeguards at the thousands of State and local agencies which are responsible for nearly three-quarters of a trillion bond dollars.”

And state Controller Betty Yee announced Thursday her staff will audit ABAG’s internal administrative and accounting controls.

“As California’s chief fiscal officer, I am charged with protecting state resources,” Yee said. “When public money goes missing, I need to determine how it happened and whether effective controls are in place.”

Yee’s audit will initially focus on FY 2012-13 and 2013-2014, but that might expand if investigators discover accounting weaknesses that may have affected earlier years. The Controller’s Office sent a letter today to ABAG asking that the association make available documents that will be used in the audit including ledgers, contracts, invoices, personnel records, meeting minutes, policies and procedures. The audit work will begin Feb. 20 and is expected to take a few weeks.

More, after the jump…
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Posted on Thursday, February 12th, 2015
Under: California State Senate, John Chiang, Kevin de Leon | 4 Comments »

California’s budget finished 2013-14 in the black

California finished its fiscal year in the black for the first time since 2007, state Controller John Chiang confirmed Thursday.

California in the blackThat means the state had funds available to meet all of its payment obligations without needing to borrow from Wall Street or from the $23.8 billion available in its more than 700 internal special funds and accounts.

“While this is welcome news after seven years of record-high borrowing just to pay our everyday bills, we still have much work to do,” Chiang said in a news release. “We should remain laser-focused on paying down the Wall of Debt, reversing the many accounting gimmicks to which we’ve become addicted and keeping the State as liquid as possible to avoid experiencing the payment delays and IOUs that plagued our State during the Great Recession.”

The economy inevitably will decline again sooner or later, he noted. “We should be vigilant about preparing for that day while we celebrate the great progress we’ve made to date.”

Chiang’s report found the General Fund had $1.9 billion in cash on June 30, marking the first time it has ended the fiscal year in the black since 2007, when it ended the year with $2.5 billion in the bank.

For the 2013-14 fiscal year, revenues came in at $101.6 billion, or $2.1 billion (2.1 percent) more than projected in the Governor’s budget released in January. Personal income taxes totaled $66.2 billion, coming in $1.7 billion above the January estimates (2.6 percent). Corporate taxes totaled $8.5 billion, which was $725 million more than expected (9.3 percent). Retail sales and use taxes came in at $22.2 billion, or $415 million under (1.8 percent) the estimates.

Revenues for June alone totaled $14.8 billion, beating estimates in the 2014-15 Governor’s Budget by $304 million (2.1 percent). Income tax collections for the month of June came in $635 million (7.4 percent) above estimates. Corporate taxes topped estimates by $289 million (13.2 percent). Sales taxes came in short of estimates by $265.8 million (11.6 percent).

Posted on Thursday, July 10th, 2014
Under: John Chiang, state budget | 2 Comments »

Court: Chiang shouldn’t have held lawmakers’ pay

State Controller John Chiang overstepped his legal authority in 2011 by deciding to dock lawmakers’ paychecks because he deemed the budget they had passed to be unbalanced, a state appellate court ruled Friday.

“(W)here the Legislature is the entity acting indisputably within its fundamental constitutional jurisdiction to enact what it designates as a balanced budget, the Controller does not have audit authority to determine whether the budget bill is in fact balanced,” Court of Appeal Associate Justice M. Kathleen Butz wrote; associate justices Cole Blease and William Murray Jr. concurred in this affirmation of a lower court’s 2012 decision.

Proposition 25 of 2010, approved by 55 percent of voters, lets the Legislature approve budges on a simple-majority vote, but it also says lawmakers must forfeit their pay and per diems for each day the state is past its constitutional deadline without a budget.

Chiang announced in June 2011 that his office’s review of the budget, which had been passed on the day it was due, “found components that were miscalculated, miscounted or unfinished. The numbers simply did not add up, and the Legislature will forfeit their pay until a balanced budget is sent to the governor.” He ended up withholding about $583,000 from the lawmakers.

Assembly Speaker John Perez, D-Los Angeles, and state Senate President Pro Tem Darrell Steinberg, D-Sacramento, sued on principle, without seeking recovery of that back pay.

Posted on Friday, January 24th, 2014
Under: Assembly, California State Senate, Darrell Steinberg, John Chiang, John Perez, state budget | 2 Comments »

John Chiang: California’s books still look good

California took in $15.03 billion in revenue in April – $119.9 million short of estimates, but still leaving the Golden State in relatively solid financial condition, state Controller John Chiang reported today.

Total revenues for the first 10 months of the fiscal year exceeded Gov. Jerry Brown’s January projections by $4.6 billion (6.1 percent), due largely to $4.4 billion (8.5 percent) in better-than-expected personal income tax revenue.

“We’ve reached an important milestone in California’s economic recovery. For the first time in nearly six years, we closed out a month without borrowing from internal state funds to pay our bills,” Chiang said in a news release. “But, there remains significant debt that must be shed before we can claim victory and these unanticipated revenues provide us with an important opportunity to take further steps toward long-term fiscal stability.”

Chiang said California had to borrow at unprecedented levels over the past six years from its own internal special funds and from Wall Street to meet its payment obligations; the state also withheld some payments and used IOUs for only the second time since the Great Depression. June 2007 was the last time the State was able to pay its bills without leveraging its internal funds.

California ended the last fiscal year with a $9.6 billion cash deficit, but April 30, that deficit narrowed to $5.8 billion, Chiang said. The gap is being covered by $10 billion in external borrowing, which the state will start repaying later this month.

Personal income taxes for April came in $275 million (2.2 percent) below monthly estimates outlined in the governor’s budget, due mostly to fewer returns filed and more refunds paid out than expected in the month of April. But corporate taxes for April were $6.6 million (0.5 percent) above monthly estimates and sales tax receipts were $113.4 million (26.6 percent) above estimates.

Posted on Wednesday, May 8th, 2013
Under: Jerry Brown, John Chiang, state budget | 3 Comments »

Honda’s endorsers & Khanna’s ‘digital advocates’

The battle for the 17th Congressional District continues as Rep. Mike Honda, D-San Jose, rolls out a new batch of endorsements and Democratic challenger Ro Khanna fires up his digital grassroots.

honda.jpgHonda on Tuesday announced the endorsements of state Senate President pro Tempore Darrell Steinberg, Assembly Speaker John Perez, Superintendent of Public Instruction Tom Torlakson, Controller John Chiang, Insurance Commissioner Dave Jones, Treasurer Bill Lockyer, Board of Equalization member Betty Yee, and 14 current and former state lawmakers. He’d previously announced he has Attorney General Kamala Harris’ endorsement, while Khanna last month announced he has Lt. Gov. Gavin Newsom’s nod.

Perez said Honda “has been a thoughtful and effective leader, with a distinguished track record of bringing both parties together to find solutions for the very difficult challenges facing our country. Our state is lucky to have such a phenomenal representative fighting for us in Congress, and I am proud to support him for reelection.”

And Torlakson said Honda “is working to improve science, technology, engineering and math (STEM) education in our classrooms, which will provide our children with a 21st century education and keep our country a leader in the global economy. I am proud to support Mike’s campaign for Congress and look forward to continue working with him to ensure that each and every child has the opportunity to get a quality education.”

Honda said he’s grateful for the state officials’ support: “We will continue working together for quality jobs, good schools, and a bright future for California’s families.”

Ro KhannaMeanwhile, Khanna is continuing his effort to “bridge the gap of digital and traditional involvement” by inviting people to become “digital advocates” to spread word of his campaign throughout Silicon Valley. The campaign’s first digital training for volunteers is scheduled for 7 to 9 p.m. tonight, Tuesday, May 7, at 43255 Mission Blvd. in Fremont; more trainings will be held in the coming months.

And Khanna will hold a meet-and-greet to answer district residents’ questions at noon this Friday, May 10, at 3333 Bowers Ave., Suite 130 in Santa Clara.

Posted on Tuesday, May 7th, 2013
Under: 2014 primary, Assembly, California State Senate, Darrell Steinberg, Gavin Newsom, John Chiang, John Perez, Kamala Harris, Mike Honda, Tom Torlakson, U.S. House | 13 Comments »

$14 mil in state tax refunds returned, unclaimed

California’s Franchise Tax Board announced this morning that it’s holding more than $14 million in returned state income tax refunds, mostly for taxpayers who moved and didn’t update their addresses.

“I want to make sure all taxpayers receive their refunds and as quickly as possible,” state Controller John Chiang, who chairs the FTB, said in a news release. “This is an easy way update your contact information and get the refund before the holiday season.”

Nearly 48,000 refunds, ranging from $1 to $35,000, were returned this year by the U.S. Postal Service. Here’s the breakdown for some Bay Area counties:

    Alameda – 1,382 returns worth $442,000
    Contra Costa – 730 returns worth $254,000
    Santa Clara – 1,681 returns worth $590,000
    San Mateo – 507 returns worth $159,000
    Santa Cruz – 341 returns worth $63,000
    San Francisco – 918 returns worth $497,000

If you suspect some of this money might belong do you, update your address on the FTB’s website; the board will re-issue returned refunds automatically once a new address is received.

Anyone expecting a refund or unsure if they received one can check their status online as well. As of November 29, the board had issued more than 10 million refunds worth nearly $10 billion.

Posted on Monday, December 3rd, 2012
Under: John Chiang, taxes | No Comments »

What they’re saying about the budget forecast

The Legislative Analyst’s Office today issued a fiscal forecast showing California’s state budget deficit for the fiscal year starting next July 1 will be almost $13 billion.

If the state Finance Department concurs next month, this could mean $2 billion in mid-year “trigger cuts” this year, mostly in the K-12 and higher education budgets.

From Gil Duran, spokesman for Gov. Jerry Brown:

“California’s budget gap is the result of a decade of poor fiscal choices and a global recession. This year, we cut the problem in half. Next year, we’ll continue to make the tough choices necessary until the problem is solved.”

From Assembly Speaker John Perez, D-Los Angeles:

“Today’s announcement by the LAO is indicative, but not determinative of the final decision on whether the budget triggers will be pulled next month and we must wait until the Department of Finance December forecast, which will have up to date information and certainly may alter the trigger calculation to lessen the level of trigger cuts.

“Given the uncertainty in the global economy, we included these triggers as a mechanism to ensure California’s fiscal solvency through this budget year. We approved budget solutions that eliminated seventy five percent of the ongoing structural deficit over time, and we have more work to do to accelerate the elimination of the remainder of that deficit.

“Ultimately, we all know that the best long-term solutions to our budget challenges are rebuilding our economy and putting Californians back to work, and we will continue working to build on the progress we’ve made with respect to job creation in the coming year.”

From state Senate Majority Leader Ellen Corbett, D-San Leandro:

“I am deeply troubled by this forecast and the prospect of making another round of deep cuts to public schools and higher education. The Legislature and governor should explore all of our available options, and do everything we can, to prevent mid-year cuts.

“The bottom line is our public schools and institutions of higher education are woefully underfunded, and we must find a way to reverse this trend of cutting their support if we are serious about providing Californians and their children with a bright future.”

From Assembly Budget Committee Vice Chairman Jim Nielsen, R-Gerber:

“The Legislative Analyst’s Office report indicates, as predicted, that the budget passed by Democrats with only a majority vote was overly optimistic and based on shaky assumptions. In this budget, state spending is predicted to increase by 12 percent by 2012-2013. It is clear that state spending has not been brought under control, and that’s not even factoring in the enormous cost of the federal healthcare mandates.

“It indicates that a lot more needs to be done to get California’s budget under control, and that does not happen through tax increases. Government has changed very little in how it conducts its business in the last three years.”

From state Controller John Chiang:

“Today’s news is no surprise. Our economy’s sluggish growth means a tax windfall is unlikely, and not a penny of the estimated $4 billion has been collected to date. The Governor and lawmakers were smart to backstop their hopeful budget projections with mid-year cuts, but they may not have gone far enough. Today’s report tracks with the troublesome pattern we have seen in the State’s receipts and spending, which could mean a cash-flow problem in California’s near future.”

From state Senate President Pro Tem Darrell Steinberg, D-Sacramento:

“Today’s numbers make it clear that the state’s first priority must be to get to the ballot in November and raise needed revenues to avoid any more damage to Californians. The notion of cutting deeper into education, public safety and services for those in need is unthinkable. I imagine an overwhelming majority of Californians agree.

“We’ve cut to the point that the results are being felt like never before. The cupboard of easy solutions is bare. Just ask the students in our higher education systems; the more than one million elderly, blind, or disabled living in poverty; the families who see their kids go to school where the classrooms are more crowded and the resources are dwindling. We’ve hit a crossroads where the time has come to turn things around.

“Democrats have tackled more than half of the reoccurring deficit problem we’ve been plagued with ever since Governor Schwarzenegger cut the Vehicle Licensing Fee. As the LAO points out, last year’s budget actions have put our ongoing deficits at the lowest we’ve seen since the recession began. By building on that foundation, new revenue will finally allow the state to recover and reinvest.”

Read more, after the jump…
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Posted on Wednesday, November 16th, 2011
Under: Assembly, Bob Dutton, California State Senate, Darrell Steinberg, Ellen Corbett, Jerry Brown, John Chiang, John Perez, Mark Leno, state budget | 2 Comments »

Audit finds lousy bookkeeping in Calif. prisons

Lousy internal control policies in California’s prison system puts millions of taxpayers’ dollars at risk of fraud and abuse, according to an audit released today by state Controller John Chiang.

“My auditors found the CDCR has grossly inadequate procedures in place for collecting overpayment of salaries and travel advances made through the agency’s office revolving fund,” Chiang said in a news release. “This is the latest in a series of agency audits conducted by my staff that point to the waste and abuse of state funds due to the lack of attention to collecting overpayments. Gov. Brown and I are working together to identify the causes of these problems and to protect public funds.”

The audit comes amid increasing inclination on both sides of the political aisle to find fiscal savings in the prison system, which accounts for 11.4 percent of the state’s general-fund spending in the current budget; in comparison, about 11.9 percent of general-fund spending goes to higher education.

Chang’s auditors reviewed California Department of Corrections and Rehabilitation records from July 1, 2009 through July, 31, 2010, and found that inadequate collection efforts resulted in delays in collecting millions of dollars in overpayments for employee salary and travel advances. Of more than $6 million in outstanding receivables related to salary and travel advances, more than $4 million, or 65.6 percent, remained outstanding for more than 60 days, and $465,000, or 7.5%, had been outstanding for more than three years.

For example, an employee terminated in May 2010 got a lump-sum check for $14,950 from the office’s revolving fund to meet the timeline for paying employees separating from state service, auditors found. But CDCR didn’t take the steps necessary to offset the employee’s final check, resulting in the former employee receiving both a salary advance and a full, final check. And six months later, there had been no effort to recoup the $14,950 overpayment.

In another case, an employee got a salary advance of more than $8,000 in January 2008, plus a regular payroll check; as of Nov. 1, 2010, almost three years later, the advance still hadn’t been collected, even though the employee still works for CDCR.

The audit also found serious internal control deficiencies put CDCR at risk for fraud and abuse. For example, CDCR was tardy or noncompliant in trying to “reconcile bank accounts to ensure the accuracy and completeness of recorded transactions,” the controller’s office said – what you and I would call balancing our checkbooks. As of June 30, 2010, the bank reconciliation of CDCR’s major account showed $27 million in unresolved funds on their bank balance, while CDCR’s records showed unresolved funds totaling more than $31 million on their book balance. Without reconciling these funds, anyone with access to the fund’s check stock could issue bogus checks with little chance of getting caught.

Also, state accounting procedures require two authorized signatures for payments of more than $15,000, yet the audit found two separate checks exceeding that amount without dual signatures.

And the audit found CDCR used its revolving fund to spend more than the department’s appropriation under the state budget. That those payments appeared to be for legitimate purposes isn’t the issue, the audit said: CDCR has no legal authority to make such payments without an appropriation from the Legislature. As of last Nov. 30, CDCR still hadn’t received reimbursement for more than $3.5 million in payments made from its revolving fund prior to June 30, 2010.

Martin Hoshino, CDCR Undersecretary for Administration and Offender Services, said the agency agrees with the findings and already has implemented 22 of the 36 recommendations made by Chiang’s office. In his formal response, Hoshino said CDCR has now “prioritized the vigorous collection of outstanding debts,” succeeding in decreasing the outstanding balance by $2.2 million since November 1, 2010. “We will continue in our efforts until we have surmounted the issues identified in this audit.”

Chiang’s auditors will revisit CDCR a year from now to gauge its progress in correcting the problems.

UPDATE @ 3:16 P.M.: “The situation here is terrible, but the great thing is that we have acknowledgement and action – it’s a new day in Sacramento,” Chiang told me this afternoon, noting Brown issued an executive order April 20 addressing some of the issues this audit found. “We think they’re making the efforts to do so. We’re going to go back a year from now and make sure they’re implementing as promised.”

Chiang said amid the state’s fiscal crisis, administrators must find every opportunity large and small to conserve money.

He blamed the sloppiness on “a lack of focus. What we’ve heard in prior instances is that it (proper bookkeeping) is not their core function, but they have to understand they’re not going to be able to perform those core functions unless they have financial controls.”

Posted on Wednesday, July 20th, 2011
Under: John Chiang, state budget, State Prisons | 1 Comment »

Controller smacks down state prisons

The state prison system lacks financial internal controls and puts millions of dollars at risk for fraud and abuse, reported California Controller John Chiang in a new audit of the California Department of Corrections and Rehabilitation.

Read on for Chiang’s news release:

Controller Review Finds Poor Financial Controls at CDCR

SACRAMENTO – In an audit released today, State Controller John Chiang found a lack of internal control policies and procedures at the California Department of Corrections and Rehabilitation (CDCR), putting millions of public dollars at risk of fraud and misappropriation.

“My auditors found the CDCR has grossly inadequate procedures in place for collecting overpayment of salaries and travel advances made through the agency’s office revolving fund,” Chiang said. “This is the latest in a series of agency audits conducted by my staff that point to the waste and abuse of state funds due to the lack of attention to collecting overpayments. Gov. Brown and I are working together to identify the causes of these problems and to protect public funds.”

The CDCR review looked at records from July 1, 2009, through July 31, 2010. The audit found inadequate collection efforts resulted in delays in collecting millions of dollars in overpayments for employee salary and travel advances. Of the more than $6 million in outstanding receivables related to salary and travel advances, more than $4 million, or 65.6%, were outstanding for longer than 60 days, and $465,000, or 7.5%, had been outstanding for more than three years.

One employee who was terminated in May 2010 received a lump sum check for $14,950 from the office’s revolving fund to meet the timeline for paying employees separating from state service. But the CDCR did not take the steps necessary to offset the employee’s final check, resulting in the former employee receiving both a salary advance and a full, final check. Six months later, there still was no effort to recoup the overpayment of $14,950.

In another case, an employee received a salary advance of more than $8,000 in January 2008, plus a regular payroll check. As of November 1, 2010, almost three years later, the advance still had not been collected, even though the employee still works for CDCR.

The audit also found that serious internal control deficiencies put the agency at risk for fraud and abuse. CDCR was tardy or noncompliant in attempting to reconcile bank accounts to ensure the accuracy and completeness of recorded transactions. As of June 30, 2010, the bank reconciliation of CDCR’s major account showed $27 million in unresolved funds on their bank balance, while CDCR’s records showed unresolved funds totaling more than $31 million on their book balance. Without reconciling these funds, anyone who has access to the fund’s check stock could fraudulently issue checks with little chance of being detected.

In addition, although state accounting procedures require two authorized signatures for payments of more than $15,000, the Controller’s review found two separate checks exceeding that amount without dual signatures.

In another finding, the audit determined that CDCR used its revolving fund to spend more than the department’s appropriation under the State Budget. While the majority of those payments appeared to be for legitimate purposes, the department has no legal authority to make such payments without an appropriation from the State Legislature. As of November 30, 2010, CDCR still had not received reimbursement for more than $3.5 million in payments made from its revolving fund prior to June 30, 2010.

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Posted on Wednesday, July 20th, 2011
Under: John Chiang | 1 Comment »