The California Bottom Line

Over the past year, Local 1000 has identified numerous solutions to save the state billions, without cutting the essential services we provide.

In the reports summarized below, we have revealed more than $1 billion in uncollected revenue, we have exposed how California can save more than $200 million by eliminating wasteful medical staffing contracts in the prisons, and we have shown how another $100 million can be saved each year by replacing pricey and unnecessary IT contractors with state workers who do the same work at half the cost.

• $6.5 billion goes uncollected each year due to corporate and individual scofflaws that either over-deduct expenses or underreport income.
• $2 billion goes uncollected each year due to evasion and non-filing of sales and use taxes.
• 4.8 billion was raised by the tax amnesty program in 2004-05.

• $100 million could be saved each year by in-sourcing a fraction of the more than $1 billion the state spends annually on costly IT contracts.
• $200 million could be saved each year by replacing medical registry contracts with state employees at our 24-hour institutions.
• $50 million or more could be saved annually on architectural and engineering contracts at Caltrans.

• $600 million or more could be saved by implementing reforms in AB 900 - the landmark prison reform law passed in 2007.
• $170 million or more is wasted on overspending on private drug treatment and medical registries.
• $200 million or more could be saved if CDCR implemented court decisions on prisoner release.

SEIU Local 1000 members’ hands-on job experience provides us with unique perspectives on the challenges our state faces and insights into solutions to the current crisis. During this fiscal downturn, we are using the knowledge state workers have gained to help eliminate waste and increase revenue for the State of California.

In 2008, SEIU Local 1000 approached the Board of Equalization with a proposal to work together to improve the collections process. The Board agreed. We met with BOE workers at their worksites to discuss problems they identify with the collections process. Now we are working with BOE management to implement the recommendations and to advocate jointly for legislation to strengthen the collections process.

Click here to read the full Supplemental Report

State spends billions on IT contracts

• Right now, the state is spending almost $3 million a day and over a billion dollars a year on costly IT contracts the pay contract employees two to three times the amount it would cost to employ state workers.
• Currently, the state of California has 2,345 active IT contracts worth just over $4 billion. By reducing dependence on IT contractors and in-sourcing just a fraction of work currently contracted out, the state could save untold millions.
• But the governor and the Legislature continue to waste taxpayer money. Since the governor declared a fiscal state of emergency in January 2008 and ordered non-essential contracts to be cut, the state has entered into 1,833 new IT contracts worth $598 million.

Read the full Supplemental Report here.

SEIU Local 1000 recognizes that many personal service and consulting contracts may be legitimate; however, the state can save hundreds of millions of dollars each year by reducing its use of personal services and consulting contracts by Reducing its Use of Costly Contract Staff.

• $100 million could be saved each year by in-sourcing a fraction of the more than $1 billion the state spends annually on costly IT contracts.
• $200 million could be saved each year by replacing medical registry contracts with sate employees at our 24-hour institutions.
• $50 million or more could be saved annually on architectural and engineering contracts at Caltrans.

Click here to read the latest issue of The California Bottom Line.

The second edition of The California Bottom Line summarizes more than $1 billion in savings that can be realized by ending the waste and mismanagement in our state prison system. In this research report, Local 1000 outlines how:
• Fully implementing rehabilitation reforms enacted in AB 900 can save $561 to $684 million;
• Cutting overspending on contracting out in prisons would save between $125 and $178 million; and
• Promptly recalculating prisoner release dates, as ordered in two state Appellate Court decisions and one state Supreme Court decision, could save up to $218 million.

The California Bottom Line and website is at the center of SEIU Local 1000’s campaign to influence the debate around the state budget crisis. We’re highlighting member ideas that promote more effective and efficient government while reducing the need to cut vital services or raise taxes. Our first issue highlighted research—based on input from FTB and BOE members, and from state records—that shows that the uncollected tax gap is $8.5 billion, implying that hundreds of millions—if not billions—could be collected with increased efforts by the Governor.

SEIU Local 1000 will continue to publish research showing alternatives to the governor’s demand that all department budgets be slashed by 10 percent or that we increase the outsourcing of state services.

Click here to view the second edition of The California Bottom Line.

Hancock, Swanson seek alternative to massive budget cuts

Two members of the state Assembly said Saturday the state needs to do a better job of collecting unpaid taxes after hearing testimony about California’s $8.5 billion tax gap.

“We shouldn’t have to look at cutting critical services when so much tax money is not being collected,” said Assemblymember Loni Hancock, (D-Berkeley), at a town hall meeting on the budget crisis in Oakland. “We need to look seriously at how the state can do a better job of collecting taxes.

Assemblymember Sandre Swanson said that state legislators need to look at all options – including uncollected taxes — in order to bring in more money to save funding for programs such as education and preschool.

“We need to have a fair and rational debate on the budget crisis,” Swanson said. “We need to take an honest look at the consequences of cutting funding to education and so many other crucial services.”

The comments by both assembly members came after testimony on the tax gap by a SEIU Local 1000 member at a hearing that focused on the state’s $14 billion projected budget deficit and the impact of huge cuts proposed by Governor Arnold Schwarzenegger. The California Bottom Line is a new blog created by Local 1000, California’s largest state employee union, in order to highlight budget alternatives that improve government efficiency.

Read the rest of this entry »

This first edition of The California Bottom Line summarizes the $6.5 billion in personal income and corporate taxes, and $2 billion in sales and use taxes that the Legislative Analyst’s Office (LAO), the Franchise Tax Board (FTB), and the Board of Equalization (BOE) estimate go uncollected each year.

“The Legislative Analyst’s Office, FTB and BOE estimate that the state fails to collect an estimated $8.5 billion that it is owed. The law-abiding taxpayers of California deserve something stronger and more ambitious—they deserve a tax collection system that is fair,” said Jim Hard, SEIU Local 1000 President.

The governor said he wants to correct structural flaws that force the state into deficit spending when revenues fall. But we believe that if California were able to do a better job going after unpaid taxes, we could have a more accurate basis for evaluating the state’s long-term financial needs. These are taxes that are already owed to the state but are not being paid. Click here for a PDF of The California Bottom Line.

Local 1000’s goal is to promote a more effective and efficient government while reducing the need to cut vital services or raise taxes. Our first edition highlights research showing that each year California fails to collect $8.5 billion in taxes, according to Legislative Analyst’s Office. If those taxes were being collected every year, our state would not be facing a $14 billion deficit.

We first heard about the tax gap from our members who work in that Franchise Tax Board and the Board of Equalization. In the coming weeks we plan to post more ideas about the state budget and the funding of state services. I hope you enjoy the first edition of The California Bottom Line – please share it with others.

We want readers to share more ideas about solving the budget crisis, click here.

Welcome to The California Bottom Line, a new blog dedicated to helping Californians exploring alternative ways to solve our state budget crisis. This blog is created SEIU Local 1000, the largest union of state employees, to start an informal discussion about how to fund state services. At SEIU, we accept that some sacrifices may need to be made. We believe that all options should be on the table. But we don’t want to see the state get mired in the same debate over raising taxes or cutting critical services. We want everyone to explore creative alternatives with an open mind.

In the coming weeks we plan to post our ideas about the state budget and the funding state services. And we want our readers to share their ideas with us too.

While the governor releases a budget calling for deep cuts in education and other state programs without any mention of shoring up the revenue side of the state’s budget equation, the largest state employees’ union has a different solution: collecting $8.5 billion in taxes already owed to the state each year that goes unpaid and uncollected.

“Across-the-board cuts in vital state services are fiscally irresponsible when the state’s chief executive isn’t keeping our financial house in order,” said Jim Hard, Local 1000 president. “Why should Californians suffer the budget knife when the state isn’t collecting billions in unpaid taxes?”

In a press conference held yesterday, Hard illustrated a number of solutions to the budget crisis that the state should consider before slashing essential services or raising taxes:

• The Legislative Analyst’s Office points to $6.5 billion in corporate and personal income taxes that go unpaid – and uncollected –each and every year.
• Another $2 billion in sales and use taxes go uncollected each year.
• Local 1000 has identified additional hundreds of millions of dollars the state is wasting: $126 million spent on wasteful outsourcing of information technology jobs when the work can be performed by state employees for half the price; and more than $100 million in savings that could be realized by releasing prison inmates on time, after they have served their sentence.

“The governor is the chief executive of the state, and what CEO doesn’t collect his bills?” said Hard. “Before we slash programs or raise taxes, we must collect the billions of tax dollars we’re owed.”