Chapter 1 General Government - The California Performance Review

GG 02The California Performance ReviewAdditional Tax Collection and Audit Staffwill Generate Additional Tax RevenueSummaryAdditional tax collection and audit staffing will generate an increase in state revenue throughaudit assessments and collection of tax dollars owed.BackgroundIn the past year, California’s revenue collection entities have been reduced by more than 1,000staff years:• The Board of Equalization (BOE) had 3,668 staff years in Fiscal Year 2002–2003. The FY2004–2005 budget proposes 3,462 staff years, which represents a loss of 206 staff years; 1• The Franchise Tax Board (FTB) had 5,746 staff years in FY 2002–2003.FY 2004–2005 budget proposes 5,075 staff years, which represents a loss of 671 staffyears; 2 and• The Employment Development Department’s (EDD) Tax Branch will lose more than 100staff years in the proposed FY 2004–2005 budget. 3Staffing reductions have had the unintended consequence of impeding the collection of taxesowed the state. The EDD Tax Branch, BOE and FTB’s Tax Branch are having difficultyincreasing revenue collections under existing budget allocations.As a stop-gap measure, EDD has redirected staff to critical areas such as cashiering ofcollections. Other EDD employees have been redirected from support functions, auditing andcollection areas to maintain the flow of revenue. The FTB and the BOE have also redeployedstaff in order to maintain revenue collections. 4EDD, FTB and BOE have identified the following strategies to enhance tax revenue collections.VacanciesEDD has 22 vacancies in its Tax Branch. If these vacancies were filled, at an already budgetedcost of $1.7 million, they would produce an additional $4 million each year for theUnemployment Trust Fund, Disability Insurance Trust Fund and in the collection of personalincome taxes. 5 However, hiring freezes can be imposed in the future that can lead to the sameresult of maintaining vacancies in revenue-producing entities at the very time when suchrevenues are most needed.A Government for the People for a Change 13