Government Overhaul Misses Key Deadline

SACRAMENTO —  A sweeping overhaul of state government demanded by Gov. Arnold Schwarzenegger has missed a practical deadline for moving to the Legislature this session and probably will be delayed until 2005, officials said.

Investigators for the “California Performance Review” failed to meet an April 30 target for getting the plan examined by the Little Hoover Commission, an advisory watchdog over state government operations.

As a result, lawmakers say it is unlikely that the Legislature will consider all expected recommendations before it adjourns for the year Aug. 31. However, they might review portions of the plan before then, officials said.

The plan is said to recommend attacking Medi-Cal fraud, consolidating services such as legal work now spread across dozens of agencies and eliminating more than 100 commissions and boards.

In January, the new governor made it a top priority to “blow up” bureaucratic boxes and overhaul California’s vast and complex government -- with 321,000 workers throughout the state earning salaries totaling $17.4 billion, plus benefits.

In February, he appointed Billy Hamilton, a Texas management expert, and Chon Gutierrez, a trouble-shooter for California Republican governors, to lead a staff of 260 consultants and volunteer state employees in a search for ways to make the government more responsive and efficient at a reduced price.

Schwarzenegger set a June 30 deadline for a report, but officials believed they could get a head start if they proposed their recommendations to the Little Hoover Commission by April 30, the first step in getting the program before the Legislature in the hope that at least some parts could take effect this year.

Some lawmakers, including newly elected Senate Republican leader Dick Ackerman of Irvine, said they believed that the April 30 target was missed because the task was too massive to accomplish in only a few months.

“I think it ended up to be a much bigger job than anybody thought it would be,” Ackerman said this week. “If it takes some extra time to do it, so be it. We want to have a good product. The fact we are even doing this is a positive.”

Hamilton disagreed that the evaluators underestimated the task. He said the timing of the project was delayed by other issues, including reform of the workers’ compensation insurance system and the drive to eliminate the state’s $14-billion budget shortfall.

“I never took it as a cold deadline,” Hamilton said of the April date.

He viewed it as one “launch window” of several still available. For example, some money-saving elements could be included in a budget revision the governor is to present this week.

Hamilton said the group would meet the June 30 deadline set in Schwarzenegger’s executive order.

Senate President Pro Tem John L. Burton (D-San Francisco) had warned the administration that he would not object to a few specific reorganization bills but said he would oppose an omnibus proposal submitted on a take-it-or-leave-it basis.

The Legislature cannot amend the governor’s reorganization bill.

“I don’t think they know what they are doing,” Burton said recently of the evaluators. “I think they looked at the back cover of the state phone book and saw boxes and said, ‘Blow them up.’ ”

Officials suggested that the finished plan would propose an extensive merger of departments that serve similar functions, but it was unclear whether jobs would be eliminated.

“That decision will have to be made by the governor and the Legislature,” Gutierrez said.

Although officials were tight-lipped on what exactly the review had found so far, Hamilton said investigators did discover a “fairly high level” of fraud in health and welfare programs, such as Medi-Cal.

“This looks like it is going to be one of the best areas for improvement,” he said.

Hamilton said fraud had been committed by providers of healthcare in the Medi-Cal program -- a recurring issue -- and by recipients of services such as food stamps.

He said other states had encountered similar problems and devised solutions, including the purchase of new technologies. The review would recommend that California borrow some of those solutions, Hamilton said.

In a separate interview, Gutierrez, co-director of the evaluation and a veteran of more than 30 years in state service, disclosed that 326 salaried and uncompensated boards and commissions had been examined and “at least half” would be recommended for abolition. He declined to identify any.

In other cases, savings and efficiencies would occur under consolidations and mergers, he said.

“When you consolidate, you may not need as many supervisors,” he said. With the savings that would result, he said, the funds could be spent on other services or to reduce costs.

Sources have said that the review investigators would recommend creating a new state agency to oversee all government functions related to transportation, water and housing.

In the Health and Human Services Agency, the reporting headquarters for scores of departments, divisions and bureaus, consolidation probably would include not only functions relating to health programs such as Medi-Cal and nursing homes but also the licensing and regulation of healthcare professionals, they said.

Currently, physicians, dentists, nurses and other direct healthcare providers are licensed by the state Department of Consumer Affairs.

Schwarzenegger caused anxiety among state employees in January when his new budget called for adoption of a constitutional amendment that would expand the use of private companies to provide goods and services. He called enhanced outsourcing “one of the necessary tools for reform.”

But Gutierrez, who is also interim director of the Department of General Services, said the reorganization plan would include no outsourcing, “to the best of my knowledge.” He indicated, however, that a separate series of recommendations might include such a proposal.

Officials have been especially circumspect in estimates of how much money the reorganization might save. Recently, Hamilton estimated it would be a modest $150 million but said he believed “we can do a lot better than that.”