The operational functions performed by the Department of Finance, the Department of General Services, the Department of Personnel Administration and the State Personnel Board should collectively serve as the backbone of state government, yet the functions they perform are so fragmented that strategic management and efficient operation is currently impossible.

An analysis by the California Performance Review found the following four specific problems with this system:

The Governor and the Legislature do not have access to the information necessary to make strategic decisions.
Real-time information about state operations is not currently available. For instance, California does not have timely access to information about its spending patterns, and performance measures are not used to evaluate the effectiveness of government programs.
The authority to make key management decisions is fragmented.
Functions such as personnel, budgeting and asset management are performed by four state agencies for all of government and are duplicated, in many cases, at the individual department level. As a result, it is impossible to make government-wide decisions about issues including staffing and procurement.
California has not adequately prepared for the impending human capital crisis.
More than a third of the state’s workforce is expected to retire in the next five years. This includes some of California’s most seasoned and valuable managers. However, despite warnings from the State Controller and the Little Hoover Commission, California has not completed a statewide workforce plan.
California does not effectively leverage its buying power for the procurement of information technology and other goods and services.
The lack of a statewide procurement strategy results in significant, and avoidable, state expenditures. By consolidating California’s administrative functions, the state could more effectively leverage its buying power and save hundreds of millions of dollars on an annual basis.

The mission of the Office of Management and Budget should be to provide administrative services and oversight to all areas of state government and to make sure that taxpayer dollars are used most efficiently. Consolidation of administrative services should not only reduce costs, but should increase the quality of service to state agencies and the public. Consolidating overhead functions should allow the state to leverage its size, utilize best practices and put the best people in charge of critical operational areas.

The goals of the Office of Management and Budget should be to:

• Identify and implement best-practices in fiscal management statewide;
• Conduct performance reviews and financial audits of state government programs;
• Provide support services in technology, human resources, financial management and procurement; and
• Administer public retirement and benefit systems.

The foremost goals of the Office should be efficiency and customer service. This streamlined, integrated and coordinated structure should maximize efficiency in the performance of each program within the Office and, ultimately, enable customer departments to spend less time and effort on administrative and bureaucratic activities and more time achieving program goals.

To meet the challenges of the 21st century, California should consolidate procurement, personnel management, financial services, asset tracking and information technology services into an Office of Management and Budget. This Office should consist of following seven divisions:

• Technology Division;
• Fiscal Affairs Division;
• California Performance Review Division;
• Business Services Division;
• Personnel Management Division;
• Regulatory Affairs and Adjudication Division; and
• Retirement Benefits Division.

This organizational framework is depicted in Exhibit 11.

The Director of the Office of Management and Budget should be responsible for the management of the state’s fiscal affairs, personnel management, and procurement systems and in conjunction with the State’s Chief Information Officer should have responsibility and authority for statewide strategic planning and coordination of technology, including policy and standards development as well as business process analysis.

Technology Division:
Management Goal:
The goal of the Technology Division should be to implement responsive technology solutions that support state operations in a cost effective manner. In addition, the Division should deliver services in a timely, transparent and accessible manner. This principal technology organization should provide statewide direction for a customer focused transformation of government operations through the exploration and application of technologies across organizational boundaries–employing shared services, interoperable systems and common infrastructures.
Proposed Functions:
The Technology Division should be charged with implementing the statewide strategic plan and promulgating technology policies.
The Division should be comprised of five branches:
• Consolidated Technologies Branch;
• Project Management Branch;
• Research and Development Branch;
• Technology and Systems Acquisition Branch; and
• Telecommunications Branch.
The Consolidated Technologies Branch should contain the California State Data Center, comprising the Stephen P. Teale Data Center and the Health and Human Services Data Center. This entity should provide data center, network, security, centralized systems and storage, enterprise applications and planning and consulting services to all agencies.
The Project Management Branch should function as the state’s project management office. This organization should produce statewide project management standards and methodologies. In addition, it should provide oversight on projects to ensure their success.
The Research and Development Branch should be tasked with investigating new and emerging technologies and plan for their integration into state government.
The Technology and Systems Acquisition Branch should be charged with the procurement functions of large or sensitive technology systems and leveraged technology procurements for all agencies.
The Telecommunications Branch should have a mandate for planning, implementing and maintaining a converged and integrated statewide telecommunications infrastructure.
Transferred Functions:
The functions of the Stephen P. Teale Data Center, the Health and Human Services Data Center, the Technology Investment Review Unit, Technology Oversight and Security Unit and California State Accounting and Reporting System of the Department of Finance, the Telecommunications Division, eGovernment Initiatives Division and Technology Acquisition Section of the Department of General Services and the Office of the Chief Information Officer within the Office of Planning and Research should be transferred to this Division. In addition, specific technology support personnel and telecommunications support personnel from departments should be transferred to the Technology Division.

Fiscal Affairs Division
Management Goal:
The goal of the Fiscal Affairs Division should be to support the effective and efficient operation of state programs by providing direction, guidance and control of financial operations to achieve program objectives.
Proposed Functions:
The Division should be responsible for statewide financial planning, accounting, budgeting and auditing functions.
Transferred Functions:
The fiscal and budget functions of the Department of Finance should be transferred to this Division.

California Performance Review
Management Goal:
The goal of the California Performance Review Division should be to carry out, on a continuous basis, a detailed examination of program delivery and performance of state agencies to identify ways to enhance service delivery and to develop and implement business process improvements. Additionally, the Division should monitor, track and measure performance and productivity indicators and should establish performance milestones and report the state’s progress in achieving these milestones to the Governor on a regular basis.
Proposed Functions:
The functions of this Division should include: the analysis of key services provided by departments; an analysis of performance management practices; and developing policy recommendations to reduce the total cost of government operations, increase productivity and improve the quality of government services.
Transferred Functions:
The functions of the Performance Review Unit of the Department of Finance should be transferred to this Division.

Business Services Division
Management Goal:
The goal of the Business Services Division should be to strategically support the operation of statewide programs by facilitating business management operations in the areas of: asset management, fleet administration, business services, procurement and contracting, consultant and project management, risk and insurance management and printing and digital management services.
Proposed Functions:
The function of the Business Services Division should be to create a comprehensive and consistent approach to business management. Moving these components into this Office should create a seamless system of process oversight providing a more effective business management structure with enhanced service delivery. Consolidating these functions into this Division should facilitate the development and application of consistent business management systems, policies and standards throughout state government.
Transferred Functions:
The existing functions of the Department of General Services, with the exception of the Office of Fiscal Services, the Office of Legal Services, the Statewide eGovernment Initiatives Office and the Telecommunications Division (The California 9-1-1 Emergency Communications Office, The Office of Public Safety Radio Service and the Office of Network Services), should be transferred to the Business Services Division.

Human Resources Division
Management Goal:
The goal of the Division should be to promote a comprehensive personnel management system for the State of California that is based on merit, treats applicants and employees equitably and compensates employees fairly. The definition of merit developed by the State Personnel Board should serve as a guide for this new system.
Proposed Functions:
The Division should consolidate the personnel functions of the State Personnel Board and the Department of Personnel Administration. The State Personnel Board, which is constitutionally mandated, should continue to serve as a hearing and appellate body for reviewing state disciplinary actions as well as other merit oversight activities. The Division should oversee benefits, operations, policy, strategic workforce planning, Equal Employment Opportunity, employee-employer relations, labor relations and legal support.
Transferred Functions:
All of the existing functions of the Department of Personnel Administration should be transferred to the Division. In addition, all of the non-appeal functions of the State Personnel Board should be transferred to the Division. The State Personnel Board should establish a coordinating relationship with the Division.
Regulatory Affairs and Adjudication Division
Management Goal:
The goal of the Regulatory Affairs and Adjudication Division should be to provide for the effective review of the rulemaking process and the hearing of administrative and mandate disputes. In addition, the Division should carry out the responsibilities of the Government Claims Program.
Proposed Functions:
Although all four entities should be merged into a single division, they should remain independent in the performance of their functions. However, the review of government claims should be split from the Victims Compensation and Government Claims Board. The Office of Administrative Hearings should continue to provide both adjudication and dispute resolution services and the Office of Administrative Law should continue assisting state agencies in reviewing proposed administrative regulations. The Commission on State Mandates should continue to adjudicate claims by local entities that allege the existence of reimbursable statemandated programs, decide claims against the Controller and determine the existence of significant financial distress for applicant counties that seek to reduce their general assistance standards of aid. The Government Claims Program should also continue to resolve claims filed against the State of California and administer special programs mandated by the Legislature for the purpose of providing appropriate specified financial relief for people who have incurred damages due to natural disasters, or through the action or inaction of state government.
Transferred Functions:
The existing functions of the Office of Administrative Hearings, the Office of Administrative Law, the Commission on State Mandates and the Government Claims Program within the Victim Compensation and Government Claims Board should be transferred to this Division.

Retirement Benefits Division
The Retirement Benefits Division should consist of the current State Teachers’ Retirement System, the California Employees’ Retirement System and the Boxer’s Pension program which is currently part of the Athletic Commission. The organization of these entities should not be altered, and a coordinating relationship should be developed with this Division.

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