Major Accomplishments of State Controller Gray Davis
Government Efficiency and Performance
Through constant vigilance, an aggressive audit policy and stringent
budgetary controls, the Office of State Controller under Gray Davis has
saved California taxpayers more than half a billion dollars over the past
seven and a half years. About half of this savings came from rejection
of improper claims submitted by State agencies and officials. The
remainder represents funds recovered from program administrators,
contractors and vendors due to improper expenditures or financial abuses
in State-funded programs.
In February of this year, Davis and State Assemblywoman Valerie Brown
announced the introduction of legislation to create a State Government
Performance and Review Act, which would require an annual, top-to-bottom
performance review of all State government departments and agencies. The
audit proposal is modeled after the National Performance Review
undertaken last year by Vice President Al Gore and a similar government
performance review in Texas in 1992. The Texas study found nearly $5
billion in potential savings and the review process has been
institutionalized. Eighteen other states are also experimenting with
various forms of performance reviews.
In October 1993, a Controller's Office audit of the State-owned Asilomar
Conference Center in Pacific Grove revealed that employees were skimming
money from the operations. Davis characterized the management and
record-keeping situation at the center as a "nightmare" and referred the
matter to the Monterey County District Attorney. In describing the
problems at the center, the San Francisco Chronicle editorialized:
"Controller Davis is right: the state must exhaust every remedy to
restore integrity to Asilomar."
Under Gray Davis's leadership, the State Controller's Office shut down a
major scam by suppliers of Medi-Cal durable medical equipment (DME).
When an aggressive large-scale audit revealed dozens of bogus suppliers
who were submitting false claims to the State, the Controller's Office
referred 24 of them to the Attorney General for possible criminal
prosecution. To date, there have been seven convictions, two dismissals
and 10 cases pending final resolution. Since the Controller's actions,
total monthly claims by DME suppliers have dropped from a high of $26
million to around $8 million per month.
A Controller's Office audit of the State's beverage container recycling
program found that the program was poorly managed, with redemption money
being improperly paid to recyclers accepting non-redeemable containers.
As a result, major administrative changes were made in the program by the
Department of Conservation, including tighter fiscal controls and changes
in the law to prevent fraudulent redemption claims. These changes have
resulted in an estimated savings of $10 million annually for the State
In a 1992 audit conducted for the California Public Employees' Retirement
System (CalPERS), the Controller's Office exposed widespread use of a
costly practice called "pension spiking." This is a maneuver by which
employee pensions are purposely inflated by last-minute salary increases
or by adding the value of fringe benefits to the basic pay. Davis called
this practice "legal larceny," and pointed out that it ripped off
taxpayers and shorted pension funds available for the retirement of
honest employees. As a result, CalPERS has adopted a more aggressive
approach toward identifying and eliminating such abuses, and has
established an audit unit to crack down on inaccurate and/or fraudulent
reporting of pension-qualifying compensation.
And based on Davis's findings, the Legislature has since outlawed the
To improve efficiency and effectiveness, Controller Davis has brought new
technology to bear on the operations of State government. The department
that verifies State agencies' claims submitted for payment was
computerized on July 1, 1993, enabling the Controller's Office to
eliminate duplicate claims submissions and detect other claim
irregularities more quickly and efficiently. Also, in October of last
year the Controller's Office brought on line a centralized computer
system for tracking vacation time, sick leave and other absences for all
200,000 State employees. The new system will save an estimated $3.5
million in personnel time each year.
Budget Responsibility and Reform
Controller Davis has consistently supported continuing State payments to
vendors, State workers, Medi-Cal providers, local governments and
State-funded programs during State budget delays, so that those who
depend on State payments do not suffer financial hardship because of
political games in Sacramento. In 1990, Davis went to court three times
to ensure the continuation of such payments.
When a State budget was not passed for a month after it was due in 1990,
Controller Davis refused to issue paychecks to legislators and State
constitutional officers -- including himself -- until the budget was
enacted. "Every day that passes in Sacramento sets a new record for
fiscal irresponsibility," Davis said in announcing his decision.
In the spring of 1992, with the State facing a cash shortage and the
likely prospect of a lengthy budget delay, Davis proposes a responsible
borrowing plan to avoid the spectre State once again not being able to
pay its bills. Governor Wilson rejected the Controller's plan, thereby
forcing the State to issue IOUs (registered warrants) for the first time
since the Depression.
Davis also refused to pay legislators and State elected officials during
1992's even longer 63-day budget stalemate, arguing that if vendors and
others who receive payments from the State were not being paid, it would
be inappropriate to pay elected officials.
Following the 1992 budget fiasco, Davis sponsored legislation to pay
interest penalties to vendors and others who are denied payment by the
State and suffered hardship during the two-month budget deadlock.
To avoid the national embarrassment and serious financial consequences of
issuing IOUs again to pay the State's bills, Gray Davis in 1993 developed
a cash management plan -- accepted by Governor Wilson -- that protected
the State from having to issue IOUs last year. Under Davis's strategy,
the State could have paid its bills without IOUs even if the budget had
not been passed until December. This plan sent the message to Wall
Street that California was managing its finances in a responsible way,
thus helping protect the State's bond rating.
During the recently completed 1994-95 State budget deliberations, Gray
Davis was praised by former Republican State Sen. Ed Davis for his
"excellent performance in ensuring that honesty and reality prevailed" in
At the 1993 State Economic Summit in Los Angeles, the Controller unveiled
a seven-point economic revitalization plan for California. The blueprint
included an innovative idea to require written contracts guaranteeing new
jobs in exchange for tax breaks to businesses. Later last year, the
public-private contract proposal was included in the Democratic
leadership's package of legislation aimed at stimulating the State's economy.
As a member of the CalPERS Board of Directors, Gray Davis spearheaded an
innovative, first-in-the-nation program to invest State employee pension
funds in building affordable housing -- some smaller units sell for as
low as $80,000 -- for first-time homebuyers. Begun in 1992, this effort
has put more than 8,000 construction workers back to work, will
ultimately build 5,000 new homes in 42 different projects throughout
California -- and is returning an unprecedented 20% back to the pension fund.
Gray Davis also initiated the "Claim What's Yours" computerized outreach
program to help return more than $1 billion in unclaimed property
belonging to approximately 2.4 million Californians. The outreach
program included computerization of unclaimed property records and
installation of a toll-free telephone line for public inquiries. Since
1987, more than $260 million in unclaimed funds has been returned to
300,000 individuals and organizations. The largest payout under the
program so far was in 1993, when an American Legion post fell heir to
more than $1 million left by a drifter who lived in Long Beach and died
Collection of Unpaid Debts
In December 1993, Controller Davis announced a pilot program to use the
tax-collection powers of the State's Franchise Tax Board, which he
chairs, to crack down on "deadbeat" parents who are delinquent in child
support. Covering only six counties -- Fresno, Nevada, Santa Clara,
Solano and Ventura -- the program has returned $25 million in child
support to 17,000 families in just one year. The program has been so
successful that the Legislature voted to expand it statewide in 1995.
Gray Davis is sponsoring legislation to allow California cities and
counties to use the monitoring and collection powers of the FTB to
collect unpaid obligations such as court fines and civil judgments,
parking tickets, library fines and bad checks written for fees and
licenses. An estimated $4.3 billion in such debts is owed to counties
and cities throughout California. A centralized debt collection system
-- currently utilized by eight other states, while three more are in the
process of implementing such programs -- would increase revenues without
increasing taxes by reducing unnecessary duplication, excessive private
collection costs and inefficiences of scale. The service would be
entirely voluntary and would be provided to counties and cities virtually
free of charge; the only cost would be for new computer hardware and
software if needed.
During the 1990-91 fiscal year, Controller Davis joined the
Superintendant of Public Instruction to challenge then-Gov. George
Deukmejian's attempt to reduce State funding to public education. Davis
continued to pay the full Proposition 98 funding amount to public schools
in defiance of the Governor's veto of a portion of the Prop 98 funds
approved by the Legislature.
In 1993, Controller Davis announced that the California State Lottery had
shorted education funding by $10 million. He took steps to fix the
problem and to ensure that in the future, education would get all the
money to which it is entitled.
In the spring of 1993, the Controller stood with teachers and school
board members from the Los Angeles Unified School District to deliver $35
million in unclaimed State desegregation funds for which the district was
eligible. The Controller's action helped the district head off a looming
fiscal crisis and avert a threatened teachers' strike in the State's
biggest school district.
A Controller's Office audit in 1989 revealed that the California State
Lottery was improperly returning unclaimed prize money back into prizes
instead of giving the unclaimed prizes to the State's schools. This
resulted in an additional $20 million per year for public education.
Subsequent to the Controller's disclosure, a law was passed making it
absolutely clear that unclaimed Lottery prize money must go to public
In a related development, in June 1993 the Controller ordered all
interest earnings from Lottery sales be transferred directly to public
education instead of being used for Lottery administrative costs, as had
sometimes been done in the past. This action resulted in an additional
$10-20 million annually for the State's schools.
In 1991, Gray Davis went all the way to the California Supreme Court and
beat Gov. Pete Wilson in order to keep the struggling Richmond Unified
School District open.
In 1993, Controller Davis was the first major State elected official to
publicly oppose Proposition 174, the so-called school voucher initiative,
and played a leading role in its overwhelming defeat. Davis was featured
in an anti-174 TV commercial that aired statewide for the last three
weeks of the campaign.
Conservation and the Environment
As a member of the State Lands Commission, the Controller has
consistently fought to protect California's coastline from the
devastating impact of oil spills. In 1987, he persuaded the Commission
to reject a major oil drilling plan by ARCO off the coast of Santa
Barbara. ARCO has since returned its oil leases in that area to the State.
In 1988 the Controller settled a State dispute with Bank of America that
resulted in the nation's first debt-for-nature swap. Under the
agreement, $36 million was recovered for former customers of the bank and
41,000 acres of environmentally sensitive land valued at $17 million was
transferred to the State. This resulted in creation of the Dye Creek
Nature Preserve in Tehama County and a State demonstration forest in
Santa Cruz County.
In 1988 Controller Davis also negotiated a settlement of an inheritance
tax dispute between the State and the estate of Howard Hughes that
resulted in the transfer to the State of 60 acres of wetlands for the
Ballona Wetlands restoration project in Los Angeles.
In January of 1993, Davis joined environmentalists and the city of
Needles in a lawsuit blocking the Bush Administration's last-minute
transfer of federal land for a nuclear waste dump in the Mojave Desert.
Davis has been a leading opponent of the Ward Valley nuclear dump. Since
President Clinton took office, Davis has been working closely with
Interior Secretary Bruce Babbitt to make sure questions about financial
liability and the environment are answered before the dump site is licensed.
In January 1993, a new State law too effect making it a crime to block
access to women's health clinics in California. The bill was sponsored
by Gray Davis in response to clinic blockades and harassment by Operation
Rescue zealots and was carried by Oakland Assemblywoman Barbara Lee. The
State law was the model for federal clinic-access legislation recently
passed by Congress and signed into law by President Clinton.
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