Briefing Report: An Examination of AB 1948

The False Choice of Arbitrary Standards
Wednesday, July 2, 2014

What do Mark Zuckerberg, Sergey Brin, Larry Ellison and Tim Cook all have in common? They are all Silicon Valley Tech Titans who have demonstrated the foresight, resources and gumption for managing and investing in ideas that turn into industry game-changers, thereby keeping their respective multi-billion dollar enterprises running full steam ahead.

Yet all of these California based CEOs have something else in common. Under an Assembly Bill being considered in the California State Legislature, not a single one of these global icons would be eligible to serve as Treasurer-Tax Collector or Director of Finance in their respective home counties.

California’s County Tax Collectors & Good Governance

California’s county treasurer-tax collectors are responsible for a veritable cornucopia of complex financial duties. From the collection of tax revenues to the oversight of investment funds for school districts and special districts, the duties of our treasurer-tax collectors span the gamut rendering them the safe-keepers of taxpayer dollars in the county treasury.

Despite this heavy responsibility, qualifications for county treasurer-tax collectors are merely optional, and at the discretion of the local board of county supervisors. Lest the only requirements be a minimum age of 18 and voter registration within the county, some local government observers are seeking to implement mandatory qualifications for the position of county treasurer-tax collector. Enter Assembly Bill 1948, authored by Assemblyman Kevin Mullin (D-San Mateo), this measure endeavors to “further professionalize” the treasurer-tax collector thereby providing greater accountability and oversight to taxpayer dollars.

Good Intentions

In an effort to attain the goal of further professionalizing the position of county tax collector, AB 1948 prohibits any person from being eligible for election or appointment unless they meet one of the following criteria:

  • Has served in a senior financial management position in a public agency for three years, including, but not limited to treasurer, collector, auditor auditor-collector, or the chief deputy or an assistant in those offices;

  • Possess a baccalaureate, masters, or doctoral degree from an accredited college or university in a finance-related field;

  • Possess a certificate issued by the California Board of Accounting;

  • Possess a charter issued by the Institute of Chartered Financial Analysts; or

  • Possess a certificate from the Association for Financial Analysts.

The provisions of the bill would apply to any office of county treasurer, tax collector, treasurer-tax collector, director of finance, consolidated director of finance, or any office consolidated with the office of treasurer or tax collector.

At first glance, the measure appears to be a common sense approach that fundamentally provides greater protection of taxpayer assets. And while there is no denying that the measure strives to strengthen local government, a deeper analysis reveals several questions, conundrums and potential unintended consequences.

Questions and Conundrums

“Throughout my political career, I've believed in the concept of home rule. Some call it local control. Whichever phrase you use, the concept is the same - the best decisions are those made closest to those who will be impacted by the decisions."  - Linda Lingle

Generally, the state does not legislate broadly to remedy individual issues that are wholly within the scope and authority of local government's police powers. Despite the measure’s good intentions, AB 1948 sets forth several problematic policy concerns that are worthy of examination. 

AB 1948 Interferes with Local Control. As noted, qualifications for county treasurer-tax collectors are optional and at the discretion of the board of county supervisors. Nothing in current law prohibits local governments from adopting the standards that are mandated under AB 1948 on their own accord. In fact, according to the Assembly Local Government Committee analysis of the bill, 47 of California's 57 counties (excluding San Francisco) have voluntarily adopted an ordinance providing for the qualifications required in this bill. 

Moreover, two additional counties, Sacramento and Santa Clara, have established director of finance offices under their charter authority and have qualifications associated with those positions. Together, these 49 counties cover approximately 90% of the state's population.

AB 1948 Constricts Choice and Hurts Small Counties. If enacted, California’s rural counties run the risk of being inordinately impacted. Establishing mandatory qualification for the position of treasurer-tax collector limits a smaller county's ability to recruit and retain qualified candidates. 

As pointed out by The Rural County Representatives of California (RCRC) and the California State Association of Counties (CSAC), in expressing concerns with the bill, some of California’s more rural and low-population counties have very small populations with median educational levels that are far less than the state average.  As such, the “practical impact of AB 1948 could hamper a county's ability to have qualified candidates for these positions or set expectations that certain qualifications are being met when they may not be.”

AB 1948 is Based Upon a Flawed Premise. In part, the fundamental premise of the bill rests upon the wrong-headed presumption that meeting an arbitrary minimum statutory requirement ensures that an individual will be a "better" candidate than someone who does not meet those same requirements.

Assumptions and Unintended Consequences

“Society cannot continue to disable themselves through their need to categorize people or make assumptions as to other individual’s abilities.” - Evelyn Glennie

When giving consideration to the measure, it is important to consider if mandating the minimum set of standards established in AB 1948 truly results in better trained and more qualified candidates. Unfortunately, the faults in that premise are exposed by the unavoidable reality of the following examples.

As currently drafted, AB 1948 presupposes all of the following:

  • An individual who has served a public agency in senior financial management for at least three years is more qualified than an individual who has served a private enterprise in a senior management position for 30 years.

  • A twenty-two year old graduate and theater major who has accumulated 16 semester units in finance is more qualified than a County Supervisor of ten years lacking a finance degree.

  • A recent college graduate with a 2.0 GPA in accounting is more qualified than a two-term mayor or sitting Member of the Assembly.

In May of 2014 it was reported that the State Controller’s Office made tens of billions of accounting mistakes. At times, the word “mistake” carries the connotation of a minor oversight.  Unfortunately in this instance these “minor oversights” ran up a tally of $31.65 billion in errors. That’s more than the gross domestic product of Iceland and Jamaica combined.

However, under the auspices of AB 1948, any of the individuals who had a hand in those accounting errors would be a “qualified” candidate for county treasurer, as long as they had served at the Controller’s Office for a minimum of three years. By contrast, a State Senator with eight years’ of service in the Legislature as a sitting member of the Budget or Governance and Finance Committee may not be “qualified” to run for county treasurer depending upon their educational background.

One final example demonstrates how the provisions of the bill would preclude otherwise educated, experienced and well-meaning candidates from serving their community.  While speaking in favor of the bill during the June 11, 2014 Senate Governance and Finance Committee hearing, former Chairman of the Joint Legislative Audit Committee and Speaker pro-tempore of the Assembly, Fred Keeley, noted that had this legislation been in place several years ago, he would not have been able to serve in his current position as the Treasurer of Santa Cruz County.

The Policy Considerations of Protecting Taxpayer Dollars

Over the course of the 2012 fiscal year, California’s County Treasurer Tax Collectors were responsible for $60 billion. Proponents note that with that amount of taxpayer dollars at stake, citizens deserve as much assurance as possible that their hard-earned tax dollars are being used effectively. 

Yet, if the rationale being used for the bill rests on providing taxpayers greater assurances that their tax dollars are being effectively utilized and managed, then AB 1948 falls far short of its respective goal on that front as well. Despite annually dealing with billions of taxpayer dollars, none of the following California State government elected positions requires any minimum standards associated with financial dealings:

Governor
Treasurer
Controller
Senators
Assembly Members

Legislative Precedent?

Proponents rightfully hold up as their primary example for the necessity of the bill as the 1994 Orange County bankruptcy case. In response to the bankruptcy filing on December 6, 1994, by Orange County and the Orange County Investment Pool, which lost more than $1.5 billion in high-risk investments, Former Senator Bill Craven (R-Oceanside) introduced SB 866 which established optional criteria that boards of supervisors may adopt that specifies educational and work experience thresholds in order to stand for election or appointment.

The difference between SB 866 and AB 1948 however is that the former was made effective at the local level of governance only if a county's board of supervisors enacts an ordinance to adopt those requirements, which the board may repeal at any time

By contrast, AB 1948 makes these professional qualifications mandatory, instead of at the discretion of each county board of supervisors, and requires them for the offices of director of finance, consolidated director of finance, or any office consolidated with the office of treasurer or tax collector, beginning January 1, 2015.

Summing It Up

The core quality of our government is the mobilization of private responsibility, initiative, and trust in the voluntary association of citizens. This is the great “leap-of-faith” which in part defines our democracy. We trust the voters of our state to utilize their right to control their own destiny by marking their choices down on a ballot every election.

It is true that a ‘tragedies of the commons’ loom large harboring the potential for irrational effects and outcomes which may from time to time result from our democratic system. However, it is fair to question whether the correct response to that potential tragedy is to constrict choice, and replace it with the false choice of arbitrary standards.

When we limit choice we disallow successful local leaders to prove their qualifications while serving their community.

For more information on this report or other local government issues, contact Ryan Eisberg, Senate Republican Office of Policy at 916/651-1501.