Jerry Brown calls for criminal investigation of Board of Equalization

Its spending has been under scrutiny for several years. The Sacramento Bee reported last year that the agency spent $118,000 on designer furniture for Jerome Horton’s office; the new audit said the agency spent $189,000 last year on two “connecting women to power” events in Southern California.

Brown’s letter follows a recent audit from the Department of Finance that found the Board of Equalization had allowed its elected members to “redirect” staff for promotional events. The audit found the agency could not explain how it corrected accounting failures identified in a 2015 audit.

It described reports from employees who feared they’d lose their jobs if they displeased elected officials. The report also suggested that board members inappropriately “intervened” in administrative decisions, creating inconsistencies that are “contrary to state law.”

“The board exists to serve the public, and the report highlights the extent to which it has fallen short,” Brown wrote.

Two Democratic board members – Fiona Ma and state Controller Betty Yee – have asked Brown to strip the board of its authority. Both of them endorsed Brown’s letter.

“This is about accountability,” Yee said.

“Based on my two years here, I have found and come to the conclusion that we must put in place real checks and balances, accountability and a willingness to be transparent,” Ma said.

The board is scheduled to meet on Monday in a closed-session meeting to discuss potential lawsuits and personnel changes.

“Our actions in the next few weeks are going to be very important,” said board member George Runner, a Republican who wants his colleagues to address the audit on their own. “It’s important that we don’t try to find scapegoats, that people try to find responsibility, and we create roles and guidance for board members.”

Staff members for two other board members, Republican Diane Harkey and Democrat Jerome Horton, did not respond to requests for comment late Thursday. The board’s executive staff declined to comment.

Lawmakers also have questioned the board’s ability to reform itself. Brown’s letter includes a request for the Legislature to address the audit by June.

Brown’s order represents an unusual takeover of an elected body whose core responsibilities are enshrined in the state Constitution. Each of the board’s four members elected by district represent about 10 million Californians, making their districts some of the largest jurisdictions for any elected official in the country.

The board is a unique agency where elected officials weigh tax appeals and set policy. In other states, those responsibilities rest with revenue departments staffed by civil servants and led by officials appointed by governors.

Brown’s letter is “a movement in the right direction in the sense that tax collection ought to be under the authority of the governor,” said Daniel Simmons, an emeritus professor of law at UC Davis who has studied the Board of Equalization and argued for major changes to the agency. “I’m glad to see him exercise that authority and take responsibility for it.”

Brown’s letter to the board was accompanied by three additional notices from state leaders describing the new restrictions on the tax agency’s ability to spend money. The agency will need approval from the state Human Resources Department to hire, from the Technology Department to issue technology-related contracts and from the Department of General Services to make any other purchases.

The Board of Equalization collects about $60 billion a year in taxes and fees. It’s in the midst of a major technology project that was estimated to cost more than $300 million.

“Given recent revelations, this suspension is both warranted and necessary to protect state taxpayers,” reads the letter from Department of General Services Director Daniel Kim.