Monday, August 09, 2004

The California Performance Review - Episode IV: The Lies of the Jedi

The 2,500 page report from der Gövernor’s State Performance Review claims that its recommendations will save California $32 billion over the next five years, and help the state solve its pressing fiscal crisis without higher taxes. Wow! $32,000,000,000.00! Manna from Heaven! Win Free Money!

Unfortunately, this claim is fraudulent, spurious, sham, bogus and fake. We've seen that the Performance Review reflects a Hollywood movie approach to state government, so let’s look at how the Star Wars special effects department fabricated the number the report uses for the biggest claimed “savings”, one that by itself amounts to $8.2 billion.

"The dark side clouds everything. Impossible to see the future is."

Recommendation GG07 “Maximize Federal Grant Funds” is supposed to benefit the State by $8.2 billion over five years. The problem now, it seems, is that California does not get its fair share of Federal grant money. The proposed solution is aggressive grant seeking under the centralized control of a new special unit in der Gövernor’s office. How do we know that the money is really there? Because, says the report:

“A recent audit conducted by the California Bureau of State Audits found that federal grants received by California in FY 2001-2002 were $5.3 billion less than an allocation based on population share alone.(fn 3) If current population data had been used to compute federal formula grants, California would have received more than $48 billion in federal funds rather than $42.7 billion actually received.”

In der Gövernor’s California, nobody reads footnotes. If they had, they would find that the audit report actually said:

“Overall, California's share of total federal grant awards is slightly less than its 12 percent share of the nation's population (population share). During fiscal year 2001-02, California received $42.7 billion, or 11.8 percent of the total amount of federal grants awarded. We reviewed the 86 grants accounting for 90 percent of total nationwide federal grant awards in fiscal year 2001-02. California's share of 50 of these grants exceeded 12 percent, providing $4.9 billion more than an allocation based on population share alone. California's share of the remaining 36 grants was $5.3 billion less than an allocation based on population share alone. Several factors come into play when the federal government awards federal grants. Some are under the State's control and some are not.”

So the Performance Review team got that $5.3 billion by counting only those cases where California got less than 12%, and ignoring all the grants that gave California more than 12%. (The technical academic word for this sort of half-quote is “dishonest.”) What passes for a special effect is really just kindergarten math: “You got an apple and I got an orange, so my fair share is half of your apple.” And why did some grants fall below the population percentage? Did our former governors fail to shake the Federal money tree hard enough? No, the State Audit Bureau report actually found (p. 11) that at present:

“State agencies are doing a good job of identifying new or expanded grant funding, using the Federal Register to identify new funding possibilities and pursuing other sources of information, such as the Web sites of federal awarding agencies."

So why don’t we get more money? The Audit Bureau report explains that California's share is below its population percentage for:

Other grants, we learn, have been lost because of differences in federal and state policies, lack of state matching funds, or failure to comply with federal guidelines. A shortage of qualified staff to handle the application process is also a problem:

“Finally, the statewide hiring freeze has limited agencies from spending available federal funds on grants staff, and a pending budget cut of 10 percent in personnel costs may further limit federal funds for staff.”

(Fade and segue to Performance Review Recommendation SO43, which is to reduce personnel costs by cutting back on replacing state employees when they retire.)

So who is responsible for the selective quotations and for taking the State Audit Bureau findings out of context? And how did they arrive at that $8.2 billion number?

"Clear your mind must be, if you are to discover the real villains behind this plot".

It seems that der Gövernor brought soft-spoken Billy Hamilton all the way from Texas to be the “Yoda-type character” behind the Performance Review. And being from Texas, Billy-Bob Yoda naturally remembered how much better things are in the Lone Star state when it came time for him to tell Californians what they are doing wrong:

“If federal grants were distributed to the states based on population share alone, an additional $5.3 billion would be received by the state. (fn 24) Texas increased the amount of federal funds it received by 6 percent in FY 2004–2005. (fn 25) If California achieved the same level of increase that Texas has achieved, it would result in an additional $2.6 billion in federal funds once full implementation has occurred.

But footnotes tricky things can be. Twisted and misrepresented, just like the others, these perhaps are? Look closely we should.

"(24) California State Auditor, Bureau of State Audits, "Federal Funds: The State of California Takes Advantage of Available Federal Grants, but Budget Constraints and Other Issues Keep It From Maximizing This Resource," p. 1. Audited numbers obtained from the audit work papers. The $5.3 billion is based on audit work papers C4.1-2.4/1."

But – that’s the same State Audit Bureau report we've seen already. The one with the other numbers that the Performance Review forgot to mention. The one that shows California would *lose* $4.9 billion from the other 50 grant programs if all grants were allocated solely on the basis of population.

"(25) Texas Office of State-Federal Relations, "Texas Federal Priorities 108th Congress, 2nd Session," p. 1. Assumption: Texas increased their federal dollars by 6% in Fiscal Year 2004-2005. The 6% is an increase of total federal dollars allocated to Texas. They went from $37.03 billion in FY 2002-2003 to $39.2 billion in FY 2004-2005. This is an increase of $2.17 billion."

Something is strange here. There's a year missing -- FY 2003-04 should come after '02-03 and before '04-05. Count correctly Yoda cannot. Let's see the original source: “Federal funds are the second largest segment of the Texas state budget, accounting for $39.2 billion, or more than one-third of FY 2004-2005 appropriations. Compared with the FY 2002-2003 biennium, budgeted Federal funds rose by $2.17 billion, an increase of almost 6 percent.” Biennium --little word meaning "two years". Little word saw Yoda not.

The fact that Federal funds in the Texas budget may have increased by 6% from '02-03 to '04-05 doesn't prove very much, and certainly doesn't support Yoda's claim that California can reap a windfall by making der Gövernor into the chief Grant-Stalker. Where's the evidence that the Texas Office of Federal-State Relations was the cause of that 6% increase, or indeed of any increase at all? Of course Texas will get more Federal money in FY '04-05, because the Feds are spending more money – Federal budget data (at p. 22) show total outlays rising from $2,157 billion in FY ’02-03 to $2,318 in ’03-04 (up 7.5%) and project an additional 3.5% increase to $2,399 billion in FY ’04-‘05. Yoda appears to be giving the Texas Office of Federal-State Relations the credit for grant increases that more likely stem from the passage of time and the regular motion of the earth around the sun.

The Performance Review takes that 6% biennial increase in Federal dollars budgeted by Texas and multiplies it by the $42 billion that California now gets in Federal grants to get $2.6 billion. This figure is then arbitrarily allocated over five years, supposedly to reflect the phase-in of the change. The five year total is the $8.2 billion. Just concentrate all the power of state government into the charismatic hands of Gövernor Grant-Stalker and the money will appear as if by magic. Cut! Where's the stunt man? That's show biz -- a meaningless calculation, an irrelevant result, and a dazzlingly huge number appears on the screen. Incredible!

And that's how the Performance Review generates the numbers to support its recommendations. What at first looks like industrial light & magic is really just the usual creative accounting, Hollywood style. Why not claim a savings from multiplying 93,000,000 -- the distance in miles from the earth to the sun -- by 98.6 -- the temperature of a healthy person in degrees farenheit? The result is about the same size, and the method is equally valid.

But government is more than theatre. You can’t shoot retakes to cure botched decisions, and you can’t fix highways with paint and paper mache. The thousands of real people in state offices whose jobs are now on the line are more than a mob of extras paid by the day. How can any responsible public official propose a total revamp of state government when 25% of the asserted savings turns out to be the imaginary product of irrelevant numbers and distorted quotes? There’s only one possible conclusion -- and this recent photograph of Billy Hamilton meeting with Governor Schwarzenegger clinches it:

“The dark side of the Force gone over to Yoda has!”

It's a wrap!

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