Who regulates the regulators and proposes reforms of the reformers? The bipartisan Milton Marks “Little Hoover” Commission on California State Government Organization and Economy is the state's only independent and citizen-based oversight mechanism. It is, in fact, so independent that the Legislature charged it with oversight of the Bureau of State Audits, including contracting with an independent auditor for annually examining the State Audit Fund. The commission conducts four to five comprehensive reviews of executive branch programs, departments and agencies each year and recommends ways to improve performance. It is statutorily responsible for analyzing all gubernatorial reorganization plans and making recommendations to the Legislature. Information collected at commission hearings goes into its final reports along with reviews of academic literature, consultations with experts and interviews with people whom the programs affect.

Commission Members

The Little Hoover Commission was created in 1962 and was modeled after President Truman’s 1947 Hoover Commission, which took its name from its appointed chairman, former President Hoover. The original Hoover Commission was bipartisan, with its members selected by the President, Congress and the public and private sector. It was organized into 24 task forces that studied government functions and regulatory activities for the purpose of making recommendations to reshape the government.

The state panel was originally called the Milton Marks Commission on California State Government Organization and Economy. Milton Marks, Jr. was a politician who represented San Francisco in both the state Senate and Assembly alternatively as a Republican and a Democratic for 38 years.

In 1993, the Legislature created  the Bureau of State Audits under the direction of the commission to comply with audit requirements of the federal government. California voters had just rejected Proposition 159, which would have established an independent office of the Auditor General.     

Senate Bill 37 (California Legislative Information)

The commission's role is distinctly different from other state and private-sector bodies that analyze state programs, such as the Bureau of State Audits and the Office of the Legislative Analyst. Unlike fiscal or performance audits, the commission's studies look beyond whether programs comply with existing requirements. Instead, they explore how programs could and should function. The commission produces in-depth reports that serve as a basis for reform legislation. Based on its reports, the commission facilitates implementation of legislation by building coalitions, testifying at hearings and providing technical support to policy makers.

The commission does not shy away from the big issues. In 2011, it was pension reform. In 2010, water management. It has studied and made recommendations about education, stem cell research, prisons, infrastructure development, Medi-Cal, horse racing, acupuncture, children’s mental health, card clubs and transportation, to name just a few subjects of note.

The commission also oversees the independent Bureau of State Audits and annually hires a public accountant to audit the auditor.

The 13-member commission is made up of two state senators, two assembly members, five commissioners appointed by the governor, two by the assembly speaker and two by the Senate Rules Committee.

At the outset, the staff conducts research by bringing key players together for discussions, contacting experts, reviewing academic literature and interviewing those most closely affected by the targeted topic. A subcommittee of commissioners directs this process.

Based on this preliminary research, the subcommittee identifies key issues and organizes public hearings. It then develops findings and recommendations that focus on the key issues and forwards a draft report to the full commission for its consideration before  release of a final report.

The commission works to implement its recommendations either through legislation or administrative changes. New hearings are held and progress reports are issued in the years following the initial report until the commission's recommendations have been enacted or its concerns have been addressed.

The commission released five reports in 2010. They called for an overhaul of how the state deals with infrastructure problems, creation of a governor’s office for economic development, a modernization of water governance and improvement of charter schools. In November 2010 it released a far-ranging report entitled “Reforms for Smart Management” that revisited a number of issues it had reviewed in the past, but this time under the shadow of an unprecedented economic downturn.

About the Commission (Little Hoover website)

Commission Reports (Little Hoover website)

All of the commission’s budget is allocated from the state’s General Fund. Gov. Jerry Brown has proposed that the commission receive a 4% increase from 2010-11 to $906,000. That budget was 7.8% larger than the year before. Nearly 87% of the budget is earmarked for personnel and the rest for operating expenses.

3-Year Budget (pdf)

The Little Hoover Commission has averaged four reports a year for almost 50 years, and it’s safe to say someone didn’t like something about each one. Headlines from the Los Angeles Times are indicative of the hard-hitting approach the commission takes.

Report: Fish and Game Fails to Do Job (by Rich Roberts, Los Angeles Times)

Panel Assails State’s Bilingual Education (by Stephanie Chavez, Los Angeles Times)

State Panel Gives Medi-Cal a Poor Bill of Health (by Irene Wielawski, Los Angeles Times)

Watchdog Calls Special Districts Lax (by Eric Bailey, Los Angeles Times)

State’s AIDS Programs Lack Direction and Commitment (Victor F. Zonana, Los Angeles Times)

Here are some of the highlights:

Prison Reform. The commission has issued numerous reports touching on prison reform, its most recent in January 2007. Prior to the report, the state had already ceded control to the federal courts for prison mental health, juvenile justice and the prison health system. It warned that if the state didn’t act fast, it would lose control of the entire prison system. The commission also noted, “The problem does not need further study.  The State knows what the answers are, thanks to nearly two decades of work.” Those answers, the commissions said are: Relax the three-strikes rule, expand the use of furloughs, move non-violent female offenders to local facilities, waive parole for offenders who pose little threat and discharge low-risk offenders. The report was criticized by one of the commission’s own members, who cast a dissenting vote against it. Republican Assemblywoman Audra Strickland disagreed with the report’s premise that “thirty years of ‘tough on crime’ politics has not made the state safer.” Strickland wrote, “By every measure, used by both the FBI and the California Attorney General, crime rates are dramatically down.”  She did not want to re-invent parole, inhibit the three-strikes rule or establish an unelected sentencing commission (that would undercut the Legislature).  

Stem Cell Research, June 2009. California voters overwhelmingly approved Proposition 71 in 2004, which authorized $3 billion for creation of a new agency and research funding in reaction to President Bush’s restrictions on federal funding on certain embryonic stem cell research. Five years later, amid complaints about the agencies structure and policies, the Little Hoover Commission was mainly supportive of the effort. It noted that the federal political environment had changed with the election of Barack Obama, the agency was effectively establishing California as a global leader in stem cell research. But it said the 29-member governing board should be cut in half, the power of its chairman should be reduced, there should be more transparency in its loans and grants, and the process should be more open. The board was not happy. “If enacted by the Legislature and signed by the governor the recommendations would dramatically disrupt and delay the agency’s push to achieve its mission of delivering therapies to patients,” it said in a press release circulated to the news media but not posted to its website. Many of the changes proposed by the commission violated Prop.71, the press release said. Board chairman Robert Klein wrote, “I would hope the legislature will not devote any of its valuable time to this measure that has little chance of benefiting the state while it has great potential to do harm.”

CIRM Directors Rebuff Five Reform Proposals (California Stem Cell Report)

CIRM Responds to Recommendations of the Little Hoover Commission (California Stem Cell Report)

Education. No less than 29 of the commission’s reports touch on some aspect of education.  In November 2010, the panel tackled charter schools, 14 years after its last report on the subject and 18 years after the state passed the California Charter Schools Act. While the charter school movement continues to grow, reaching 912 schools by 2010, the commission found the process of establishing a new charter onerous. It noted that school districts can effectively impede establishment of charters and recommended the state Board of Education take oversight responsibilities. The report called for a Board of Charter Schools to be established as an independent entity in the California Department of Education. None of these proposals sit well with people opposed to charter schools.

New Name for the State Auditor

The Little Hoover Commission has overseen the Bureau of State Audits since the latter’s creation in 1993. The bureau, which is independent of the executive and legislative branches and headed by the state auditor, examines and reports annually on financial statements in the executive branch, conducts performance audits and performs other related tasks.

Among its oversight duties, the commission hires an independent accountant to annually audit the auditor.

Legislation introduced in the state Senate in 2012 would rename the bureau as the State Auditor’s Office. The Senate Rules Committee, in its published analysis, specifically addressed questions about this being a backdoor attempt to change the operation of the agency by citing assurances from the author’s office that it “simply intends to rename the ‘Bureau of State Audits’ as the ‘State Auditor’s Office.’ ” 

Senate Bill 1395 (California Legislative Information)

Independence

The Little Hoover Commission is a venerated institution in California politics. It is generally referred to as independent and non-partisan when invoked as a source of authority about whatever issue it gets involved in. Its reports are painstaking studies of complicated issues, the result of countless hearings, broad solicitation of opinion and measured composition. It is regarded as an honest broker. Yet, not unexpectedly, whoever’s side is gored in whatever controversy the commission weighs in on invariably notes that there is no such thing as an unbiased, non-political politically-appointed commission.

In 2007, when Assembly Speaker Fabian Nunez suggested that California redistricting be placed in the hands of the commission, it suddenly focused the attention of a broader constituency, the entire electorate, on a salient fact: there is no such thing as an independent group. As redistricting reformers bounced from one option to another (judges, a citizens group drafted by lot or selected by county registrars, etc.), they came up against the real limits of reform.

And so while there has been plenty of grousing about the Little Hoover Commission since its inception in 1962, no serious effort has ever been made to “reform” it. Well enough has been left alone. 

Big Trouble in Little Hoover (by Robert Greene, Los Angeles Times)

Public Pensions

The Little Hoover Commission is no stranger to controversy. Issues like prison reform, water rights and education have passionate constituencies. But when it took up the subject of public pensions in 2011 two years after the economic collapse that wrecked financial markets, the housing industry and people’s lives, stepping on the third rail of politics was bound to evoke more than just a heated discussion about the merits of reform. It called into question the commission’s own independence.

Its February 2011 report stated that California’s public pensions, including the CalPERS public pension system and the California State Teachers' Retirement System, the nation’s largest and second-largest pension systems, are not sustainable and “will crush government” because public employees are retiring younger and living longer.

The commission urged a lower defined-benefit formula with an employer-matched, risk-managed defined-contribution plan and the extension of Social Security old-age benefits to uncovered state and local employees. The commission also urged the governor and Legislature to give state and local governments the authority to freeze pension benefits for current workers.

The commission’s pension ideas would weaken public teachers’ retirement security and “would require a complete reversal of decades of judicial rulings,” California State Teachers' Retirement System chief Jack Ehnes, said in a March 9, 2011, letter to Little Hoover Commission Chairman Hancock. Little Hoover Director Stuart Drown acknowledged that public employee contributions would have to increase and that there are legal precedents limiting pension cutbacks for current employees. But, he said, changes must be attempted. CalPERS stated on its website that commitments to employees must be honored but that, “We recognize that pension costs are a source of fiscal concern for the State, local governments, and taxpayers. We look forward to engaging with the decision makers who must rely on all the facts when confronting these important issues and recommendations.”

The California pension debate reflected a larger conflict playing out across the country, as state governments in Wisconsin, Michigan, Florida, Ohio and Indiana to name but a few sought pension reforms and a weakening of organized labor in the public and private sectors, ostensibly to help balance their budgets. Overly generous giveaways to politically connected unions had to end now.

Critics on the left claimed these were political moves to blame economic problems caused by bankers, Wall Street investors, ratings agencies and other moneyed interests on working people, and were an excuse to impair the power of unions, which tend to support Democrats. 

State Treasurer Bill Lockyer found the report “long on rhetoric and short on thoughtful analysis.” Without overtly linking it to the debate over the role of organized labor in procuring economic security for workers, it touches on elements of that debate with each of his objections.

Lockyer Objected to …

·    workers being likened to bankers and market investors who game a system to milk it for personal enrichment. He says public pensions are not “wealth generators,” as the report argues. Half of CalPERS retirees receive annual pensions of $18,000 a year or less. Only 1.7% receive pensions over $102,000.

·    pension problems being likened to the subprime mortgage meltdown, and the report’s claim that the pension managers exhibited risky behavior by using overly optimistic market return rates. The rates were actually conservative. They assumed a return of 7.75% when CalPERS’ portfolio over the previous 21 years had returned 8.6%. Almost everyone who was invested in the market got hammered.

·    the report referring to a general consensus of actuaries’ dismal outlook for the pension funds when, in fact, it only refers to one actuary and took his comments out of context. The actuary, John Bartel, has publicly said that he fears far more for local pension funds than state funds and that he did not consider the state to be in crisis. Bartel told a Santa Rosa pension task force: “Just because things are not looking good … is not a reason to junk the retirement system.”

·    the report using data from 2008-2009, at the height of the financial crisis, when more current data was available that showed substantial market gains had significantly reduced the pensions’ unfunded liabilities.

·    the commission ignoring reforms already instituted by CalPERS that increased worker contributions, lowered benefits and raised retirement ages.

·    the commission’s assumption that the state’s CalPERS contribution is a “crushing” burden when it amounts to just 2.8% of the General Fund.

Public Pensions for Retirement Security (Little Hoover Report)

Comments by Bill Lockyer (State Treasurer Bill Lockyer)

Teachers' Response (California State Teachers Retirement System) (pdf)

Another Study Fraught With Errors (Public Employee Retirement System) (pdf)

Just the Facts (Professional Engineers in California Government) (pdf)

Michael Alpert, 2001 – 2007

Robert Terzian, 1994 – 2000

Nathan Shapell, 1976 – 1994. Shapell, a holocaust survivor, was chairman of the board and CEO of Shapell Industries, Inc., one of California’s larger residential construction companies. It is best known for developing Porter Ranch in Los Angeles’ San Fernando Valley. He served on the commission for 29 years and was the longest, continuously serving chairman of a state commission in the 20th century.

Manning J. Post,  1974 – 1976

H. Herbert Jackson, 1971 – 1974

D.W. Holmes, 1968 – 1971

Caspar W. Weinberger, 1967 – 1968. The future Secretary of Defense under President Reagan was a California state senator in the 1950s before becoming chairman of the California Republican Party. As California governor, Reagan tapped him for the chairmanship of the Little Hoover Commission in 1967 and then a year later appointed him state Director of Finance. He was lured away from state service by President Nixon, who made him chairman of the Federal Trade Commission. It was the first of many federal posts he was to hold.

Harold Furst, February 1965 – 1966

Eugene C. Lee, 1962  – 1964