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California

Lloyd Billingsley
Maybe Money Does Grow on Trees
Hidden funds and a failure of oversight in one-party California
18 January 2013

California attorney general Kamala Harris’s just-concluded investigation only deepens the mystery surrounding $54 million in “hidden money” discovered last year at the state parks department. State investigators interviewed 40 employees, yielding more than 2,000 pages of testimony. They found that state parks officials had intentionally concealed “only” $20.5 million held in the State Parks and Recreation Fund. The remaining $33 million was “simply obscured by long-term complexities in managing that fund.”

Harris’s report is worthy of attention for several reasons, not least because it smacks of a cover-up. Her office released the report on Friday, January 4—at the tail end of a holiday week, a great day to avoid attention. But the Sacramento Bee, which broke the hidden-money story last year, remained on the case. The Bee noted that the attorney general was “unable to fully explain how the money piled up,” declaring only that the hidden money was “unintended” and not the result of any misconduct. One witness, however, offered a different take on why the parks department would report smaller amounts to the Department of Finance: so that the state would not further reduce the parks department’s budget.

That might be a plausible conclusion. Unfortunately, the attorney general didn’t talk to some of the most relevant officials. For example, investigators had wanted to speak with former state parks director Ruth Coleman, who resigned last May—a day before the initial revelations made headlines—and has since retained an attorney. Coleman refused to be interviewed, but she offered to answer questions in writing. Incredibly, the attorney general declined to proceed even on that basis, but still claimed to find no evidence that Coleman knew about the money.

The key question for Harris had nothing to do with accounting procedures or intentions. Rather, it was whether the state employees who hid the money broke any laws. As the Bee noted, “the attorney general’s office did not even analyze what the relevant laws might be in that regard.” Worse, Harris left it to the state Natural Resources Agency, the bureaucracy that supervises the parks department, to decide whether to bring in local law enforcement. All told, it was a subtle buck-passing performance by the state’s highest law-enforcement agency, which likes to strike a tough pose with those outside state government.

Meanwhile, the State Department of Finance, which failed to detect the hidden money for more than a decade, conducted an audit and released its findings—on the Friday before Christmas. Auditors discovered $3.9 million in a fund for donations that had “no assigned purpose.” They also verified the hidden funds—$53.4 million by their tally— and found that the surplus had existed since 1993, eight years longer than officials previously believed. Parks department bureaucrats may have stashed money away even before then, but finance department audit manager Frances Parmelee told reporters that the auditors “did not look back any further.”

The hidden-money scandal only emerged in the wake of unauthorized vacation buyouts that provided other insights into California’s casual financial culture. At the center of the parks scandal was Manuel Thomas Lopez, a career bureaucrat who spent 12 of his 23 years in state government on court-ordered probation for a lengthy list of convictions, including felony drunk-driving. Even so, Lopez was duly promoted to deputy of administrative services in the parks department, where his boss, Coleman, would later accuse him of hiding the $54 million.

“This discovery uncovers the ultimate betrayal of public trust,” said state senator Noreen Evans, a Santa Rosa Democrat. “Selfish bureaucrats stashed away money for their personal gain. But, the real question now is, where does it end? If one department can hoard $54 million for 12 years, who else is playing the same tricks of deceit and thievery?” That’s an important question, especially in light of Proposition 30, the income- and sales-tax increase voters approved in November. Recall, too, Governor Brown’s 2011 prediction of an additional $4 billion for the budget, without specifying the source of the extra revenue. Trouble is, Brown doesn’t share Evans’s quest to turn every agency upside down; even if he did, California is obviously unqualified to audit and investigate itself.

Nevertheless, the attorney general’s and State Finance Department’s defective probes do convey crucial information. They confirm that California’s highest oversight and law-enforcement agencies are willing to look the other way when it’s government committing the misdeeds. Keep playing fast and loose with the money, they tell state employees in effect, because we’ve got your back. That’s how it is in a virtual one-party state that now imposes the nation’s highest taxes. To paraphrase Lincoln Steffens, Californians have seen the future, and it irks.

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