Brown administration pledges to keep closer eye on special funds

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Gov. Jerry Brown’s finance director spent nearly two hours Thursday assuring jittery lawmakers that the administration has the state budget under control in the wake of revelations about hidden money and loose accounting.

‘The public’s faith in our state budget has been shaken,’ said Assembly Budget Chairman Bob Blumenfield (D-Woodland Hills), adding that administration officials and the controller’s office ‘failed to perform basic accounting functions’ to prevent a ‘shameful situation.’

The Thursday hearing was called after officials discovered a hidden $54-million surplus at the parks department last month. A subsequent review by Brown’s Department of Finance found more accounting discrepancies, including errors that left $232.6 million in funds unreported.

Jason Sisney, a deputy at the Legislative Analyst’s Office, told lawmakers that ‘sloppiness and confusion’ led to many of the problems.

The finance director, Ana Matosantos, said the situation revealed a ‘flaw in our system’ for monitoring more than 500 special funds, which are created to support specific programs and are financed with taxes and fees. They’re an obscure yet critical part of the state’s finances, accounting for almost 28% of the total $142.4-billion budget. The administration, which plans the budget, and the controller’s office, which monitors cash flow, have pledged to scrutinize special funds more carefully. Matosantos has said no other agencies were hiding money like the parks department.

She also said some of the errors revealed by the administration’s review had already been corrected during this year’s budget negotiations. For example, officials delayed shifting some money into a recycling fund when they discovered it has $113 million more than previously thought

Besides the money at the parks department, which may have prevented a year of alarm bells over possible park closures, Matosantos has downplayed the impact any of the accounting errors had on this year’s budget. Sisney agreed, saying ‘it’s hard to see a way this information would have affected’ lawmakers’ decisions.

By the end of Thursday’s hearings, some lawmakers were willing to look on the bright side.

‘We’re suffering from a breach in trust,’ Blumenfield. ‘But I believe we can use this crisis as an opportunity.’

A Senate hearing is expected to be held next week. The state attorney general, administration officials and the state auditor are also conducting their own probes into the parks department.

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-- Chris Megerian in Sacramento
twitter.com/chrismegerian