Bond Spending: Expanding and Enhancing Oversight

Report #197, June 2009
Bond Spending: Expanding and Enhancing Oversight

Full Report

Executive Summary

Press Release

FOR IMMEDIATE RELEASE
July 1, 2009

For Additional Information Contact:
Stuart Drown, Executive Director
(916) 445-2125

Commission Calls on State to Enhance Oversight of Public Investments

The Little Hoover Commission adopted recommendations on Wednesday, June 24, 2009, urging the governor and the Legislature to take steps to build a stronger state watchdog role given the recent explosion of bond-financed projects. In its report, Bond Spending: Expanding and Enhancing Oversight, the Commission recommends strengthening oversight of bond expenditures to improve Californians’ trust in how government spends taxpayer money.

“Californians have entrusted their government with tens of billions of dollars in bond capacity in just the past few years for long-overdue infrastructure investments,” Little Hoover Commission Chairman Dan Hancock said. “It is imperative that government build confidence that this money is being spent wisely.”

The Commission found that state agencies have taken steps to improve oversight of bond expenditures. Bond-administering entities have complied with a governor’s executive order to implement a three-part accountability process. The Department of Finance established a Web site, www.bondaccountability.ca.gov and bond-administering entities provide information so the public and policy-makers can monitor projects and spending. But more must be done.

The Legislature must play a more active role in monitoring bond expenditures to hold bond-administering agencies and departments accountable and to ensure public money is being spent wisely. The Legislature also should require audits from entities independent of the executive branch, either private audit firms or the State Controller’s Office or the Bureau of State Audits, that examine both the performance of the bond project as well as the dollar amount spent. The Web site provides a portal for required reporting functions for the bond-administering agencies, but could be improved by streamlining and standardization the data to ensure the public can quickly and easily find and compare information on how bond money is being spent.

The Commission identified existing models for allocating and providing accountability for bond money – such as the California Transportation Commission – that could be replicated in other investment areas. The natural resources arena, where bond money has been spent on less tangible projects such as habitat restoration and water quality improvement, could benefit from the transparency that comes with a public commission to set priorities and provide accountability.

The Commission found that in recent years, voters increasingly have turned to bond sales to finance important public projects, such as the $43 billion infrastructure bond package authorized in November 2006, but that voters might not wholly understand the consequences and tradeoffs of this sort of financing strategy. To ensure that voters are fully engaged and educated on the financial decisions increasingly placed before them, the Commission recommends that the state establish fundamental criteria for ballot measures that are evaluated and included in an easy-to-understand format in the voter information guide.

The Commission also looked at opportunities to improve local bond oversight committees, which oversee local bond spending for schools and community colleges. Local school bond money is frequently matched by state bond money. At their best, these oversight committees help local districts stretch limited public money and provide a check on the districts to make sure money is spent as voters intended. Unfortunately, not all local bond oversight committees achieve this goal, though with education and training and further clarification of the roles and requirements of these local committees, local bond oversight could be improved.

In Bond Spending: Expanding and Enhancing Oversight, the Commission recommends that the state:

  • Improve oversight to ensure bond money is spent efficiently and effectively and as voters intended. Both houses of the Legislature should establish bond oversight committees to ensure bond money is spent efficiently, effectively and as voters intended. The Legislature also should require independent audits that are systematic and transparent and cover the performance of the bond project as well as the dollar amount spent. To improve transparency, the governor should charge the Office of the State Chief Information Officer with streamlining and managing the bond accountability Web site.
     
  • Revive and reconstitute the California Water Commission as the California Natural Resources Commission and charge it with prioritizing and overseeing bondfunded programs currently managed within the California Resources Agency. The California Natural Resources Commission should develop an overarching plan for funding state natural resource programs, address cross-cutting issues, and allocate money authorized for natural resource-related projects and programs.
     
  • Establish fundamental criteria for ballot measures. To improve transparency and clarity for voters the state should include criteria on a simple and easy-to-understand report card in the voter information guide for all bond measures placed on the ballot.
     
  • Bolster the capabilities of local bond oversight committees. To improve local oversight of school and community college school facility construction projects, the state should require mandatory training for bond oversight committee members, require civic groups to nominate local committee members, delineate the roles and responsibilities of the local oversight committees and define the purpose and objectives of the annual financial and performance audits.
     

The Little Hoover Commission is a bipartisan and independent state agency charged with recommending ways to increase the efficiency and effectiveness of state programs. The Commission’s recommendations are sent to the governor and the Legislature. To obtain a copy of the report, Bond Spending: Expanding and Enhancing Oversight, contact the Commission or visit its Web site: www.lhc.ca.gov.

Fact Sheet

Study Description

For this study, the Commission reviewed oversight mechanisms for state bond expenditures. The Commission’s concerns stem from the state’s sizeable bond package enacted in November 2006, which adds $43 billion in bonding capacity for infrastructure investment, and whether adequate mechanisms existed to ensure this money was spent efficiently and effectively. 

In January 2007, Governor Arnold Schwarzenegger issued an executive order requiring the Department of Finance to expand oversight of the 2006 bond package and directed government agencies and departments administering the bonds to develop a three-part accountability structure. As part of this study, the Commission assessed whether this expanded oversight was adequate and whether additional opportunities existed to improve oversight.

Agenda

Overview

In this report, the Commission calls on the state to enhance oversight of public investments.

During its review, the Commission found that California voters approve bond measure after bond measure, yet not enough is being done to ensure effective fund management and allocation.

The Commission recommends for more transparency in bond spending, expanding oversight by the Legislature and independent auditors, and tasking the California Water Commission with oversight of resourcerelated bonds. The Commission also recommends for more clarity for voters on bond measures and bolstering local bond oversight committees.

Print 
			Agenda
  • October 23
    2008
    Bond Oversight
    9:00 a.m., State Capitol, Room 437, Sacramento, CA
    Public Hearing
    Agenda

    AGENDA

    Public Hearing on Bond Oversight 
    Thursday, October 23, 2008, at 9:00 a.m.
    State Capitol, Room 437 
    Sacramento, CA


    Opening Remarks

    Proposition 1E and Proposition 84 Oversight Mechanisms and Lessons Learned from Prior Resources Bond Measures

    1. Mike Chrisman, Secretary, California Resources Agency (Written Testimony)
       
    2. Lester A. Snow, Director, California Department of Water Resources (Written Testimony)
       

    Opportunities to Improve Oversight of Bond Expenditures on Resources

    1. Mindy McIntyre, Water Program Manager, Planning and Conservation League
       

    Overarching Opportunities to Improve Oversight of Bond Expenditures

    1. Adrian Moore, Vice President of Research, Reason Foundation (Written Testimony)
       

    Local Bond Oversight Committees - Challenges and Opportunities

    1. Michael Day, President, California League of Bond Oversight Committees, and former Chair, Sacramento City Unified School District Bond Oversight Committee (Written Testimony)
       

    Proposition 1B - Lessons Learned from Decades of Transportation Infrastructure Financing

    1. Ross Chittenden, Proposition 1B Program Manager, California Department of Transportation (Written Testimony)
       
    2. Andre Boutros, Chief Delivery Officer, California Transportation Commission (Written Testimony)


    Public Comments

    Public Notice

    PUBLIC NOTICE

    FOR IMMEDIATE RELEASE
    October 9, 2008

    For Additional Information Contact:
    Stuart Drown, Executive Director
    (916) 445-2125

    Notice of Meeting

    On Thursday, October 23, 2008, the Little Hoover Commission will conduct a public hearing on bond oversight. The hearing will begin at 9 a.m. in Room 437 of the State Capitol in Sacramento.

    This is the second of two planned hearings as part of the Commission’s review of oversight mechanisms for state bond expenditures. The Commission’s interest stems from the state’s sizeable bond package enacted in November 2006, which adds $43 billion in bonding capacity for infrastructure investment, and its concerns about whether adequate mechanisms exist to ensure this money is spent efficiently and effectively. This hearing will explore existing state oversight mechanisms for transportation and resources bonds as well as local bond oversight committees for education facility bonds. The Commission will hear from additional witnesses who will provide recommendations for improving bond oversight in California. A complete agenda is on the reverse.

    There will be an opportunity for public comment at the end of the hearing. The Commission also encourages written comments. A business meeting will follow the hearing.

    All public notices for meetings are on the Commission’s Web site, www.lhc.ca.gov. If you need reasonable accommodation due to a disability, please contact Stuart Drown at (916) 445-2125 or littlehoover@lhc.ca.gov by Thursday, October 16, 2008.

  • September 25
    2008
    Bond Oversight
    9:00 a.m., State Capitol, Room 437, Sacramento, CA
    Public Hearing
    Agenda

    AGENDA

    Public Hearing on Bond Oversight 
    Thursday, September 25, 2008, at 9:00 a.m. 
    State Capitol, Room 437 
    Sacramento, CA


    Opening Remarks

    Overview of California Bonds and Recommendations for Improving Legislative Oversight of Bonds

    1. Elizabeth G. Hill, Legislative Analyst, Legislative Analyst's Office 
    • Attachment 1: Frequently Asked Questions About Bond Financing
    • Attachment 2: Implementing the 2006 Bond Package: Increasing Effectiveness Through Legislative Oversight
    • Attachment 3: An Overview of State Bond Debt
       

    California Fiscal Policy – What More is Needed for Bond Oversight?

    1. Tim Gage, Co-Founder, Blue Sky Consulting Group, and former Director, California Department of Finance (Written Testimony)
       

    State Controller’s Recommendations to Expand Bond Oversight

    1. Dave O’Toole, Deputy Director, California State Controller’s Office (Written Testimony)
    • Attachment 1: Senate Bill 784: State General Obligation Bond Oversight
    • Attachment 2: Citizens' Bond Oversight Commission
      ​​​​​​​

    State Treasurer’s Recommendations to Expand Bond Oversight

    1. Bill Lockyer, California State Treasurer (Written Testimony)
      ​​​​​​​

    Role of the Department of Finance in Bond Oversight

    1. Fred Klass, Chief Operating Officer, California Department of Finance (Written Testimony)
      ​​​​​​​

    Public Comments

    Public Notice

    PUBLIC NOTICE

    FOR IMMEDIATE RELEASE
    September 11, 2008

    For Additional Information Contact:
    Stuart Drown, Executive Director
    (916) 445-2125

    Notice of Meeting

    On Thursday, September 25, 2008, the Little Hoover Commission will conduct a public hearing on bond oversight. The hearing will begin at 9 a.m. in Room 437 of the State Capitol in Sacramento.

    This is the first of two planned hearings as part of the Commission’s review of oversight mechanisms for state bond expenditures. The Commission’s interest stems from the state’s sizeable bond package enacted in November 2006, which adds $43 billion in bonding capacity for infrastructure investment, and its concerns about whether adequate mechanisms exist to ensure this money is spent efficiently and effectively. This hearing will provide perspectives from the California State Controller’s Office, the California State Treasurer’s Office, the Legislative Analyst’s Office, the California Department of Finance and other fiscal policy experts. A complete agenda is on the reverse.

    There will be an opportunity for public comment at the end of the hearing. The Commission also encourages written comments. A business meeting will follow the hearing.

    All public notices for meetings are on the Commission’s Web site, www.lhc.ca.gov. If you need reasonable accommodation due to a disability, please contact Stuart Drown at (916) 445-2125 or littlehoover@lhc.ca.gov by Thursday, September 18, 2008.

Print 
		Agenda
  • October 23
    2008
    Bond Oversight
    9:00 a.m., State Capitol, Room 437, Sacramento, CA
    Public Hearing
    Agenda

    AGENDA

    Public Hearing on Bond Oversight 
    Thursday, October 23, 2008, at 9:00 a.m.
    State Capitol, Room 437 
    Sacramento, CA


    Opening Remarks

    Proposition 1E and Proposition 84 Oversight Mechanisms and Lessons Learned from Prior Resources Bond Measures

    1. Mike Chrisman, Secretary, California Resources Agency (Written Testimony)
       
    2. Lester A. Snow, Director, California Department of Water Resources (Written Testimony)
       

    Opportunities to Improve Oversight of Bond Expenditures on Resources

    1. Mindy McIntyre, Water Program Manager, Planning and Conservation League
       

    Overarching Opportunities to Improve Oversight of Bond Expenditures

    1. Adrian Moore, Vice President of Research, Reason Foundation (Written Testimony)
       

    Local Bond Oversight Committees - Challenges and Opportunities

    1. Michael Day, President, California League of Bond Oversight Committees, and former Chair, Sacramento City Unified School District Bond Oversight Committee (Written Testimony)
       

    Proposition 1B - Lessons Learned from Decades of Transportation Infrastructure Financing

    1. Ross Chittenden, Proposition 1B Program Manager, California Department of Transportation (Written Testimony)
       
    2. Andre Boutros, Chief Delivery Officer, California Transportation Commission (Written Testimony)


    Public Comments

    Public Notice

    PUBLIC NOTICE

    FOR IMMEDIATE RELEASE
    October 9, 2008

    For Additional Information Contact:
    Stuart Drown, Executive Director
    (916) 445-2125

    Notice of Meeting

    On Thursday, October 23, 2008, the Little Hoover Commission will conduct a public hearing on bond oversight. The hearing will begin at 9 a.m. in Room 437 of the State Capitol in Sacramento.

    This is the second of two planned hearings as part of the Commission’s review of oversight mechanisms for state bond expenditures. The Commission’s interest stems from the state’s sizeable bond package enacted in November 2006, which adds $43 billion in bonding capacity for infrastructure investment, and its concerns about whether adequate mechanisms exist to ensure this money is spent efficiently and effectively. This hearing will explore existing state oversight mechanisms for transportation and resources bonds as well as local bond oversight committees for education facility bonds. The Commission will hear from additional witnesses who will provide recommendations for improving bond oversight in California. A complete agenda is on the reverse.

    There will be an opportunity for public comment at the end of the hearing. The Commission also encourages written comments. A business meeting will follow the hearing.

    All public notices for meetings are on the Commission’s Web site, www.lhc.ca.gov. If you need reasonable accommodation due to a disability, please contact Stuart Drown at (916) 445-2125 or littlehoover@lhc.ca.gov by Thursday, October 16, 2008.

  • September 25
    2008
    Bond Oversight
    9:00 a.m., State Capitol, Room 437, Sacramento, CA
    Public Hearing
    Agenda

    AGENDA

    Public Hearing on Bond Oversight 
    Thursday, September 25, 2008, at 9:00 a.m. 
    State Capitol, Room 437 
    Sacramento, CA


    Opening Remarks

    Overview of California Bonds and Recommendations for Improving Legislative Oversight of Bonds

    1. Elizabeth G. Hill, Legislative Analyst, Legislative Analyst's Office 
    • Attachment 1: Frequently Asked Questions About Bond Financing
    • Attachment 2: Implementing the 2006 Bond Package: Increasing Effectiveness Through Legislative Oversight
    • Attachment 3: An Overview of State Bond Debt
       

    California Fiscal Policy – What More is Needed for Bond Oversight?

    1. Tim Gage, Co-Founder, Blue Sky Consulting Group, and former Director, California Department of Finance (Written Testimony)
       

    State Controller’s Recommendations to Expand Bond Oversight

    1. Dave O’Toole, Deputy Director, California State Controller’s Office (Written Testimony)
    • Attachment 1: Senate Bill 784: State General Obligation Bond Oversight
    • Attachment 2: Citizens' Bond Oversight Commission
      ​​​​​​​

    State Treasurer’s Recommendations to Expand Bond Oversight

    1. Bill Lockyer, California State Treasurer (Written Testimony)
      ​​​​​​​

    Role of the Department of Finance in Bond Oversight

    1. Fred Klass, Chief Operating Officer, California Department of Finance (Written Testimony)
      ​​​​​​​

    Public Comments

    Public Notice

    PUBLIC NOTICE

    FOR IMMEDIATE RELEASE
    September 11, 2008

    For Additional Information Contact:
    Stuart Drown, Executive Director
    (916) 445-2125

    Notice of Meeting

    On Thursday, September 25, 2008, the Little Hoover Commission will conduct a public hearing on bond oversight. The hearing will begin at 9 a.m. in Room 437 of the State Capitol in Sacramento.

    This is the first of two planned hearings as part of the Commission’s review of oversight mechanisms for state bond expenditures. The Commission’s interest stems from the state’s sizeable bond package enacted in November 2006, which adds $43 billion in bonding capacity for infrastructure investment, and its concerns about whether adequate mechanisms exist to ensure this money is spent efficiently and effectively. This hearing will provide perspectives from the California State Controller’s Office, the California State Treasurer’s Office, the Legislative Analyst’s Office, the California Department of Finance and other fiscal policy experts. A complete agenda is on the reverse.

    There will be an opportunity for public comment at the end of the hearing. The Commission also encourages written comments. A business meeting will follow the hearing.

    All public notices for meetings are on the Commission’s Web site, www.lhc.ca.gov. If you need reasonable accommodation due to a disability, please contact Stuart Drown at (916) 445-2125 or littlehoover@lhc.ca.gov by Thursday, September 18, 2008.