DOCUMENTS DZrA^TMENf.
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PUBLIC LIBRARY
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DOCUMENTS DEPARTMENT
VOLUME TWO
Appendix to the Journa
of the Assembly
LEGISLATURE OF THE STATE OF CALIFORNIA
1967 REGULAR SESSION
REPORTS
January 2, 1967-September 8, 1967
HON. JESSE M. UNRUH
Speaker
HON. GEORGE ZENOVICH
Majority Floor Leader
HON. CARLOS BEE
Speaker pro Tempore
HON. ROBERT MONAGAN
Minority Floor Leader
JAMES D. DRISCOLL
Chief Clerk of the Assembly
68 15
SAN FRANCISCO
PUBLIC LIBRARY
VOLUME TWO
Government Organization
y Volume 12, Number 12 — Organization of the Executive Branch
Finance and Insurance, Interim Committee on
Volume 15, Number 28 — Part I : Workmen's Compensation ; Unemployment Insur-
ance for Farm Workers
' Volume 15, Number 29 — Part II : Various Subjects
Public Utilities and Corporations, Interim Committee on
y Volume 16, Number 10 — Final Report
Social Welfare, Interim Committee on
S Volume 19, Number 14 — A Review of Rehabilitation Policies and Programs
Ways and Means, Interim Committee on
.^-"Volume 21, Number 15A — Proposed California World's Fair at Corona in 1969
^y Volume 21, Number 16 — The California Buy American Act
^Volume 21, Number 17 — Leasing of Del Mar Track
^ Volume 21, Number 18 — Drug Prices
^Volume 21, Number 19 — Services for Handicapped Children
^ Volume 21, Number 20 — Costs of Medical Education
^r Volume 21, Number 21 — Report of Subcommittee on Indian Problems
Criminal Procedure, Interim Committee on
* Volume 22, Number 9 — Narcotics Control
olume 22, Number 10 — Delinquency Control
Volume 22, Number 12 — Search and Seizure, Preemption, Watts, Firearm Control
Judiciary, Interim Committee on
^Volume 23, Number 8 — Final Report of the Subcommittee on Free Press-Fair
Trial
Military and Veterans Affairs, Interim Committee on
/ Volume 24, Number 4 — California's Civil Defense and Natural Disaster Program
Volume 24, Number 5 — California Veterans Benefits
Water, interim Committee on
/ Volume 26. Number 15 — Recreation Costs at Water Projects
/ Volume 26, Number 17 — State and Local Responsibilities for Water Resources
Constitutional Amendments, Assembly Interim Committee on
/ Volume 27. Number 4 — Constitutional Revision in California
/ Volume 27, Number 5 — The Initiative and the Effective Dates of Statutes
SUPPLEMENT TO ASSEMBLY JOURNAL APPENDIX
Social Welfare, Interim Committee or
Volume 19, Number 15 — Protective Services for Children
Natural Resources, Interim Committee on
Volume 25, Number 5 — Conflict in the Redwoods
Volume 25, Number 6 — Highway Beautification
Water, Interim Committee on
Volume 26, Number 16 — New Horizons in California Water Development
Joint Legislative Retirement Committee
Management Survey of the State Teachers' Retirement System
( 3 )
VOLUME TWO
Appendix to the Journa
of the Assembly
LEGISLATURE OF THE STATE OF CALIFORNIA
1967 REGULAR SESSION
REPORTS
January 2, 1967-September 8, 1967
HON. JESSE M. UNRUH
Speaker
HON. GEORGE ZENOVICH
Majority Floor Leader
HON. CARLOS BEE
Speaker pro Tempore
HON. ROBERT MONAGAN
Minority Floor Leader
JAMES D. DRISCOLL
Chief Clerk of the Assembly
VOLUME TWO
Government Organization
Volume 12, Number 12 — Organization of the Executive Branch
Finance and Insurance, Interim Committee on
Volume 15, Number 28 — Part I : Workmen's Compensation ; Unemployment Insur-
ance for Farm Workers
Volume 15, Number 29 — Part II : Various Subjects
Public Utilities and Corporations, Interim Committee on
Volume 16, Number 10 — Final Report
Social Welfare, Interim Committee on
Volume 19, Number 14 — A Review of Rehabilitation Policies and Programs
Ways and Means, Interim Committee on
Volume 21, Number 15A — Proposed California World's Fair at Corona in 1969
ATolume "21, Number 16 — The California Buy American Act
Volume 21, Number 17 — Leasing of Del Mar Track
Volume 21, Number 18 — Drug Prices
Volume 21, Number 19 — Services for Handicapped Children
Volume 21, Number 20 — Costs of Medical Education
Volume 21, Number 21 — Report of Subcommittee on Indian Problems
Criminal Procedure, Interim Committee on
Volume 22, Number 9 — Narcotics Control
Volume 22, Number 10 — Delinquency Control
Volume 22, Number 12 — Search and Seizure, Preemption, Watts, Firearm Control
Judiciary, Interim Committee on
Volume 23, Number 8 — Final Report of the Subcommittee on Free Press-Fair
Trial
Military and Veterans Affairs, Interim Committee on
Volume 24, Number 4 — California's Civil Defense and Natural Disaster Program
Volume 24, Number 5 — California Veterans Benefits
Water, Interim Committee on
Volume 26, Number 15 — Recreation Costs at Water Projects
Volume 26, Number 17 — State and Local Responsibilities for Water Resources
Constitutional Amendments, Assembly Interim Committee on
Volume 27, Number 4 — Constitutional Revision in California
Volume 27, Number 5 — The Initiative and the Effective Dates of Statutes
SUPPLEMENT TO ASSEMBLY JOURNAL APPENDIX
Social Welfare, Interim Committee on
Volume 19, Number 15 — Protective Services for Children
Natural Resources, Interim Committee on
Volume 25, Number 5 — Conflict in the Redwoods
Volume 25, Number 6 — Highway Beaufification
Water, Interim Committee on
Volume 26, Number 16 — New Horizons in California Water Development
Joint Legislative Retirement Committee
Management Survey of the State Tenchers' Retirement System
( 3 )
CALIFORNIA LEGISLATURE
Volume 12 Number 12
ASSEMBLY INTERIM COMMITTEE
ON GOVERNMENT ORGANIZATION
ORGANIZATION OF THE EXECUTIVE BRANCH
MEMBERS
MILTON MARKS, Chairman
WILLIAM T. BAGLEY DON MULFORD
TOM CARRELL ALAN G. PATTEE
JACK T. CASEY WALTER W. POWERS
HARVEY JOHNSON W. BYRON RUMFORD
LESTER A. McMILLAN EUGENE A. CHAPPIE
BOB MORETTI
STAFF
Judson Clark, Committee Consultant
Alma Ricker, Committee Secretary
Doris Barmby, Secretary
Published by the
ASSEMBLY
OF THE STATE OF CALIFORNIA
HON. JESSE M. UNRUH HON. CARLOS BEE
Speaker Speaker pro Tempore
HON. GEORGE ZENOVICH HON. ROBERT MONAGAN
Majority Floor Leader Minority Floor Leader
JAMES D. DRISCOLL
Chief Clerk
TABLE OF CONTENTS
Page
I. Executive Initiated Reorganization Plans 9
Findings 10
Recommendations 11
Separation of Powers Doctrine 14
Reorganization Objectives 16
The Federal Precedent 17
An Enabling Statute . 18
Limitations on Reorganization Objectives 20
A Conditional Delegation 21
An Independent Review 22
Summary 24
Appendices
A. Federal Reorganization Proposals 27
B. Reorganization in the States 32
C. Constitution Revision Commission Minority Report 34
D. Legislative Counsel's Opinion No. 8225 38
II. The 1961 Reorganization 41
Findings 42
Recommendations 43
The Agency Concept 46
The Governor's 1961 Message 47
1961 Legislature 47
"Little Hoover Commission" Evaluation 49
The Governor's 1963 Message 50
The Role of the Agency Administrator 51
Summary 53
The Executive Office Proposal 54
The 1961 Reorganization 55
Summary 57
Appendices 59
A. The Executive Office of the President 61
B. The Office of Governor in California 63
III. Department of Revenue 69
Appendix 75
IV. Department of General Services 81
Summary 87
Appendices 89
A. Letter Addressed to Each Administrator of an
Operating Agency 91
B. Letter From Director of General Services Responding
to Agency Administrators' Letters 127
C. Newspaper Series 153
(3)
LETTER OF TRANSMITTAL
Honorable Jesse M. Unruh
Speaker of the Assembly
and Members of the Assembly-
Gentlemen :
Your Interim Committee on Government Organization, in accord-
ance with your instructions, herewith submits a report on the organiza-
tion of the executive branch of California state government pursuant
to House Resolution No. 710 of the 1965 Regular Session of the Legis-
lature.
It has been said of the efforts of the last 50 years to reorganize the
basic structure of the executive branch of government in the various
states that "the problem of executive organization in state government
across the nation is as pressing and difficult now as at any time in the
past half -century of reorganization activity. ' ' x
It can further be said that similar observations concerning the
"pressing and difficult" state of state executive organization have been
consistently repeated with unfailing regularity by each new task force,
commission or committee of reorganizers from the earliest to the most
recent.
The recurring theme which has dominated these studies is (1) con-
solidation of all administrative agencies into a small number of depart-
ments organized by function, (2) establishment of clear lines of au-
thority running from the Governor at the top of the heirarchy through
the entire organization accomplished by both a shortening of the ballot
through elimination of most elective administrative officials and giving
the Governor powers of appointment and removal over all department
heads, and (3) development of appropriate staff agencies with direct
responsibility to the Governor.
The obvious conclusion that can be drawn from such repetition of
objectives over the years is that state reorganization efforts have either
been uniformly unsuccessful or proponents of reform have consistently
overstated both the extent of the reorganization "crisis" and the
urgent necessity for change.
Perhaps both conclusions are in large part true. Few observers of
reorganization activity would take exception to Professor James Bell's
statement that "those who labor in the administrative reorganization
vineyard generally receive a meager. harvest. " 2 Yet, there have been
some important reorganizations of the actual structure of our state gov-
ernments.
Perhaps more significant, however, have been accomplishments in
executive management such as improvements in budgeting procedures,
accounting and auditing, personnel administration, long-range planning
and the introduction of data processing as a management tool, and
1 James R. Bell and Earl L. Darrah, State Executive Reorganization, Bureau of
Public Administration Legislative Problems series (1961 Legislative Problems
No. 3), University of California (Berkeley, California: February 19 61), i.
*IWd., 98.
(5)
6 ORGANIZATION OF THE EXECUTIVE BRANCH
these changes have not been predicated on fundamental alterations of
the actual structure of the executive branch. And yet, it is these im-
provements in administration which have been the major reason for
California's enviable reputation as a leader among the states.
This conclusion does not diminish the importance of changes in the
actual structure of the executive branch. In the first place, great satis-
faction should not necessarily be drawn from comparison of Califor-
nia's state government administration with the standard of the other
states; and secondly, strong arguments for specific reorganizations can
be made.
This report is not an attempt at a comprehensive survey of all of the
needed reorganizations of the executive branch.3 It does not address
itself to the fundamental policy questions of the growth of services pro-
vided by state government. Nor is it intended as a directive to the exec-
utive outlining specific reorganizations which must be undertaken.
A fundamental premise of our American governmental system is that
administrative organization is the mutual responsibility and concern of
both the legislative and executive branches. The committee firmly be-
lieves that it is imperative that reorganization be viewed as a matter of
maximum cooperation among the two branches. The greatest service to
the people can be rendered by enabling both the Legislature and the
Executive to more effectively perform their constitutional responsibili-
ties.
The overwhelming approval by the voters on November 8, 1966, of
the revision of the California Constitution presented as Proposition 1A,
has given new emphasis to these objectives. With this in mind, and at
this particular time of changeover from one administration to another,
this committee feels compelled to set forth for consideration several
issues bearing on the organization of the executive branch. These in-
clude an analysis of the advisability of vesting in the Governor the au-
thority to propose executive reorganization plans (Part I) ; an evalua-
tion of the top-level administrative structure of the executive branch as
embodied in the " agency concept" of the 1961 reorganization (Part
II) ; a reaffirmation of the often repeated recommendation on the need
for a central revenue department (Part III) ; and a review of the cen-
tral staff functions performed by the Department of General Services
since its creation in 1963.
All of these studies were conducted under the able chairmanship of
the Honorable Milton Marks, who resigned as a Member of the Assem-
bly on October 25, 1966, to assume the duties of Judge of the San Fran-
cisco Municipal Court. Your committee wishes to acknowledge the long-
standing efforts of Milton Marks in behalf of a more efficient and
economical state government and to express its gratitude for the able
and energetic leadership he contributed to the work of this committee
during his tenure as chairman.
The committee also wishes to acknowledge and express its apprecia-
tion for the excellent work done by the committee staff in the conduct
of this study and the preparation of this report. In particular, Joe
Shafer, of the Assembly Legislative Keference Service, who assisted in
3 For an excellent and comprehensive survey of the development of state reorganiza-
tion in the 50 states as well as an account of California's organizational history
see Bell and Darrah, 1-54.
ORGANIZATION OF THE EXECUTIVE BRANCH 7
all phases of this study and prepared the excellent background papers
on the federal experience with executive initiated reorganization and
the organization of, and development of the executive office of the
President, is to be commended.
Legislative Analyst A. Alan Post provided the committee with a
report on the development of the "agency plan" of organization to-
gether with his comments. The committee also received a report from
the office of Auditor General William H. Merrifield on the feasibility of
combining the tax-revenue auditing of the principal tax administrative
agencies of state government.
The committee also wishes to commend the work of the Commission
on California State Government Organization and Economy, particu-
larly for their continuing review of the programs administered by the
Department of General Services.
Respectfully submitted,
Eugene A. Chappie *
Vice Chairman
William T. Bagley Bob Moretti
Tom Carrell Don Mulford
Jack T. Casey Alan G. Pattee
Harvey Johnson Walter W. Powers
Lester A. McMillan W. Byron Rumford
While all of the recommendations included in the report received the support of a
majority of the members of the committee, the listing of names on the letter of
transmittal is not intended to infer support of each recommendation by every
member of the committee.
I. EXECUTIVE INITIATED
REORGANIZATION PLANS
FINDINGS
1. Organization of the administrative structure of the executive
branch is a shared responsibility of the Executive and the Legislature.
2. The administrative structure of California state government has
not kept pace with the rapid changes in social and economic conditions
so as to most efficiently and economically meet the needs of its citizens
for government services.
3. Since 1933, Congress has delegated to the President authority to
initiate executive reorganization plans which become effective unless
specifically disapproved by either house of Congress.
4. That authority has been used extensively by each of the chief
executives since President Hoover and has been found to be an effective
method for making the machinery of the federal government more
adaptable to the ever-changing requirements of administration.
5. In November 1966 California voters approved a revision of the
Constitution, submitted as Proposition 1A, permitting the Legislature
to vest authority in the Governor to initiate plans for reorganization of
the executive branch.
6. Executive-initiated reorganization, if properly structured, can
afford a method to facilitate the Governor's performance of his respon-
sibilities with the full cooperation and assistance of the Legislature in a
more efficient and flexible manner that will significantly promote sound
organization and management of the executive branch.
(10)
RECOMMENDATIONS
1. The committee recommends the enactment of an enabling statute
in accordance with Section 6 of Article V of the Constitution to permit
the Governor to initiate reorganizations of the executive branch which
would become effective unless disapproved by resolution of either house
of the Legislature.
2. The committee supports the inclusion of a two-year limitation in
any enabling statute granting the Governor reorganization authority so
that the delegation would not be binding on future Legislatures and
the decision to continue or terminate that authority may be freely ex-
ercised.
3. The concept of executive-initiated reorganization as a cooperative
approach rests upon the essential element of a subsequent legislative
determination that the Governor is exercising his delegated authority
in conformity with the legislative purpose. The committee supports the
method of disapproval by resolution adopted by simple majority vote of
either the Senate or Assembly.
4. The committee also recommends that before the Governor submits
proposed reorganizations to the Legislature that he first submit them to
the Commission on California State Government Organization and
Economy to provide the Governor and the Legislature with a separate
and independent review.
(11)
In November 1966 the voters approved a revision of the California
Constitution, submitted as Proposition 1A, thereby giving the Legisla-
ture authority to adopt an entirely new procedure for the enactment of
executive reorganization plans.1 The new section added to the Constitu-
tion specifies that
Authority may be provided by statute for the Governor to assign
and reorganize functions among executive officers and agencies and
their employees, other than elective officers and agencies admin-
istered by elective officers.2
This new constitutional language grants express authority to the Leg-
islature to permit executive initiated reorganization of all agencies of
state government other than agencies administered by elective officers.
The argument for including such a provision in the Constitution was
debated by the Constitution Eevision Commission at the insistence of
several commission members.3 Although unsuccessful in obtaining a
majority vote on its inclusion, those members speaking for it filed a
minority report supporting their position as part of the commission's
report to the Legislature :
We believe the Legislature should have the authority to enact leg-
islation which would give the Governor the right to initiate execu-
tive reorganization subject to subsequent legislative veto. Such
1 Proposition 1A was approved by 4,129,558 in favor to 1,475,680 opposed. The re-
vision resulted from a study and report by the Constitution Revision Commission
and was approved by the Legislature for submission to the electorate as Assem-
bly Constitutional Amendment No. 13 (1966).
2 Article V, Section 6, California Constitution.
3 Minutes of Constitution Revision Commission, December 16, 1965.
(13)
14 ORGANIZATION OF THE EXECUTIVE BRANCH
authority is contained in the model state constitution, in the con-
stitutions of other states and is substantially the same as that exer-
cised by the President of the United States.4
A 1959 opinion of the Legislative Counsel was also cited in the minor-
ity report to demonstrate the need for an amendment to the Constitu-
tion.5 In the opinion, Legislative Counsel contended that certain provi-
sions of the California Constitution specify strict requirements for the
passage of legislation and permitting the Governor to propose reorgan-
ization plans subject only to legislative disapproval "runs afoul" of
these constitutional provisions.
As introduced, Assembly Constitutional Amendment No. 13, which
provided for submission of the revision of the Constitution to the elec-
torate, was in accord with the majority recommendation of the com-
mission and did not contain the language which appears as Article V,
Section 6, in the version finally approved by the Legislature. Assembly
Constitutional Amendment No. 13 was amended in the Assembly on
April 11, 1966, to authorize the enactment of a statute permitting the
Governor to initiate executive reorganization.6
SEPARATION OF POWERS DOCTRINE
One of the basic tenets of American constitutional law is the doctrine
of separation of powers. In Article III of the California Constitution it
is phrased as follows :
The powers of state government are legislative, executive and ju-
dicial. Persons charged with the exercise of one power may not
exercise any of the others except as permitted by this constitution.
Clearly, the authority for permitting the Governor to "assign and
reorganize functions among offices and agencies and their employees"
in conflict with existing statutes has now been incorporated as part of
the Constitution. As a result, even if such a procedure were deemed to
be in substantial conflict with the doctrine of separation of powers it
would stand as a permitted exception.7
Nevertheless, in assessing the advisability of enacting the enabling
statute giving the Governor the authority to initiate reorganizations
which would have the effect of law unless disapproved by the Legisla-
ture, the question whether the proposal is violative of the principle
4 Constitution Revision Commission, Proposed Revision of the California Constitution
(Sacramento: February 1966), 201. Richard Carpenter, John A. Busterud, Arthur
F. Corey, Richard J. Dolwig, Mrs. William Irvine, William R. McDougall, George
W. Rochester, Mrs. Lawrence Spear and John A. Vieg signed the minority
report. The language suggested by these commission members was more specific
than that finally included in Assembly Constitutional Amendment No. 13 and
would have read as follows :
'Authority may be vested in the Governor by statute to reallocate existing
functions among and within state executive and administrative agencies and
offices. If any reallocation affects existing law, it shall be set forth in an
executive order submitted to the Legislature within 30 days of the opening
of a general session and, subject to referendum, shall become law on the 91st
day after adjournment unless disapproved by resolution of either house."
5 Ops. Legislative Counsel No. 17220, June 2, 1959, to Senator Hugh P. Donnelly
(see Appendix C for the complete text of the opinion).
6 Assembly Journal, 1966, 665-667.
7 In an opinion issued to Hon. Milton Marks (Ops. Legislative Counsel No. 8225,
October 25, 1966) Legislative Counsel noted that although the new Section 6 of
Article V is "not explicit in authorizing actions by the Governor in conflict with
existing statutes . . . neither does it express anything to the contrary." Since
no new constitutional authority would have been necessary to authorize the
Governor to reorganize within the framework of existing statutes, Legislative
Counsel concluded, "the contrary is authorized." (See Appendix D for the com-
plete text of the opinion.)
ORGANIZATION OF THE EXECUTIVE BRANCH 15
that " persons charged with the exercise of one power may not exercise
any of the others" remains an important factor to be weighed by the
Legislature.
The device of executive initiated reorganization was first tried ex-
perimentally at the federal level in 1933 and has been extended for spe-
cified periods of time by Congress at regular intervals.8 During this
time challenges to the constitutionality of the federal organization acts
have been thoroughly and vigorously debated. One of the major issues
has been whether the reorganization procedures provided for in the law
constitute a valid delegation of the legislative powers of the Congress
to the President. A minority in the House of Kepresentatives arguing
against the first Eeorganization Act of 1939 saw the proposed delega-
tion as a threat :
Does Congress propose at this time to surrender the American
form of government and the constitutional method of legislating,
not for the promoting of efficiency and economy, but for the pro-
motion of riotous waste and extravagance . . . and the delegation
of more power to the President.9
During the First Session of the 89th Congress, hearings were con-
ducted by the Subcommittee on Executive Eeorganization of the Com-
mittee on Government Operations on the question of amending the
Reorganization Act of 1949 to either extend the President's authority
under the act for an additional limited period of time (two or four
years) or to grant the reorganization authority on a permanent basis.
Senator Abraham Ribicoff, chairman of the subcommittee, commenting
on the advisability of giving the President permanent authority to sub-
mit executive reorganization plans to Congress subject only to con-
gressional veto, indicated his support for the current authority but ob-
jected to permanently surrendering authority over such important
matters :
I think the separation of powers of this Government is one of the
geniuses of the American Constitution. And I think it would be
tragic for the legislative branch to abdicate its legislative authority
in violation of the Constitution.10
The concern expressed by Senator Ribicoff did not relate to the cen-
tral issue of giving the President the authority to propose reorganiza-
tion plans, which is now commonly accepted by members of Congress,
but only to the grant of that authority on a permanent basis. The sub-
committee did consider and affirm its position that the Reorganization
Act of 1949, as it has been extended for periods of limited duration,
does not constitute an unlawful delegation of legislative authority.
Tracing a long line of Supreme Court cases dating back to 1813, a
staff memorandum (incorporated as part of the record of the proceed-
8 The Federal Reorganization Act of 1949 (5 U.S.C.A. Sees. 133z-133z-15) which
succeeded earlier acts of the same type has been regularly extended for limited
periods of time by Congress. Efforts to give the President permanent authority
under the act have thus far failed. For a detailed discussion of the federal
law see Appendix A.
9 U.S. Congress, House, Select Committee on Government Organization, Report to
Accompany H.R. li'{25, Reorganization Bill of 1939, 76th Con., 1st Sess., 10.
10 U.S. Congress, Senate, Hearing before the Subcommittee on Executive Reorganiza-
tion of the Committee on Government Operations, "To Amend the Reorganization
Act of 1949," 89th Cong., 2nd Sess., March 29, 1965, 20, cited hereafter.
16 ORGANIZATION OF THE EXECUTIVE BRANCH
ings of the subcommittee) pointed out that a delegation of legislative
power was valid if it met the following requirements :
(1) Congress must itself have jurisdiction over the subject matter;
(2) The delegation must be made to a public official or agency;
(3) The statute must contain a definite statement of congressional
policy, clearly defining the subject and extent of the delega-
tion;
(4) If the legislation is to take effect in the future, there must be
a statement of the facts which must be found to exist before
the delegation can become operative.11
The Reorganization Act of 1949 has been carefully and precisely
drafted with these requirements in mind and the authority of Congress
to delegate reorganization authority to the President has never been
successfully challenged in a court test. Similarly, there does not appear
to be any serious impairment to the ability of this Legislature to enact
a statute consistent with the concepts embodied in the separation of
powers doctrine, yet providing the Governor complete authority for
reorganization.
Great care should be exercised, however, in drafting this legislation
so that the scope and duration of the authority is precisely defined and
limited. As has already been noted, there is no constitutional issue be-
cause virtually any procedure for executive-initiated reorganization,
no matter how broad in scope it might be, could withstand attack as a
constitutionally permitted exception to the doctrine of separation of
powers. Nevertheless, the Legislature should not readily depart from
well-established constitutional principles when delegating authority to
the Governor.
REORGANIZATION OBJECTIVES
What are the arguments for adopting a statute to permit the Gov-
ernor to propose reorganization plans which would have the effect of
law unless specifically disapproved by the Legislature, thus substan-
tially departing from the traditional method of enacting reorganiza-
tions by statute so that they take effect by legislative act?
There are several that have been advanced by proponents of execu-
tive-initiated reorganization. The one most frequently and persistently
stated is that the organizational structure of the executive branch is
primarily the responsibility of the Governor and, therefore, the initia-
tive for proposing and effecting necessary reorganizations should be
clearly and unequivocally focused upon the chief executive.
If that were the sole argument, the case for executive-initiated reor-
ganization would not be a convincing one either in theory or practice.
From a practical standpoint, it is an easy matter for a Governor to
take upon himself the initiative for promoting reorganization of the
executive branch and he would have no difficulty finding a legislator
willing to sponsor the necessary bills. Similarly, the Legislature would
have little difficulty in placing the responsibility more directly and spe-
cifically on the Governor by calling upon him to propose certain reor-
ganization bills.
^Ibid., 16-17.
ORGANIZATION OF THE EXECUTIVE BRANCH 17
This committee cannot accept the view that thrusting the burden of
reorganization upon the Governor is an appropriate posture for the
Legislature to assume. To do so would be to ignore the fact that the
Legislature itself has both an inherent obligation and a positive respon-
sibility to assist the executive in matters of reorganization.
While it is true that the actual structure of administration relates
more closely to the execution of the law than it does to the determina-
tion of policy, execution and policy formulation are inevitably so inter-
woven that it is either impossible or impracticable to separate one from
the other.
A more realistic approach is to accept the premise that reorganiza-
tion is a shared responsibility of the executive and legislative branches
and to support or reject the concept of executive-initiated reorganiza-
tion on the basis that it either promotes or impedes this process.
A second argument for departing from the current procedure of
enacting reorganizations by legislation is the substantial difficulty found
in mustering sufficient support for reforms of the structure of admin-
istration, not because of any concerted opposition, but merely because
the bills introduced for that purpose must compete for legislative at-
tention with a myriad of other proposals with major policy implica-
tions that are inevitably of more immediate interest to the Legislature
as well as the public. Keversing the procedure by giving reorganizations
the effect of law, unless specific action is taken by the Legislature to
disapprove them, requires that immediate attention be given to these
measures.
A third and closely related point is the argument that changes in the
structure of government which do not alter basic policy should be ac-
complished in a more flexible manner than is afforded by the process of
enacting statutes so that they can take effect as early as possible.
In support of this position, it is contended that the administrative
structure of the executive branch of California state government has
not kept pace with the rapid changes in social and economic conditions
so as to most efficiently and economically meet the needs of its citizens
for government services. The committee feels that executive-initiated
reorganization can provide a more responsive and effective means for
undertaking needed changes in the organization of the executive branch.
THE FEDERAL PRECEDENT
Since the close of the Hoover administration, our federal chief exec-
utives have operated under some form of reorganization authority. The
observation has been made that since the Reorganization Act of 1939
became law, "virtually the entire structure of the executive branch has
been reshaped by changes made under the cooperative presidential-
congressional approach embodied in the Reorganization Act. ' ' 12
The current Reorganization Act, which has been revised and extended
continuously since its adoption in 1949, was enacted by the Congress
following the strong recommendation of the first Hoover Commission on
Organization of the Executive Branch.13 Five years later, that recom-
13 Senate Subcommittee on Executive Reorganization, Hearing, March 29, 1965
(Statement of Harold Seidman, Assistant Director, Bureau of the Budget), 8.
13 U.S. Commission on Organization of the Executive Branch of the Government,
Letter from Chairman (Herbert Hoover) to President pro Tempore of the Senate
and to the Speaker of the House of Representatives, January 13, 1949, published
in Commission's report, General Management of the Executive Branch (Wash-
ington: U.S. Government Printing Office, February, 1949), vii-xii.
18 ORGANIZATION OF THE EXECUTIVE BRANCH
mendation was reiterated by the second Hoover commission which
called for the extension of the expiration date on the reorganization
authority which had been granted to President Eisenhower.14
Congress has responded sympathetically to arguments that a more
expedient process for effecting reorganization is needed. The Senate
Committee on Government Operations in its report recommending
enactment of the Keorganization Act of 1949 concluded :
. . . experience has demonstrated that substantial progress in re-
organizing the executive branch can come about only under general
authorizing legislation enacted by the Congress. The Congress, of
course, has made and will make selected changes in the organiza-
tion of the executive branch; but as many Members of the Con-
gress have stated, it is not feasible to enact far-reaching changes in
the organization permeating widely through the executive branch
by means of direct legislation affecting specific agencies.15
The support of Congress for the "cooperative executive-legislative
approach' ' exemplified by the reorganization acts was reached after
"long experience had demonstrated that improvements in organization
were difficult to achieve when the sole way of correcting defects was to
rely upon the passage of specific legislation. Improvements were long
delayed and often overdue when a reorganization contained in a bill
had to pursue its course through the legislative machinery and compete
for attention with urgent substantive legislation. The Reorganization
Act permits an alternative, or supplemental way of approaching this
problem, and it does so by clearly placing the responsibility for initiat-
ing improvements upon the President. ' ' 16
President Johnson, in his letter to Congress requesting reorganiza-
tion authority, phrased it another way :
The people expect and deserve a government that is lean and fit,
organized to take up new challenges and able to surmount them.
Reorganization can mean a streamlined leadership, ready to do
more in less time for the best interest of all the people.
Reorganization authority is not a whim or a fancy. It is the modern
approach to the hard, sticky problems of the present and the fu-
ture. Government has a responsibility to its citizens to administer
their business with dispatch, enthusiasm, and effectiveness.17
AN ENABLING STATUTE
The California Constitution vests responsibility for seeing that the
law is "faithfully executed" in the Governor.18 Implementation of that
objective rests on the ability of the Governor to exert his influence on
14 U.S. Commission on Organization of the Executive Branch of the Government,
Progress Report (Washington: U.S. Government Printing Office, December 31,
1954), 22.
15 U.S. Congress, Senate Committee on Government Operations, Report to Accompany
H.R. 8496: Extending the Reorganization Act of 19^9, 88th Cong., 2nd Sess., 5.
16 Senate Subcommittee on Executive Reorganization, Hearing, March 29, 19 65, 6.
17 Letter from President Johnson to Vice President Humphrey and Speaker McCor-
mack, February 8, 1965, published in Senate Subcommittee on Executive Re-
organization, Hearing, March 29, 1965, 24.
18 Article V, Section 1, California Constitution. The entire section reads as follows:
The supreme executive power of this state is vested in the Governor. He
shall see that the law is faithfully executed.
Under existing law the Legislature has provided for limited reorganizations
within the framework of statutory provisions (Government Code Section 11152).
ORGANIZATION OF THE EXECUTIVE BRANCH 19
administration of the executive branch. Eesponsiveness of the structure
of administration to changing conditions and needs is, therefore, an es-
sential ingredient to the Governor's ability to perform his constitu-
tional duties.
It is the committee's view that executive-initiated reorganization, if
properly structured, can afford a method to facilitate the Governor's
performance of his responsibilities with the full cooperation and assist-
ance of the Legislature in a way that will significantly promote sound
organization and management of the executive branch.
Legislation permitting the Governor to formulate reorganization
plans has been introduced several times in the California Legislature.
In 1965, Chairman Milton Marks of this committee introduced Assem-
bly Bill No. 2848 and an accompanying constitutional amendment to
accomplish this purpose.19
The prior bills, with some significant exceptions, have adhered to the
existing federal legislation. The legislation requires the chief executive
to examine from time to time the organization of all agencies to deter-
mine what changes are necessary to implement the specific objectives
enumerated in the bill. These objectives are :
(a) To promote the better execution of the laws, the more effective
management of the executive and administrative branch of
the state government and of its agencies and its functions and
the expeditious administration of the public business ;
(b) To reduce expenditures and promote economy to the fullest
extent practicable consistent with the efficient operation of the
state government ;
(c) To increase the efficiency of the operation of the state govern-
ment to the fullest extent practicable ;
(d) To group, consolidate and coordinate agencies and functions
thereof as nearly as possible according to major purposes;
(e) To reduce the number of agencies by consolidating those hav-
ing similar functions under a single head and to abolish such
agencies or functions thereof as may not be necessary for the
efficient operation of the state government;
(f ) To eliminate overlapping and duplication of effort.20
When the Governor decides that a change is necessary in the organi-
zation structure of the executive branch in order to promote one or
more of the objectives listed above, then he would be permitted to sub-
mit reorganization plans to the Legislature.
What constitutes "reorganization" has generally been defined in
broad terms. It includes the transfer in whole or part of any agency to
the jurisdiction and control of any other agency; or the consolidation
in whole or part of one agency with another; or the abolition of the
whole or any part of an agency when the functions of that agency are
transferred to another.
In addition, reorganization plans should make provision for the trans-
fer of emplo}Tees, the disposition of any records or property affected,
and the use of any unexpended appropriations. A further requirement
19 As has been noted, passage of Proposition 1A revising- the California Constitution
makes an amendment to the Constitution unnecessary.
20 Public Law 109, 81st Cong-., 1st Sess., Chapter 226, Title I, Section 2 (a) (the
Reorganization Act of 1949).
20 ORGANIZATION OF THE EXECUTIVE BRANCH
is that reorganization plans which conflict with existing statutes must
list all of the acts which would be suspended if the reorganization plan
became effective.
LIMITATIONS ON REORGANIZATION AUTHORITY
The essence of executive-initiated reorganization is that it is to be
utilized to effect changes in the actual structure of the organization
of the executive branch. Therefore, there are severe limitations on the
use of the reorganization procedure to accomplish changes in policy
functions vested in the executive branch by the Legislature. For exam-
ple, a reorganization plan may not have the effect of continuing any
agency or function beyond the period authorized by law for its exist-
ence. Neither can the procedure be used to create new functions not
performed by any agency of the executive branch at the time the plan
is submitted to the Legislature, nor may they extend a term of office
beyond that prescribed by law.
Since 1939, 80 plans have been submitted to Congress by the Presi-
dent and 59 have been approved. Phrased in another way — one out of
every four has been rejected. Where approval has been withheld, there
frequently are indications that the House of Representatives or the
Senate held that "they were not in accord with the basic purposes of
the act, going beyond reorganizations into areas of policy, which was
in conflict with intent of Congress in approving the act in 1949." 21
One of the most notable instances was the reaction to President Ken-
nedy's attempt in 1962 to create by reorganization plan, a Department
of Urban Affairs and Housing — a move that was defeated by a resolu-
tion of disapproval in the House of Representatives.
In 1964, Congress provided a further limitation by specifying that
no reorganization under the act shall have the effect of creating any
new executive department, or abolishing or transferring an executive
department or all of its functions, or consolidating any two or more
executive departments. Apparently Congress felt that the reorganiza-
tion authority was intended primarily as a device for making changes
within existing agencies and that any reorganization creating or abolish-
ing an executive department had inherent policy implications so that
effecting such changes by reorganization plan was improper and incon-
sistent with the purpose of the Reorganization Acts.
Another important feature of the federal Reorganization Act which
has been jealously protected by Congress is the limitation on the dura-
tion of authority vested in the President. After a short-lived grant of
permanent power to the President in 1932, Congress has provided
limitations of one to four years for the termination of the President's
authority.
This committee supports the inclusion of a two-year limitation in any
enabling statute granting the Governor reorganization authority so
that the statute would not be binding on future Legislatures and the
decision to continue or terminate that authority may be freely exer-
cised.
A further limitation is embodied in the California Constitution
which specifies that the Governor cannot be given authority to assign
and reorganize functions among elective officers and agencies admin-
21 Senate Committee on Government Operation, Report, 88th Cong., 2nd Sess., 4.
ORGANIZATION OF THE EXECUTIVE BRANCH 21
istered by elective officers.22 The enabling statute should also specifi-
cally exclude any agency whose primary function is service to the
legislative or judicial branches.
A CONDITIONAL DELEGATION
Under the federal Reorganization Act, a plan is submitted simul-
taneously to the Senate and the House of Representatives by the Presi-
dent and takes effect upon the expiration of 60 calendar days of con-
tinuous session of the Congress from the date of transmittal unless
either of the two houses passes a resolution stating that the house does
not favor the reorganization plan.
Several methods of congressional disapproval have been utilized.
Under the original act of 1933, Congress could prevent presidential
orders from taking effect only by enacting specific legislation. The 1939
act provided for disapproval by concurrent resolution and in 1949 this
was changed to permit a resolution adopted by a majority of the auth-
orized membership of either house of the Congress to defeat a proposed
reorganization. Since 1959, a simple majority of either house has been
able to defeat a reorganization plan.23
This committee supports the method of disapproval by resolution
adopted by a simple majority vote of either the Senate or Assembly.
Any enabling statute should be drafted to specifically set forth the
procedure for disapproval.
The procedure for disapproval, frequently referred to as the "con-
gressional veto," has been challenged on the basis that Congress, in
disapproving a reorganization plan, is exercising a legislative function
in a manner not authorized by the Constitution.
The constitutionality of the ' ' congressional veto ' ' has been thoroughly
and repeatedly defended by the Congress and remains unimpaired
despite several court tests.
Attorney General Tom C. Clark was asked by Senator John L. Mc-
Clellan, chairman of the Committee on Government Operations, to
advise his committee on this question, and in a memorandum to the
committee, the Attorney General pointed out that the Congress was
not exercising a legislative function when approving or disapproving
a reorganization plan :
. . . the Congress exercises its full legislative power when it passes
a statute authorizing the President to reorganize the executive
branch of the government by means of reorganization plans at that
point the Congress decides what the policy shall be and lays down
the statutory standards and limitations which shall be the frame-
work of Executive action under the reorganization act. If the
legislation stops there without future reference to the Congress,
the President's authority to reorganize is complete.24
Attorney General Clark informed the committee that the reservation
by the Congress of the right to disapprove action taken by the Presi-
22 Article V, Section 6, California Constitution.
23 Senate Subcommittee on Executive Reorganization, Hearing; March 29, 1965, 7.
24 U.S. Congress, Senate, Committee on Government Operations, Report Accompany-
ing S. 526, 81st Cong., 1st Sess., 15.
22 ORGANIZATION OF THE EXECUTIVE BRANCH
dent under the statutory grant of authority is not a legislative act or
encroachment upon executive functions delegated by Congress:
In this procedure there is no question involved of the Congress
taking legislative action beyond its initial passage of the reor-
ganization act. Nor is there any question involved of abdication by
the Executive of his executive functions to the Congress. It is
merely a case where the Executive and the Congress act in coop-
eration for the benefit of the entire Government and the Nation.25
An opinion requested of the Legislative Counsel by Chairman Milton
Marks as part of this study addressed itself to the question of the Legis-
lature's right to require the submission of reorganization plans to the
Legislature for possible disapproval. The Legislative Counsel arrived
at a conclusion contrary to that reached by Attorney General Clark
that the right to disapprove does not involve a legislative act.
The Counsel based this opinion on the assumption that effecting a
reorganization in conflict with existing statutes is ' ' legislation ' ' and
taking into account the constitutional requirement for legislation
(e.g. enactment by bill), making the effectiveness of the plan con-
tingent on adoption or nonadoption of a . . . resolution by the
Legislature would go beyond the authorization of new Section 6
of Article V and be legislation not meeting constitutional require-
ments.26
Viewing the Legislature's enactment of reorganization authority as
a conditional delegation is, of course, essential to the whole concept of
executive-initiated reorganization as a cooperative approach. To pre-
vent a subsequent legislative determination that the Governor is exer-
cising his delegated authority in conformity with the legislative purpose
is to eliminate a basic ingredient.
This committee would not favor adopting enabling legislation under
authority vested in the Legislature by Section 6 of Article V of the
revised Constitution to permit the Governor to initiate reorganization
of the executive branch unless the requirement that the proposed reor-
ganization be submitted to the Legislature for possible disapproval
remained unimpaired.27
AN INDEPENDENT REVIEW
Another step in the process of developing reorganizations of the
executive branch by the executive reorganization plan method was
contemplated by the Legislature.
In 1961, legislation authored by Chairman Milton Marks which
created the Commission on California State Government Organization
and Economy (popularly referred to as " California's Little Hoover
Commission") as a permanent, independent reviewing agency to ad-
vise the Governor and the Legislature on reorganization, anticipated the
^Ibid., 16.
26 Ops. Legislative Counsel No. 8225, October 25, 1966, to Hon. Milton Marks (see
Appendix D for the complete text of the opinion).
27 Any possible uncertainty as to the constitutionality of the reserved right to dis-
approve a reorganization plan could be resolved to the satisfaction of the Legis-
lature in granting the authority by including a section in the enabling act that
would have the effect of making the entire act invalid (as well as any reorgan-
ization submitted pursuant to it) if the section setting forth the legislative
approval or disapproval were found to be unconstitutional.
ORGANIZATION OF THE EXECUTIVE BRANCH 23
enactment of an executive-initiated reorganization statute. The legisla-
tion provided that :
Before the Governor submits any reorganization plan to the Legis-
lature ... he shall first submit such plan to the commission for
its consideration and recommendation. The commission shall sub-
mit to the Governor and to the Legislature a report on its recom-
mendations concerning such plan on or before the 10th legislative
day of the first succeeding regular session of the Legislature after
transmission of the plan to the commission.28
However, since the executive reorganization act requested by the
Governor was not enacted, the provision for submitting reorganization
plans to the commission was deleted from the Government Code.29
This committee supports the contemplated method of submitting pro-
posed reorganizations to the "Little Hoover Commission." Such a
procedure is totally consistent with the commission's responsibilities in
1 ' promoting economy, efficiency and improved service in the transaction
of the public business in the various departments, agencies and instru-
mentalities of the executive branch of the state government. ' ' 30 The
advantage of a separate review would be highly beneficial to both the
Governor and the Legislature.
It is the view of this committee that the commission has made a
significant contribution to economy and efficiency in state government
in its nearly five years of existence, and that an affirmative reply can
be made to the commission's request that
The commission should itself be independently evaluated after
sufficient time has elapsed for appraisal, to determine whether its
contributions are significant and whether its continuance is justi-
fied.31
This committee feels that the l ' Little Hoover Commission ' ' can bring
the same independent review to assist the Governor and the Legislature
in evaluating proposed reorganization plans, and recommends only that
the commission's independence of the executive branch be clarified.
It was the intent of the sponsors of the statute creating the commis-
sion that an essential element to the commission's effectiveness was its
independence of the officers and agencies of the executive branch so
that review of possible reorganization could be accomplished impar-
tially. For housekeeping purposes the commission was placed in the
Department of Finance with the provision that "the commission shall
not be subject to the control or direction of the director . . ." 32 When
the Department of General Services was created in 1963, the commis-
sion was transferred to that agency for housekeeping purposes with the
result that the statutory independence of the commission from the Di-
rector of Finance was brought into question.
This could easily be resolved by clarifying the statutory placement
of the commission within the executive branch. Some further changes
28 Statutes of 1961, Chapter 2038 (Assembly Bill No. 1510, authored by Assemblyman
Milton Marks, approved by unanimous vote of the Legislature).
28 Statutes of 1965, Chapter 159, repealed Government Code Section 8522
80 Government Code Section 8521.
81 Commission on California State Government Organization and Economy, Findings
and Recommendations Concerning Reorganization of the Executive Branch of
California State Government, December 31, 1962, 9.
82 Government Code Section 8526.
24 ORGANIZATION OF THE EXECUTIVE BRANCH
in its composition would improve the commission's independent role
and could be undertaken at the same time that the duty of reviewing
reorganization plans was imposed upon the commission.33
SUMMARY
In summary, this committee feels that the process of executive-
initiated reorganization can be properly denned and specifically limited
in a manner that will be consistent with the proper exercise of execu-
tive and legislative responsibilities by the respective branches so that
a more efficient and flexible method of reorganizing the executive
branch can be initiated.
33 Appointment of citizen members to the commission are made on the following
basis : five by the Governor, one by the Senate Rules Committee and one by the
Speaker of the Assembly. Since the contribution of its citizen members is so
important to the work of the commission, the executive-legislative relationship
might be improved by the addition of one more appointee of the Senate and
Assembly. In this same connection, it would seem more appropriate for the
commission to select its own chairman and vice chairman, rather than to have
the Governor appoint them.
APPENDICES
APPENDIX A
FEDERAL REORGANIZATION PROPOSALS
While the United States Constitution vests in the President the
responsibility to oversee the operation of the executive department
(Article II, Section 1), it has only been since the end of the Hoover
administration that the chief executive has had the statutory authority
to initiate and submit to Congress proposals for the reorganization of
the executive branch. All Presidents since that time have operated with
similar grants of power.
The first reorganization authority was given to the President by the
Executive Reorganization Act of 1932. 1 In its original form, while it
enabled the President to consolidate, redistribute, and transfer various
agencies and functions by executive order, it did not permit him to
abolish a department or agency which had been created by statute or
to either transfer or eliminate its functions. Congressional rejection
of a reorganization plan under this act could be accomplished by a
negative vote in either house, and required only a simple majority of
those present and voting. This power to initiate executive reorganiza-
tion was, under the original act, a permanent authority. This was the
only reorganization act which granted this power on a permanent basis,
although Presidents Truman and Johnson have requested it, and Presi-
dents Eisenhower and Kennedy stated that it should be granted.2
This permanent authority was short lived. On March 3, 1933, the
authority was limited to a two-year period.3 At the same time, however,
the 1933 act broadened the scope of the presidential power and, in
addition, made no provision for congressional disapproval : 4 it was
necessary to enact legislation in order to prevent a reorganization
proposal from going into effect.
Subsequent Reorganization Acts of 1939 5 and 1945,6 plus the War
Powers Act of 1941,7 developed reorganization laws along the lines that
exist today. All of these acts contained specific time limits on the grant
of authority (generally two years) and all provided for congressional
rejection of any plan submitted by a concurrent resolution. In addition,
they all prohibited the abolishment or transfer of executive departments
or their functions and they tended to exempt specific agencies from the
operation of the acts; 21 agencies were exempted under the 1939 act
and 11 agencies were exempted under the 1945 act.
REORGANIZATION ACT OF 1949
Currently, the President's authority to initiate executive reorganiza-
tion stems from the Reorganization Act of 1949, as amended,8 and this
power has been used extensively since its inception.
The Reorganization Act of 1949 both enables and requires the Presi-
dent to "from time to time reexamine the organization of all agencies
M7 Stat. 413.
2 U.S. Code Congressional and Administrative News, 1965, 88th Cong-.. 2nd Sess 1634
3 47 Stat. 1517.
* U.S. Code Congressional and Administrative News, 1965, 1636.
5 53 Stat. 561.
6 59 Stat. 61S.
7 55 Stat. 838.
8 63 Stat. 203; 5 U.S.C.A. Sec. 113z-133z-U.
(27)
28 ORGANIZATION OF THE EXECUTIVE BRANCH
of the government ' - in order to further stated objectives. The objectives,
as enumerated in the act are as follows :
1. Promote the better execution of laws, the more effective manage-
ment of the executive branch and its functions, and the expedi-
tious administration of public business.
2. To reduce expenditures and promote economy in the operation
of the government.
3. To increase the efficiency of the government to the fullest extent
practicable.
4. To group, coordinate, and consolidate agencies and functions of
the government, as nearly as may be, according to major pur-
poses.
5. To reduce the number of agencies by consolidating those having
similar functions under a single head, and to abolish such
agencies and functions thereof as may not be necessary for the
efficient conduct of the government.
6. To eliminate overlapping and duplication of effort.
Obviously these objectives are ambiguous enough to lay the basis for
wide discretionary power on the part of the chief executive. This grant
of authority, moreover, is extended by the inclusive nature of the
definition given to the term ' ' agency. ' '
Section 7. When used in this act, the term " agency " means any
executive department, commission, council, independent estab-
lishment, government corporation, board, bureau, division, service,
office, officer, authority, administration, or other establishment, in
the executive branch of the government, and means also any and
all parts of the municipal government of the District of Columbia
except the courts thereof.
Excluded from his definition are the Comptroller General of the United
States and the General Accounting Officer, both of which are part of
the legislative branch of the government.
Whenever the President finds that the economy and efficiency of the
executive branch may be promoted by restructuring the agencies within
the branch, he may draw up a reorganization plan to that effect and
submit it to the Congress, stating his findings and his justifications for
the reorganization.
The delivery of the reorganization plan must be made to both the
Senate and the House of Representatives on the same day. In addition,
the President :
. . . shall specify with respect to each abolition of a function in-
cluded in the plan the statutory authority for the exercise of such
function, and shall specify the reduction of expenditures (itemized
as far as practicable) which it is probable will be brought about
by the taking effect of the reorganizations included in the plan.
Despite the fact that the total grant of authority is quite permissive
and the discretionary power of the President is greatly enhanced, there
are, even so, several specific limitations contained in the Reorganization
Act which hedge the power of the President.
ORGANIZATION OF THE EXECUTIVE BRANCH 29
The proposed reorganization plan may not provide for any of the
following :
1. It may not create, abolish or transfer an executive department
or all of its functions, or consolidate any two or more executive
departments or their functions.
2. It may not continue any agency beyond the period authorized
by law for its existence or beyond the time it would have termi-
nated if the reorganization had not been made.
3. It may not continue any function beyond the period authorized
by law for its exercise, or beyond the time it would have termi-
nated if the reorganization had not been made.
4. It may not authorize any agency to exercise any function which
is not expressly authorized by law at the time the plan is sub-
mitted to Congress.
5. It may not increase the term of any office beyond the time which
is authorized by law.
6. It may not transfer to or consolidate with any other agency the
municipal government of the District of Columbia or all of its
functions, or abolish this government or its functions.
Unless the reorganization proposal provides for a later date, the
plan goes into effect 60 days after it is presented to the Congress, but
only if, during the 60-day period, neither the House of Representatives
nor the Senate has passed a resolution stating that the body does not
favor the reorganization plan. Such a resolution, in order to pass, must
receive the affirmative vote of a simple majority of those present and
voting.
The Reorganization Act of 1949 has, since its enactment, been used
extensively while at the same time undergoing continuous modification.
The excerpt reproduced below from the U.S. Code Congressional and
Administrative News, 1965, outlines the major changes and amendments
to the act. In addition, it charts the use which successive presidents
have made of this authority and the fate of the many reorganization
proposals which have been put forward.
The Reorganization Act of 1949 (Public Law 109, 81st Cong.)
was originally enacted as a means of expediting reorganizations in
the executive branch, following submission of its reports and recom-
mendations by the first Commission on Organization of the execu-
tive branch of the government (Hoover commission). Since it was
designed primarily as a means of enabling the implementation of
these recommendations, it gave the President much greater latitude
than the 1939 or 1945 acts by eliminating exemptions of specified
agencies and authorizing him to submit reorganization plans pro-
viding for the creation of new departments at the cabinet level.
Rejecting the two-year time limit of the 1939 and 1945 acts and
the President's request for permanent authority, the committee
approved a four-year period terminating on April 1, 1953. This
was based on the ground that a two-year period would not allow the
President sufficient time to prepare and submit reorganization
plans to the Congress, in view of the very extensive work of the
Hoover commission. The method of congressional rejection was
also modified by providing for such action by the adoption of a
30 ORGANIZATION OF THE EXECUTIVE BRANCH
resolution of disapproval by a majority of the authorized member-
ship of either house of the Congress, rather than by the earlier
requirement of a concurrent resolution which necessitated action
by both Houses. Under the original 1949 act, the President sub-
mitted 41 plans, of which 30 became effective and 11 were rejected.
The Reorganization Act of 1949 was subsequently extended for
two-year periods in 1953, 1955, 1957, and 1961. In 1959, this com-
mittee reported a bill extending its provisions for two additional
years, or to June 1, 1961. The House of Representatives approved
an identical bill but both measures died on the Senate Calendar at
the end of the 86th Congress. The 1949 Reorganization Act was
extended again for one year in 1964. Reorganization authority thus
lapsed from June 1, 1959, to April 7, 1961, and from June 1, 1963,
to July 2, 1964.
In the 1957 extension, the method of congressional rejection was
again amended to provide disapproval of reorganization plans by
either house of the Congress by a simple majority of those present
and voting, and the 1964 extension eliminated the authority of the
President to submit plans proposing the creation of new cabinet
departments.
As previously noted, during the four-year period of the original
Reorganization Act of 1949, 41 reorganization plans were sub-
mitted, of which 30 became effective and 11 were rejected. Under
the subsequent extensions, a total of 27 plans were submitted, of
which 20 became effective and seven were rejected. Thus, between
the effective date of the 1949 act and June 1, 1963, the termination
date of the President's reorganization authority under the 1961
extension, a total of 68 plans were submitted, of which 50 became
effective and 18 were rejected. Between the effective date of the
Reorganization Act of 1939 and June 1, 1963, a total of 80 plans
were submitted, of which 59 became effective and 21 were rejected.
No reorganization plans were transmitted in 1964 and plan No. 1
of 1965, submitted under the 1964 extension, is not included in this
compilation.
From the foregoing, it appears that during the entire history of
executive reorganization, covering a period of more than 30 years,
with the exception of the initial act, the act of June 30, 1932, every
subsequent act has granted reorganization authority to the Presi-
dent for a limited period of time, varying from one to four years,
despite the fact that three Presidents have either requested or
recommended the granting of permanent authority. Although the
1932 act granted permanent authority, nine months later it was
amended and superseded by a rider to an appropriation act which
limited the President's authority to a period of two years.9
The following tables provide an analysis of the various reorganization
statutes (Table I), a summary of the action taken by Congress (Table
II), and the use of the reorganization authority by the various Presi-
dents who have operated under it (Table III).
•U.S. Code Congressional and Administrative News, 1965, 1635-1638.
ORGANIZATION OF THE EXECUTIVE BRANCH
31
TABLE I
Statutes providing reorganization authority
Duration of authority
and termination date
Reorganization authority
Method of disapproval
Permanent
Two years (March 20, 1935)
Two years (Jan. 21, 1941)
Duration of war, plus six
months, or such earlier time
as designated by Congress.
Two years and three months
(April 1, 1948)
Four years (April 1, 1953)
Two years (April 1, 1955)
Two Years (June 1, 1957)
Two years (June 1, 1959)
Two years (June 1, 1963)
One year (June 1, 1965)
Reorganization Act of 1932; Title IV of the
Legislative Appropriations Act for fiscal year
1933, Public Law 212, 72nd Congress.
Acts of March 3 and March 20, 1933:
Amending and superseding the act of June
20, 1932.
Reorganization Act of 1939: Public Law 19,
76th Congress (act of April 3, 1939).
Title I of War Powers Act of 1941 (act of
Dec. 18, 1941).
Reorganization Act of 1945: Public Law
263, 79th Congress (act of Dec. 20, 1945).
Reorganization Act of 1949: Public Law
109, 81st Congress (act of June 20, 1949).
1953 amendment: Public Law 3, 83rd
Congress (act of Feb. 11, 1953).
1955 amendment: Public Law 16, 84th
Congress (act of March 25, 1955).
1957 amendment: Public Law 86-286 (act
of Sept. 4, 1957).
1961 amendment: Public Law 87-18 (act
of April 7, 1961).
1964 amendment: Public Law 88-351 (act
of July 2, 1964) (no authority to create
new executive departments).
Simple resolution of either
house.
No provision (enactment of
law required).
Concurrent resolution.
No provision.
Concurrent resolution.
Majority of authorized mem-
bership of either house: Sen-
ate, 49; hosue, 218.
Same as 1949 act.
Do.
Simple resolution of either
house.
Do.
Simple resolution.
SOURCE: U.S. Code
2nd Sess., 1638.
Congressional and Administrative News, 1965, 88th Cong.,
TABLE II
Summary of action on reorganization plans submitted between 1939 and 1963
The following table shows the actions under the Reorganization Acts
of 1939, 1945, and 1949. The actions under the 1949 act are indicated
by dates of extensions and amendments :
Rejected
Reorganization acts extensions Plan Became
and amendments submitted effective
1939 5
1945 7
1949 41
1953 12
1955 2
1957 3
1961 10
Total 80 59
5
0
4
3
30
11
12
0
0
2
2
1
6
4
21
TABLE III
Number of reorganization plans submitted by each President and
duration of reorganization authority
The following table shows the number of reorganization plans which
were submitted by each of the Presidents who have been granted
reorganization authority since 1939 and the period of time during
which they had such authority :
Roosevelt 5 plans in 7 years
Truman 48 plans in 8 years
Eisenhower 17 plans in 8 years
Kennedy 10 plans in 3 years
SOURCE: U.S. Code Congressional and Administrative News, 1965, 88th Cong.,
2nd Sess., 1638.
APPENDIX B
REORGANIZATION IN THE STATES I
Despite a high level of enthusiasm, among academicians and admin-
istrators, for the concept of executive initiated reorganization, only a
handful of states have seen fit to follow the lead of the federal govern-
ment in allowing their chief executives wide discretionary powers to
reorganize the executive branch of government.
Where this power does exist, the impetus for its creation has come
largely from students of public administration and "Little Hoover
Commissions. ' ' The recommendations of these groups generally mirror
those contained in the sixth edition of the Model State Constitution,
prepared by the National Municipal League. Section 5.06 of Article V
of the model constitution states in part :
. . . the legislature shall by law prescribe the functions, powers
and duties of the principal departments and of all other agencies
of the state and may from time to time reallocate offices, agencies
and instrumentalities among the principal departments . . . ;
but the governor may make such changes in the allocation of such
functions, powers and duties, as he considers necessary for effi-
cient administration. If such changes affect existing law, they shall
be set forth in executive orders, which shall be submitted to the
Legislature while it is in session, and shall become effective, and
shall have the force of law, 60 days after submission, or at the
close of the session, whichever is sooner, unless specifically modified
or disapproved by a resolution concurred in by a majority of all
the members of each house.
The Alaska Constitution provides for executive initiated reorganiza-
tion in the following words :
The Governor may make changes in the organization of the executive
branch or in the assignment of functions among its units which
he considers necessary for efficient administration. Where these
changes require the force of law, they shall be set forth in execu-
tive orders. The Legislature shall have 60 days of a regular session,
or a full session if of shorter duration, to disapprove these execu-
tive orders. Unless disapproved by resolution concurred in by a
majority of the members in joint session, these orders become
effective at a date thereafter to be designated by the Governor.1
Both of these represent fairly wide grants of power with no neces-
sary time limitations on the grant of authority. Both the State of New
Hampshire and the Commonwealth of Puerto Rico adopted similar
plans in 1949, but for limited period of time. In 1955, the Governor of
Pennsylvania was granted this power also. According to the Penn-
sylvania act, the chief executive may initiate reorganization plans
affecting only units of bureau size or smaller. If neither house of the
1 Alaska Constitution, Art. Ill, Sec. 23.
(82)
ORGANIZATION OF THE EXECUTIVE BRANCH 33
State Legislature exercises a veto over the proposal within 30 days,
the proposals become effective.2
Units below the department level can be consolidated, abolished or
transferred to other departments, but no changes can be made which
alter the departmental function. According to one source, this type of
plan combines the merits of executive reorganization flexibility with
the adequate protection of the overall administrative departmental
pattern established by the Legislature :
While this program restricts the Governor's actions to shifts of
bureaus or smaller units, even within these limitations much can
be done to improve the state's administrative structure.3
The State of Michigan in 1958, and the State of Oregon in 1959, also
adopted broad reorganization acts patterned after the federal model. In
the case of Oregon, the grant of power was limited to a short period
while in Michigan the idea was to establish a permanent reorganizing
procedure.4
a Bell, James R., and Earl L. Darrah, State Executive Reorganisation (Berkeley:
University of California, 1961), 26-27.
8 Ibid., 27.
* Ibid.
2— L-418
APPENDIX C
CONSTITUTION REVISION COMMISSION
MINORITY REPORT RE: LEGISLATIVE AUTHORIZATION
OF EXECUTIVE REORGANIZATION
The undersigned members of the California Constitution Kevision
Commission believe that the Legislature should be granted express au-
thority to provide for executive reorganization of all agencies of state
government other than agencies created by the Constitution which the
Legislature itself cannot change. In an opinion dated June 2, 1959, the
Legislative Counsel (Ralph Kleps) declared that the Legislature could
not enact a bill which would authorize the Governor to prepare reorga-
nization plans to achieve greater efficiency by transferring all or part
of an agency or its functions to another agency, by abolishing the
functions of an agency or by consolidating agencies. The bill referred
to required the plan would have gone into effect unless disapproved by
concurrent resolution. Effecting a reorganization plan in such manner
runs afoul of several provisions of the Constitution according to the
Legislative Counsel.
The 1959 opinion of the Legislative Counsel is attached. We believe
it demonstrates both the need for such a constitutional provision as well
as the nature of the proposal supported by the undersigned members
of this report.
We believe the Legislature should have authority to enact legislation
which would give the Governor the right to initiate executive reorga-
nization subject to subsequent legislative veto. Such authority is con-
tained in the model state constitution, in the constitutions of other
states and is substantially the same as that exercised by the President
of the United States. The present provisions of the California Consti-
tution prevent the Legislature from delegating this power to the chief
executive even though the plan as submitted to the Legislature cannot
become effective if disapproved by either house of the Legislature.
Our proposal which can be added either to Article IV or Article V
would read as follows :
Authority may be vested in the Governor by statute to reallocate
existing functions among and within state executive and adminis-
trative agencies and offices. If any reallocation affects existing law,
it shall be set forth in an executive order submitted to the Legisla-
ture within 30 days of the opening of a general session and, subject
to referendum, shall become law on the 91st day after adjournment
unless disapproved by resolution of either house.
We, respectfully, disagree with a majority of the members of the
commission who rejected giving the Legislature this power and urge
its inclusion in any revision of the Constitution submitted to the voters.
Richard Carpenter Mrs. William Irvine
John A. Busterud William R. MacDougall
Arthur F. Corey George W. Rochester
Richard J. Dolwig Mrs. Lawrence Spear
John A. Vieg
(34)
ORGANIZATION OF THE EXECUTIVE BRANCH 35
State of California
OFFICE OF LEGISLATIVE COUNSEL
Sacramento, California
June 2, 1959
Hon. Hugh P. Donnelly
Senate Chamber
Government Reorganization — #17220
Dear Senator Donnelly :
You have asked that we consider the constitutionality of a bill relating
to reorganization of the state government, which provides, in essence,
as follows : The bill declares a state policy that state agencies shall be
so organized as (1) to reduce expenditures to the fullest extent con-
sistent with efficiency, (2) to group, coordinate, and consolidate agencies
and functions according to major purposes, (3) to reduce the number
of agencies by consolidating those having similar functions under a
single head and to abolish such agencies and functions as are not
necessary for the efficient conduct of government, and (4) to eliminate
overlapping and duplication of effort.
The Governor is authorized to prepare reorganization plans to effec-
tuate these purposes by transferring all or part of an agency or its
functions to another agency, by abolishing the functions of an agency,
and by consolidating agencies. The plan may not change the functions
of agencies created by the Constitution or extend the life of an agency
beyond any previously prescribed termination date, or continue a func-
tion beyond any such termination date.
A reorganization plan is required to be submitted to both houses of
the Legislature simultaneously and the plan goes into effect 30 days
after submission, or at such later date as is specified in the plan, unless
the Legislature by concurrent resolution adopted within the 30-day
period, disapproves it.
We note, at the outset, that the suggested bill is very similar to the
Federal Reorganization Act of 1949 (5 U.S.C.A. Sees. 133z-133z-15),
which succeeded earlier acts of the same type dating back to 1933 (see
1945 U.S. Code Cong. Serv., p. 918, and 1949 U.S. Code Cong. Serv.,
Vol. 2, p. 1381). Many reorganization plans have been placed in effect
under that legislation and its predecessors.
Insofar as such legislation merely authorizes executive reorganization
within the framework of existing statutes we see no problem.* The
constitutional difficulty arises in connection with reorganizations which
are in conflict with statutes previously enacted by the Legislature. On
this point, so far as we have been able to determine in the time allowed,
the constitutionality of the federal reorganization legislation has not
* It should be noted that there are, at present, provisions in California law author-
izing- limited reorganizations by the executive branch of the state government.
Section 11152 of the Government Code provides as follows:
Subject to the approval of the Governor, the head of each department may
arrange and classify the work of the department and consolidate, abolish, or
create divisions thereof. So far as consistent with law the head of each
department may adopt such rules and regulations as are necessary to
govern the activities of the department and may assign to its officers and
employees such duties as he sees fit. For the betterment of the public
service, he may reassign to any employees under the chief of any division
such duties as he sees fit. . .
See also, Sec. 13005, Gov.C, making the same provision with respect to the
Department of Finance.
36 ORGANIZATION OF THE EXECUTIVE BRANCH
been passed upon specifically. The Supreme Court of the United States,
however, in dealing with this question has chosen to solve the problei
by relying upon the fact that Congress has ratified the particular reor-
ganization by later legislation, including appropriation acts. (Swaynt
and Hoyt v. U.S., 300 U.S. 297, 301-302, 81 L. Ed. 659, 663 ; Isorandt-
sen-Meller Co. v. U.S., 300 U.S. 139, 148, 81 L. Ed. 562, 569 (1948) ;
40 Cal. L. Kev. 1211, 1222.) We note, also, that Congress has taken the
precaution in several instances of enacting statutes which placed certain
of the reorganization plans into effect (5 U.S.C. 133s, 133u, 133v).
Assuming the constitutionality of the federal precedent, under the
United States Constitution, it does not follow, of course, that such a
procedure would satisfy the requirements of the California Constitution
which contains detailed provisions as to the enactment of laws (Calif.
Const., existing Art. IV). We have found no California cases in which
the courts have had to consider such a sweeping authorization to the
executive branch as is involved here.
There is, however, authority which can fairly be said to be "on all
fours." In Opinion of the Justices, 83 Atl. 2nd 738, the Supreme Court
of New Hampshire held legislation almost identical to the bill in ques-
tion here to be unconstitutional. The majority of that court evidently
had no doubt that placing such a reorganization plan in effect amounted
to legislating, and, this being the case, it was necessary that the re-
quirements of the New Hampshire Constitution for enactment of legis-
lation be complied with. The procedure in question did not meet those
requirements, specifically, because concurrence of both houses in the
approval of the plan was not necessary, i.e., the plan would go into
effect though one house had expressly indicated its disapproval.
If it be assumed that effecting a reorganization plan pursuant to the
provisions of this bill is legislating, the bill runs afoul of several pro-
visions of the Constitution. Section 15 of Article IV provides that no
law shall be passed except by bill, that any bill may be rejected by
either house, and that no bill shall become law without concurrence of
a majority of the members elected to each house. We further note that,
in general, no act passed by the Legislature shall go into effect until
90 days after final adjournment of a session of the Legislature, with
exceptions for urgency measures and with certain other exceptions not
relevant here. However, measures creating or abolishing an office or
changing the salary, term, or duties of an officer cannot be urgency
measures (Art. IV, existing Sec. 1, Calif. Const.). The bill contemplates
reorganizations making changes of this nature, yet provides that the
plan shall go into effect 30 days after submission to the Legislature,
absent prior disapproval.
It is basic, of course, that the power to legislate reposes in the Legis-
lature and cannot be delegated (Art. Ill, existing Sec. 1; Art. IV,
existing Sec. 1, Calif. Const.). If the power to abolish statutory agencies
and functions is involved, it is difficult, if not impossible, to escape the
conclusion that the contemplated reorganization is legislation and must
meet constitutional requirements for legislation (see Re Opinion of the
Justices (Mass.), 52 NE 2nd 974, 150 A.L.E. 1432). Under these cir-
cumstances, we think that the only safe procedure is one in which the
Legislature, by statute adopts any reorganization plan submitted to it
by the Governor so that is takes effect by a legislative act.
ORGANIZATION OF THE EXECUTIVE BRANCH 37
It is true that the Legislature can, without divesting itself of the
legislative power, delegate to an executive agency the power to "fill in
the details" under sufficiently definite standards. Thus, if the Legisla-
ture should repeal the existing statutory provisions which set the struc-
ture of state government, we have no doubt that it could delegate
authority to the Governor under appropriate standards to create a new,
and more efficient, framework of government. Any bill setting the stage
for such an exercise of power by the Governor would have to meet the
specific requirements of the California Constitution, of course, includ-
ing the provision that amended or revised laws must be set forth at
length and must deal with a single subject (Const., Art. IV, existing
Sec. 24). We have serious doubts, however, that the bill which you
have suggested would meet these requirements.
Very truly yours,
Ealph N. Kleps
Legislative Counsel
By Terry L. Baum
Deputy Legislative Counsel
APPENDIX D
State of California
OFFICE OF LEGISLATIVE COUNSEL
Sacramento, California
October 25, 1966
Honorable Milton Marks
Russ Building
San Francisco, California 94104
Reorganization of Executive Branch
of State Government— #8225
Dear Mr. Marks :
You have pointed out that in an opinion of the Legislative Counsel,
dated June 2, 1959, prepared under Request No. 17220, printed on
pages 201-203 of the February 1966 Report of the Constitution Revi-
sion Commission, we expressed serious doubts about the constitutionality
of a bill described as follows, insofar as it authorized reorganization in
conflict with existing statutes :
. . . The bill declares a state policy that state agencies shall be
so organized as (1) to reduce expenditures to the fullest extent
consistent with efficiency, (2) to group, coordinate, and consolidate
agencies and functions according to major purposes, (3) to reduce
the number of agencies by consolidating those having similar func-
tions under a single head and to abolish such agencies and func-
tions as are not necessary for the efficient conduct of government,
and (4) to eliminate overlapping and duplication of effort.
The Governor is authorized to prepare reorganization plans to
effectuate these purposes by transferring all or part of an agency
or its functions to another agency, by abolishing the functions of
an agency, and by consolidating agencies. The plan may not change
the functions of agencies created by the Constitution or extend the
life of an agency beyond any previously prescribed termination
date, or continue a function beyond any such termination date.
A reorganization plan is required to be submitted to both houses
of the Legislature simultaneously and the plan goes into effect
thirty days after submission, or at such later date as is specified
in the plan, unless the Legislature by concurrent resolution adopted
within the 30-day period, disapproves it.
The opinion noted that the constitutionality of similar federal legisla-
tion had not been determined by the courts and that a decision of the
New Hampshire Supreme Court had held a similar bill unconstitutional
on the ground that it purported to authorize what amounted to legisla-
tion without compliance with constitutional requirements for legislation,
and concluded that, assuming that this was legislation, various require-
ments of the California Constitution for enactment of legislation would
not be met, e.g., the plan would go into effect although one house did
not approve it.
(38)
ORGANIZATION OF THE EXECUTIVE BRANCH 39
You ask whether such a bill would be constitutional if Proposition 1A
on the November 1966 ballot is adopted by the people.
Section 6 of Article V in the revision contained in Proposition 1A
reads as follows :
Sec. 6. Authority may be provided by statute for the Governor
to assign and reorganize functions among executive officers and
agencies and their employees, other than elective officers and
agencies administered by elective officers.
Comparing this provision with the bill considered in our earlier
opinion, we observe first that this provision is not explicit in authoriz-
ing actions by the Governor in conflict with existing statutes. However,
neither does it express anything to the contrary. This provision is one
not found in the present Constitution. No new authority would have
been necessary to authorize the Governor to reorganize within the
framework of existing statutes, as, indeed, he is now authorized, to a
considerable extent, to do (see Gov.C. Sec. 11152). In our opinion it
would be held that under this new provision the Governor could be
authorized to effect reorganization differing from the organization then
provided by statute.
The bill described in our prior opinion would have authorized re-
organization plans "transferring all or part of an agency or its func-
tions to another agency . . . abolishing the functions of an agency,
and . . . consolidating agencies." The proposed new constitutional
provision speaks of authorizing the Governor "to assign and reorganize
functions among the executive officers and agencies and employees. "
We note, at this point, that we do not understand the bill considered
in our opinion, in providing for "abolishing the functions of an
agency," to mean that the reorganization could provide that a service
that the Legislature has required to be performed shall not be per-
formed (as contrasted with providing that such a service shall be per-
formed under a new scheme of organization). Neither do we understand
the constitutional provision to empower the Legislature to authorize
the Governor to make such changes. With this understanding it is our
opinion that Section 6 is broad enough to encompass all of the types of
changes in organization of the executive branch authorized by the bill.
The bill discussed in our prior opinion required submission of a plan
to the Legislature for possible disapproval by concurrent resolution.
Under the new constitutional provision the Legislature could authorize
the Governor to make such changes without any requirement of sub-'
mission of the plan to the Legislature for possible disapproval. The
provision makes no reference to such submission to the Legislature, and
we think that it is doubtful that this feature of the bill would, if
Proposition 1A is adopted, be constitutional. That is, assuming that
effecting a reorganization in conflict with existing statutes is "legisla-
tion, ' ' and taking into account the constitutional requirements for legis-
lation (e.g., enactment by bill), making the effectiveness of the plan
contingent on adoption or nonadoption of a concurrent resolution by
the Legislature would go beyond the authorization of new Section 6 of
Article V and be legislation not meeting constitutional requirements.
We thus conclude that if Proposition 1A is adopted, the bill, as we
understand it, discussed in our prior opinion, would be constitutional,
40 ORGANIZATION OF THE EXECUTIVE BRANCH
except that insofar as the bill requires submission of a plan to the
Legislature for possible disapproval by concurrent resolution we would
have serious doubts as to its constitutionality.
Very truly yours,
George H. Murphy
Legislative Counsel
By Terry L. Baum
Principal Deputy
II. THE 1961 REORGANIZATION
The Development of the Agency Concept
and the Executive Office Proposal
FINDINGS
1. The 1961 Legislature approved the last major reorganization of
the administrative structure for top-level management of the executive
branch. That reorganization was popularlv referred to as the "Agency
Plan."
2. The Agency Plan was to place most of the departments, boards
and commissions of state government under one of eight agencies ac-
cording to function under the supervision of an agency administrator
who was to serve in the dual capacity of advisor to the Governor and
coordinator of programs within the agency.
3. From its inception the Agency Plan did not develop uniformly.
The original recommendation was that eight agencies be created; only
four were given statutory status and the remaining four were created
by executive order of the Governor. In addition, specific changes have
taken place, both by legislative directive as well as informal means,
which have had the effect of creating even greater variances in the
operations of the different agencies.
4. One of the direct results of these changes in the Agency Plan has
been to give the administrator greater direction and control over the
functions of the departments within the agency in direct contradiction
of the original concept of the 1961 reorganization as submitted to the
Legislature.
5. Another feature of the Agency Plan was the creation of an execu-
tive department and reassignment of the functions of the Department
of Finance to an integrated executive office of the Governor and a new
Department of General Services. Only the portion of this recommenda-
tion pertaining to the creation of a Department of General Services has
been implemented.
6. No serious study has subsequently been undertaken to determine
the feasibility of a formal reorganization of the executive office of the
Governor. It is possible that an integrated Governor's office would per-
mit a fuller realization of those objectives of the Agency Plan which
were associated with improved communication of the Governor's poli-
cies to the departments.
(42)
RECOMMENDATIONS
1. The Agency Concept deserves reevaluation to determine whether
those changes which have occurred, by statutory enactment and infor-
mal means, demonstrate the need for formal reorganization of certain
of the agencies into "full-blown" departments.
2. This committee also supports a full exploration of the potential
improvement which might result from the establishment of an execu-
tive office in California. Such a review should give serious consideration
to the fixing of responsibility for the fiscal and policy-management
functions now vested by law in the Director of Finance.
(43)
In 1961, Governor Edmund G. Brown submitted to the Legislature
a proposal for reorganizing the administrative structure of the execu-
tive branch of California State Government. That proposal, referred
to as the "Agency Plan," culminated a study which had begun two
years earlier with the creation by executive order of the "Governor's
Committee on Reorganization of California State Government."
A tentative reorganization proposal was drafted by the Governor's
committee calling for a regrouping of various departments, boards and
commissions and a strong executive office. This proposal was the subject
of a special two-day conference of selected state and local government
officials meeting at the Davis campus of the University of California in
September of 1959. Following this conference, the Governor assigned
the reorganization proposal to nine task forces and an executive com-
mittee representative of the affected units of government.
In December of the same year, the Governor's Committee on Organi-
zation of State Government * issued its final report entitled ' ' The
Agency Plan for California." The committee identified five glaring
defects inherent in the existing structure :
(a) The Governorship in California had been weakened by diffu-
sion of authority.
(b) Department directors and boards and commissions were unable
to communicate directly with the Governor.
1 The Governor's Committee on Reorganization of State Government was composed
of all of the members, except one, of the original committee which had submitted
the tentative reorganization proposal two months earlier.
(45)
46 ORGANIZATION OF THE EXECUTIVE BRANCH
(c) Departments, boards, and commissions did not have adequate
communication with each other.
(d) The Governor lacked an effective means for the formulation
and execution of unified, coordinated policies.
(e) There was not enough high-level attention to program plan-
ning and evaluation.2
THE AGENCY CONCEPT
In order to overcome these deficiencies, the committee proposed the
''Agency Plan," a structure that would place most of the departments,
boards, and committees under one of eight agencies to provide the basic
framework for the over-all organization. As nearly as possible, units
were to be grouped logically according to function. At the head of each
agency was an agency administrator who was to serve in the dual
capacity of advisor to the Governor and administrator of one of the
major functions of state government. In addition, the committee recom-
mended that an executive department be created which would provide
the Governor with highly qualified technical assistance in planning,
budgeting and management.
Such an organization, according to the report, would serve the fol-
lowing purposes :
1. Reduce the excessive array of separate organization units re-
porting to the Governor.
2. Give the Governor an improved organization structure for carry-
ing out his general management responsibilities, particularly for
executive planning and coordination.
3. Improve management by establishing cohesive groups of activi-
ties with strong staff and technical services.
4. Retain the advantages of citizen participation in state govern-
ment through the use of advisory boards and quasi-legislative
and quasi- judicial bodies where appropriate, but minimize the
administrative functions of such boards and commissions and
locate them organizationally within the basic structure of the
executive branch.
5. Decentralize administrative service and control activities to ex-
ecutive agencies insofar as possible to permit flexible and effi-
cient performance under broad over-all policies established by
the Governor and his principal officers.
6. Bring all agencies into a closer relationship with the Governor
so that he could more effectively exercise his executive power for
which he is politically and legally responsible.3
Taken in its entirety, the proposed organization represented a tradi-
tional approach to the solution of the problem of executive department
structure.4 While recognizing the necessity for the separation of gov-
ernmental powers, it emphasized a strong and unified executive branch
in which administrative authority and responsibility are focused in the
chief executive. The grouping of government activities into departments
based on function, the removal of administrative duties from the vari-
2 Governor's Committee on Organization of State Government, The Agency Plan for
California, December 1959, 3-6.
*Ibid.3 7-8.
4 Bell, James R., and Earl L. Darrah, State Executive Reorganization, Bureau of
Public Administration, University of California, Berkeley, February 1961, 61.
ORGANIZATION OF THE EXECUTIVE BRANCH 47
ous boards and commissions, and the coordination of administrative
staff services,5 were all designed to emphasize the authority of the
Governor :
. . . grouping, taken in this way, means that the individual depart-
ments retain their separate identities and functions, but are
brought together under an over-all agency for various purposes
. . . Unless the agency is given by law the functions of the sub-
ordinate organizations, it does not have the usual responsibilities
of a governmental operating unit. It does not build roads, license
vehicles or run prisons. These functions remain those of the consti-
tuent departments. ' ' 6
THE GOVERNOR'S 1961 MESSAGE
Governor Brown called for the adoption of the agency plan in his
message to the 1961 Legislature. The Governor's reorganization was
based on the creation of eight agency groups, each responsible for its
own internal coordination under one head who could report directly to
the Governor:
There is no intention of upsetting the internal structures of the
departments in these initial steps. It may well be that such changes
should come in some departments, boards or commissions, but only
after the new agency groupings have been tested by experience.
Our first task is to modernize and streamline administration so
as to define lines of responsibility more clearly and to obtain better
executive control over segments of the executive branch of govern-
ment which now receive little direction.
We can then proceed to better employment of the modern tools of
administration such as performance and program budgeting, work
standards, the optimum employment of electronic data processing
equipment and more effective, more efficient record keeping.7
The Governor suggested that a gradual, rather than a drastic, ap-
proach be adopted toward reorganization, arguing that pioneering
should be done in "less sensitive areas."8 Consequently, the Governor
suggested that only four agencies be created at that time :
(1) Youth and Adult Corrections Agency
(2) Health and Welfare Agency
(3) Agriculture and Resources Agency
(4) Transportation Agency
A small staff was suggested for each agency administrator until such
time as experience developed a clearer idea of the agency's exact role.
1961 LEGISLATURE
Two bills were passed by the 1961 Legislature creating four agen-
cies; 9 two of these agencies had been proposed in the original "Agency
5 Ibid.
°Ibid., 63.
7 Statement of Governor Edmund G. Brown on "Reorganization of the State Govern-
ment," transmitted to the California Legislature, February 13, 1961.
8 Ibid.
9 AB 159 3 (Winton), creating- the Health and Welfare Agency, Youth and Adult
Corrections Agency, and the Resources Agency, and SB 699 (Collier), creating
the Highway Transportation Agency.
48 ORGANIZATION OF THE EXECUTIVE BRANCH
Plan" report; one, the existing Transportation Agency, had been in-
cluded as a result of legislative initiative; and the Kesources Agency,
as finally created, failed to include a Department of Agriculture due to
opposition, which had developed within the agricultural industry, on
the basis that the industry would be downgraded by such a combina-
tion.10
Subsequently, Governor Brown set up four additional, nonstatutory
agencies by executive order :
1. Public Safety Agency
2. Employment Relations Agency
3. Business and Commerce Agency
4. Revenue and Management Agency
In April 1962 the legal issue of the Governor's power to carry out
these actions was raised by Insurance Commissioner F. Brinton McCon-
nell, based on a contention that the " shadow" administrators had no
official status or powers because the Governor had not acted officially,
and that the Governor had neither the legislative authority nor the
inherent power to take such action.11
In response, an Attorney General's Opinion of October 3, 1962, de-
clared that the Governor does have such inherent authority, but that
it extends only to ministerial functions, not to the delegation of the
Governor 's discretionary powers :
. . . the basic functions, duties, and responsibilities of departments,
boards, and commissions are unchanged as a result of the reorgan-
ization whether such department, board or commission is assigned
to a particular agency by statute ... or by executive action.
Where the department, board or commission is assigned to an
agency by statute, . . . the agency administrator is not only the
coordinator, but is also the liaison man between each such depart-
ment, board or commission and the Governor; and he also is
charged with the duty of reporting to the Governor on over-all
policy . . . and also has general supervision over and is directly
responsible to the Governor for the operations of the departments,
boards and commissions within the agency ... It is impossible
to delineate the scope of the term general supervision, but it is
believed to embrace only that authority to supervise those activities
of a department, board or commission which are purely admin-
istrative in scope and not specifically conferred upon such depart-
ment, board or commission by constitution or statute . . .12
According to the Attorney General, this is in contrast to the situation
11 where a department, board, or commission is assigned to an agency
by executive action, the agency administrator is merely a coordinator
for all such departments, boards, and commissions." However, the
agency administrator does not have the authority
to annul, amend, revise, or modify any legal action of a depart-
ment, board or commission any more so than the Governor himself
10 Office of the Legislative Analyst, Some Observations on the Agency Concept in
California State Government, September 6, 1966, 6.
11 Brief of F. Brinton McConnell in opposition to the actions of the Governor. April
5. 1962.
12 J, 0 Ops. Atty. Gen., 148.
ORGANIZATION OF THE EXECUTIVE BRANCH 49
does. Any supervisory powers the Governor possessed with respect
to the various state department heads prior to the reorganization,
whether by statute or executive action, were neither increased nor
diminished by the reorganization. An executive reorganization
which requires various department heads to coordinate the ac-
tivities of their departments through a coordinator, as in the
instant case, does not constitute a delegation of the Governor's
supervisory power.13
Commenting on this, the Legislative Analyst wondered how a posi-
tion can be created by executive order and not be an official position.14
In addition, he noted that it was
. . . interesting . . . that a degree of institutionalization has
since transpired within the structure of the nonstatutory agencies
which is evidenced by such things as letterhead stationery, identifi-
cation in the state telephone directory, identification in the
State Administrative Manual, official use of the title "adminis-
trator," and, in at least one instance, by a state official being addi-
tionally designated as "Deputy Administrator, Revenue and Man-
agement Agency" . . .15
"LITTLE HOOVER COMMISSION" EVALUATION
The only formal evaluation of the "Agency Plan" in operation was
undertaken by the Commission on California State Government Or-
ganization and Economy (the "Little Hoover Commission") which
was also established by the 1961 Legislature. The first report of the
commission, based on an evaluation of testimony from over 90 expert
witnesses includes
the commission's observations on the "agency" concept of organ-
izational structure, implemented in part by the Governor and the
Legislature in 1961, together with recommendations for executive
and legislative considerations in 1963. 16
Much of the commission's evidence on the workings of the plan was
derived from responses to a letter sent by its chairman, Eugene Lee,
to all agency administrators.17
In presenting its findings, the commission stated the difficulty of
evaluating the reorganization so soon after it was put into effect :
The state reorganization program commenced in 1961 is in mid-
stream, and an evaluation of progress in such a case is both specu-
lative and subjective. Nevertheless, judgments must be made and
decisions reached as to whether to turn back, to modify or to con-
tinue as originally proposed. The commission does not pretend
that it has found the answers.18
The commission concluded that the initial action taken by the Gov-
ernor and the Legislature had met a pressing need for reorganization;
15 Ibid.
14 Legislative Analyst, September 6, 1966, 9.
15 Ibid.
16 Commission on California State Government Organization and Economy, Findings
and Recommendations Concerning Reorganisation of the Executive Branch of
California State Government, December 31, 1962. Also, Findings, and Recom-
mendations Concerning Organization for Central Staff Services, March 11, 1963, 5.
17 Ibid., 22-23.
wIbid., 9.
50 ORGANIZATION OF THE EXECUTIVE BRANCH
it summarized the major accomplishments of the reorganization after
one year of operation :
(1) Made the Governor's responsibility as chief executive more
manageable and more effective ;
(2) Filled a needed, but previously missing, level of political-ad-
ministrative leadership created by the size and complexity of
California state government;
(3) Provided a potentially greater opportunity for more effective
legislative review and improved communication with the exec-
utive branch ;
(4) Produced specific and tangible benefits of program coordina-
tion among related departments, the elimination of overlap-
ping services, and more effective utilization of manpower,
space, and financial resources.19
Finally, the commission recommended that steps be taken by the Gov-
ernor and the Legislature in 1963 to strengthen and carry forward
this reorganization program :
(1) Extension of statutory status to the Business and Commerce
Agency;
(2) Establishment of statutory agency administrators on a full-
time basis without concurrent responsibility for serving as
departmental directors ;
(3) Provision of a minimal staff (four-six professional positions)
to assist each statutory administrator ;
(4) Decentralization of such management and staff controls as
can be exercised more effectively at the agency and depart-
mental level;
(5) Continuation of studies evaluating the inclusion within the
agency concept of all operating functions of state administra-
tion responsible to the Governor. As a general rule, all such
executive departments should be integrated in some fashion
within the agency framework.20
THE GOVERNOR'S 1963 MESSAGE
In his message to the 1963 Legislature, the Governor continued to
stress reorganization as a series of gradual steps. He indicated that the
partial plan in operation thus far was fulfilling the high hopes held
for it, and that a large saving had been derived from the existence of
the agency administrators. The Governor submitted reorganization
proposals :
(1) Creation of Department of General Services, including the
Division of Architecture ;
(2) Remove the office of State Fire Marshal from the Public Safety
Agency and place it in the General Services Department;
(3) Statutory status for the Business and Commerce Agency;
(4) Consolidate gains already made in existing statutory agencies:
19 Ibid., 13.
*>Ibid., 7.
ORGANIZATION OF THE EXECUTIVE BRANCH 51
(a) Establish new Department of Rehabilitation (consisting
of a number of units then in the Department of Educa-
tion) in the Health and Welfare Agency;
(b) Place the Citizens' Advisory Committee on Aging in the
same agency ;
(c) Place the Office of Coordinator of Atomic Energy Devel-
opment and Radiation Protection in the Department of
Public Health ;
(d) Legislation for Highway Transportation Agency, to (1)
rename it Highways and Transportation; (2) change name
of Department of Public Works to Department of High-
ways; (3) place the State Aeronautics Board and the
Division of Aeronautics as integral parts of the agency
rather than as a part of Public Works;
(e) Give the Board of Corrections separate status within the
Youth and Adult Corrections Agency.
(5) Give the Governor authority to develop reorganization plans
along the following lines:
(a) Transfer of any unit of government, or its functions, to
the jurisdiction and control of another;
(b) Consolidation or integration of the functions within a
unit;
(c) Consolidation or integration of the functions of various
units;
(d) Abolition of part or all of the functions of any jurisdic-
tion;
(e) Abolition of any unit whose functions have been found
obsolete ;
(f ) Authorization for an officer to delegate any of his func-
tions.21
THE ROLE OF THE AGENCY ADMINISTRATOR
The function of the agency administrator, as described by the 1959
report of the Governor's Committee on Organization of State Govern-
ment, was to act as an extension of the Governor's personality:
Each agency is headed by an administrator who serves as an out-
post of the Governor in the broad area of state government, func-
tioning as both his policy and managerial representative and ad-
visor. He is responsible to the Governor for the performance of
the departments within the agency. He is concerned primarily
with major policy and program matters and does not impair his
own usefulness or that of department directors by taking over
activities that can be done as well or better at the department level.
General administration of the agency's budget is one of his basic
responsibilities.22
As the committee noted, the general administration of the agency's
budget was to be one of the administrator's chief duties. In this con-
21 "Message to the California Legislature" by Governor Edmund G. Brown, January
5, 19 63. Recommendations one and two were adopted along- with portions of
four, but the extension of the agency concept to include a statutory Business
and Commerce Agency was rejected as was the executive initiated reorganization
proposal.
- The Agency Plan for California, 11.
52 ORGANIZATION OF THE EXECUTIVE BRANCH
text, the submission to the Legislature of the 1966-67 Budget raised
some further questions about the agency administrator's role. One of
the pertinent items involves the housing of federally funded programs
(with their staff or board) in the agency administrator's office, without
their attachment to any other unit in the agency.23
It is quite likely that because of the nature of the agencies, they may
assimilate more and more responsibility for administering programs,
notwithstanding the statutory definition of purpose adopted in 1961.
This could well lead to the eventual conversion of the "agency" into
large, integrated "departments." Due to this development during the
five years of operation under the agency plan, it appears quite appro-
priate at this time to reevaluate the organizational needs of the state
and whether they are being met through the agency concept.
In fact, the Legislature has already taken some actions which have
specifically modified the statutory authority of the agency administra-
tors. In 1963, the Administrator of Highway Transportation was given
the authority to "issue such orders as he deems appropriate to exercise
any power or jurisdiction, or to assume or discharge any responsibility
to carry out or effect any of the purposes vested by law in a department
in the agency. ' ' 24 While this authority may be tempered in practice by
the exercise of a general accepted pattern of operation by the agency
administrator, it is clear that this is a statutory authorization for the
exercise of those powers of a department head which were specifically
denied to the office of the agency administrator under the original
statute.
During the 1965 Second Extraordinary Session, another departure
was made when the Legislature delegated to the Health and Welfare
23 Analysis of the Budget Bill, 1966-1967, 1966 Regular Session, Report of the Legis-
lative Analyst to the Joint Legislative Budget Committee, 494ff and 712ff, out-
lining two of the specific instances noted by the Legislative Analyst :
(a) In the Health and Welfare Agency: Medicare
Chapter 4, Statutes of 1965, Second Extraordinary Session, also made the
administrator responsible for the administration of the state's new health
care program, effecting a basic change in the statutory agency administrator
concept. Details concerning the administrative staff for this function are
not available at the present time, but will be submitted to the Legislature
in a separate addendum to the budget . . . requesting one additional position
to assist in handling the increasing administrative responsibilities in the
agency.
This budget does not include $546,000 appropriated to this agency . . . for
the purpose of developing and administering the state's new health care
program.
Approximately six positions are located in this agency at the present time
for this purpose. There are also approximately 95 positions temporarily
located in mental hospitals, paid for out of this appropriation, for the pur-
pose of qualifying mental patients for welfare assistance under this new
legislation. There will be permanent staff located in the agency for the
purpose of implementing this new medical program and that staff along
with the $54 6,000 appropriated for administration should be accounted for
in this budget in the future regardless of the final decision with regard to
budgeting for the medical care program itself.
(b) In the Resources Agency: A bevy of grants with related staffs, and a
commission.
When the Resources Agency was established, the Legislature did not con-
template a new office to administer action programs. Thus, Government Code
Section 12850 states: "The administrator of each agency has the power of
general supervision over, and is directly responsible to the Governor for,
the operations of each department, office, and unit within the agency."
Section 12851 states: "Each administrator shall develop and report to the
Governor on legislative, budgetary, and administrative programs to accom-
plish comprehensive, long-range, coordinated planning and policy formula-
tion in matters of public interest related to his agencies, employ staff and
consultants, and appoint advisory and technical committees to assist in
the work."
s* 63 Stat. 136$.
ORGANIZATION OF THE EXECUTIVE BRANCH 53
Agency Administrator the powers and duties conferred by law upon
the Director of the Department of Social Welfare to administer the
health care programs.25
In a report submitted to this committee by Legislative Analyst A.
Alan Post, these changes in the role of the agency administrator are
noted and the following conclusion is drawn :
... it is evident that the original concept of the statutory agency
administrators as instruments of communication between the Gov-
ernor and the departments is being changed both by statutory
authorization and by informal means. There is a growing tendency
for agency administrators to concern themselves with detailed
programming and budgeting and, to the extent that such inte-
grated planning is implemented, it raises questions as to statutory
authority of individual departments over functions which overlap
department lines under the coordinated planning of the agency
administrator.
It seems inevitable, therefore, and necessary that modifications in
departmental authority will be made to implement more fully the
agency concept of coordinated planning and operations. It likewise
seems desirable that because of the complexities requiring coordi-
nation and planning, any modifications in the statutory structure
of the agencies should be based on organization studies in depth.26
SUMMARY
With sufficient foresight the changes which have taken place in the
agency concept during its six years of operation should have been ap-
parent to the proponents of the 1961 reorganization. They should have
been foreseen as the logical result of inserting the agency administrator
at a level in the administrative structure which requires him to per-
form two greatly different and often competing roles.
The agency administrator is placed in a position to serve as coordina-
tor of related programs among departments within his agency on the
one hand, with every likelihood that line authority will develop as
problems which exceed the bounds of the existing department structure
demand the kind of administrative coordination that is normally exer-
cised by department heads.
At the same time the administrator is supposed to serve as the Gov-
ernor 's source of communication to the departments to assist the Gover-
nor in performing the broad policy responsibilities of chief executive.
To the extent that the administrator becomes immersed in the day-to-
day administrative responsibilities and becomes an advocate of depart-
ment programs, his ability to serve as the Governor 's ' ' outpost ' ' to the
departments is substantially diminished.
It is possible to agree with the ' ' Little Hoover Commission 's ' ' evalua-
tion that agency administrators are not providing "just another level
of government but rather a missing level, ' ' 27 but to that conclusion
must be added the observation that the conflicting nature of the respon-
sibilities suggests that the "missing level" of administration that the
»1965 2nd Ex. Sess., Chapter 4.
26 Legislative Analyst, Some Observations on the Agency Concept in California State
Government (September 6, 1966), 13.
27 Findings and Recommendations Concerning Reorganization of the Executive Branch
of California State Government, 13.
54 ORGANIZATION OF THE EXECUTIVE BRANCH
statutory agency administrator has been asked to fill may, in fact, con-
sist of two separate and incompatible roles.
The conclusion drawn by this committee is that the agency concept
deserves reevaluation to determine whether those changes which have
occurred, by statutory enactment and informal means, demonstrate the
need for formal reorganization of certain of the agencies into "full
blown ' ' departments. Where there is a demonstrated need for coordina-
tion of programs which overlap existing departments by an administra-
tor exercising line authority, this should be undertaken to avoid
duplication and inefficiency resulting from similar administrative
staffing at both the department and agency level.
THE EXECUTIVE OFFICE PROPOSAL
The second major function of the agency administrator as an "out-
post" of the Governor to the departments perhaps suggests deficiencies
in the structure of the office of the Governor itself, which deserve
serious attention. In this connection, it is noteworthy that proponents
of the "agency plan" also called for substantial changes in the Gov-
ernor's office to pattern it after the executive office of the President.
"While discussion of this proposal paralleled establishment of the agency
plan, no concrete legislative proposals were advanced.
No man, no matter how energetic or brilliant, can perform the
administrative role of the chief executive if he relies purely on his own
faculties. In order to insure that the administration of the government
is performed adequately, the chief executive must have the necessary
staff assistance. Moreover, in order to insure that the integrity and the
unity of the executive office are maintained, this staff must be person-
ally loyal and under his direct supervision.
The natural growth of the federal government plus the impact of the
depression upon the governmental machinery, forced the issue of admin-
istrative reform of the office of the President in the 1930 's.
The 1937 report of the President's Committee on Administrative
Management called particular attention to the need to reform the
presidential staffing :
The President needs help. His immediate staff is entirely inade-
quate. He should be given a small number of executive assistants
who would be his direct aides in dealing with the managerial
agencies and administrative departments of government. These
assistants would be in addition to his present aides who deal with
the public, with the Congress, and with the press and radio . . .
They would remain in the background, issue no orders, make no
decisions, emit no public statements. Men for these positions should
be carefully chosen by the President from within and without the
government . . . They should be possessed of high competence,
great physical vigor, and a passion for anonymity. They should
be installed in the White House itself, directly accessible to the
President.28
This was the genesis of the Executive Office of the President. Congress
acted almost immediately to implement the organizational recommenda-
tions of the committee, and President Franklin D. Roosevelt, acting
28 Report of the President's Committee on Administrative Management,, 1937, 5.
ORGANIZATION OP THE EXECUTIVE BRANCH 55
under his reorganization powers, for the first time gave official counte-
nance to the Executive Office of the President.29
THE 1961 REORGANIZATION
The Governor's Committee on Organization of State Government
recommended a similar proposal for California when they called for
the creation of an executive department "directly under the Govern-
nor. ' ' 30 Referring to the federal model, the committee observed :
It is well to recall that this report is concerned with reorganization
of the unique California state government. There are few prece-
dents on which to rely ; no other state has so large a budget ; Cali-
fornia has long had and effectively used organizational devices
which smaller, less experienced states are now only trying. It may
well be asked, "Is our state government at that stage of develop-
ment which characterized the federal government in 1937?" That
year was the threshold for changes which have . . . improved the
operation of the federal executive branch and in no small measure
lightened the potential burden of the President.31
The development of the Governor's office in California has been in-
fluenced by three significant developments :
1921 — The formal creation of the Department of Finance.
1934 — The establishment of the State Personnel Board and present
civil service system.
1943 — The first steps in the formal organization of the Governor's
personal staff under Governor Earl Warren.32
The Governor 's committee proposed a strengthening of the Governor 's
office by the creation of an executive department headed by an execu-
tive officer. This new department, directly responsible to the Governor,
was to be staffed by career specialists in management, budgeting and
planning and would provide for
. . . continuity in the management of state government and give
the Governor the help he needs to do the planning, budgeting,
organizing, evaluating and coordinating that are all part of the
complex job of managing state government.33
In addition, recognizing the nonadministrative functions of the Gov-
ernor (his ceremonial and political duties), the committee proposed to
retain his immediate staff of secretaries under the over-all supervision
of an executive secretary.34
The following units were to be established within the executive de-
partment :
1. Budget Unit
2. Management and Organization Unit
3. Program Unit
4. Physical Planning Unit
29 Reorganization Plan No. I of April 25, 1939.
30 The Agency Plan for California, 13.
aiBell and Darrah, 93.
**Ibid., 94.
83 The Agency Plan for California, 13.
^Ibid.
56 ORGANIZATION OF THE EXECUTIVE BRANCH
5. Economic Development Unit
6. Consumer Counsel
7. Atomic Coordinator
The intended effect was to more sharply define the role of the Gov-
ernor's office as the focal point for the management of state govern-
ment.35 As far as the Governor 's office was concerned, the emphasis was
to be on the coordinative and advisory functions of the staff: "It is
concerned with improving the management of state government, but it
does not itself do the managing. ' ' 36
The principal objections raised to the committee's proposed reorga-
nization of the Governor's office centered on the fact that acceptance
of the recommendations would result in the abolition of the Department
of Finance. It was over this issue that Bert W. Levit, chairman of the
Governor's committee and a former director of the Department of
Finance, dissented from the committee report :
At present, while the Director of Finance is directly responsible
to the Governor, is appointed by him, and is subject to removal at
any time, the director and finance department staff are effectively
insulated from constant political pressures and manifestations by
members of the personal staff of the Governor.37
The other members of the committee responded to the criticism and
reasserted their position that the functions performed by the Depart-
ment of Finance should be reassigned in the following manner :
(a) Top policy-management to the executive department of the
Governor ;
(b) Housekeeping to the new Department of General Services;
and
(c) Continue budget and fiscal controls decentralized to agencies.38
This approach was needed in the committee's view to insure mainte-
nance of executive control :
Top policy decisions should be made in the Governor's office.
Through the executive department the Governor will have adequate
control of fiscal policies and the execution of programs, and in all
ways will provide fiscal and management leadership. He will have
. . . the top personnel of the existing Department of Finance to
help him develop budget expenditure guide lines and to judge
administrative performance in the departments and agencies.39
The Governor's 1961 Reorganization Message did not include a dis-
solution of the Department of Finance or reassignment of functions.
The following year a further postponement was suggested by the ' ' Lit-
35 Ibid.
86 In this connection, the committee recommended that the executive department
should not include functions that jare "operational or ministerial." With
specific reference to the Economic Development Unit, the Consumer Counsel,
and the Atomic Energy Coordinator, the committee suggested these functions
should remain in the executive department only so long as they are essentially
developmental and coordinative in nature.
37 Letter from Bert W. Levit to Hon. Edmund G. Brown, December 9, 1959, pub-
lished in The Agency Plan for California, 63, 64.
38 Letter from the majority of the members of the Committee on Organization of
State Government (excluding Bert W. Levit) to Hon. Edmund G. Brown, De-
cember 15, 1959, published in the Agency Plan for California, 65, 66.
39 Ibid.
ORGANIZATION OF THE EXECUTIVE BRANCH 57
tie Hoover Commission, ' ' and accepted by the Governor, that action on
the executive office proposal await an evaluation of the effectiveness of
the proposed Department of General Services — a commission-endorsed
reorganization which was favorably received by the 1963 Legislature.40
The establishment of the Department of General Services, and the
transfer to the new department of the housekeeping duties formerly
the responsibility of the Director of Finance means that the establish-
ment of an integrated executive office, as it has been proposed, could
be undertaken with fewer reassignments of finance department func-
tions.
No serious dialogue has taken place since the 1963 reorganization
made this change in the operations of the Department of Finance and
no additional impediment to the executive office proposal has been ad-
vanced to suggest the necessity for further delays.
SUMMARY
This committee review of the background of proposed reorganizations
of the Governor's office has not been undertaken to bolster a recom-
mendation to the Legislature. Rather, it is intended to call attention
to the fact that it has been supported in the recent past as a means of
improving the Governor's ability to coordinate programs administered
by agencies over which he has direct responsibility. It is possible that
an integrated Governor's office would permit a fuller realization of
those objectives of the Agency Plan which were associated with im-
proved communication of the Governor's policies to the departments.
This committee supports a full exploration of the potential improve-
ment which might result from the establishment of an executive office
in California. None of the previous studies have reviewed in any depth
the specific statutory functions performed by the Director of Finance
and the anticipated result of the transfer of these functions. One of the
advantages which accrues to the existing structure in the way in which
it fixes responsibility for fiscal and policy management in one individual
and the potential diffusion of this responsibility could well have a detri-
mental effect on administration. At the other extreme, the disollution of
the Department of Finance in favor of an Executive Office could mean
little more than a name change of questionable value.
While it would seem to matter little whether that name change is
made, if, in fact, all of the functions continue to be performed by an
executive officer rather than a director of finance, the ramifications
associated with this proposed reorganization could well have far-reach-
ing effects depending not only on the manner in which the executive
office is formally structured by law but also the informal means which
may be utilized to exercise authority. The committee would, therefore,
strongly urge a critical examination of the operation of the Governor's
office and the desirability of implementing by legislative action any
such reorganization which would serve to assist the Governor in the
performance of his constitutional duties.
40 Commission on California State Government Organization and Economy, Findings
and Recommendations Concerning Organization for Central Staff Services, March
11, 1963, 2.
APPENDICES
APPENDIX A
THE EXECUTIVE OFFICE OF THE PRESIDENT
The concept of an executive office originated, as did the idea of exec-
utive initiated reorganization, in the desire to give the chief executive
an administrative structure which would enable him to fulfill his con-
stitutional responsibilities.
The executive office was conceived of as the central organ for the
provision of staff services to the President. The units which comprise
the office have undergone a number of changes since 1939, reflecting
the growth of the administrative structure. Currently, the Executive
Office of the President is composed of the following units:
1. The White House Office (1939)
2. The Bureau of the Budget (1921)
3. The National Security Council (1947)
4. The Council of Economic Advisors (1946)
5. The Office of Emergency Planning (1962)
6. The National Aeronautics and Space Council (1958)
7. The Office of Science and Technology (1962)
Obviously, all these units are of critical importance in the determina-
tion of policy. The first two, however, the White House Office and the
Bureau of the Budget, represent probably the two most decisive voices
in overall policy formulation.
The White House Office was a direct response to the recommendations
of the 1937 report of the President's Committee on Administrative
Management, and, in the executive order which created it, was described
as an office "in general, to serve the President in an intimate capacity
in the performance of the many detailed activities incident to his im-
mediate office."41 The chief staff assistance is performed, currently, by
a special counsel to the President, a press secretary, a number of special
assistants to the President for designated areas of concern, and aides
which represent the various branches of the military. These represent
the inner core of the presidential "family."
The Bureau of the Budget is the largest single unit in the executive
office. Its role within that structure is defined by Executive Order
8248 of 1939 :
— (a) To assist the President in the preparation of the budget
and the formation of the fiscal program of the government.
(b) To supervise and control administration of the budget.
(c) To conduct research in the development of improved plans
of administrative management, and to advise the executive depart-
ments and agencies of the government with respect to improved
administrative organization and practice.
(d) To aid the President to bring about more efficient and
economical conduct of government service.
(e) To assist the President by clearing and coordinating depart-
mental advice on proposed legislation and by making recommenda-
a Executive Order 8248 of 1939.
(61)
62 ORGANIZATION OF THE EXECUTIVE BRANCH
tions as to presidential action on legislative enactments, in ac-
cordance with past practice.
(f) To assist in the consideration and clearance and, where
necessary, in the preparation of proposed executive orders and
proclamations, in accordance with the provisions of Executive
Order No. 7298 of February 18, 1936.
(g) To plan and promote the improvement, development, and
coordination of federal and other statistical services.
(h) To keep the President informed of the progress of activities
by agencies of the government with respect to work proposed, work
actually initiated, and work completed, together with the relative
timing of work between the several agencies of the government;
all to the end that the work programs of the several agencies of
the executive branch of the government may be coordinated and
that the moneys appropriated by the Congress may be expended
in the most economical manner possible with the least possible
overlapping and duplication of effort . . ,42
The objectives which gave rise to the creation of the executive office,
plus the necessity of maintaining a unified executive office, made it im-
perative that the office be developed along the lines that it has :
While the number of staff assistants and agencies in the executive
office was increasing, their functions were also evolving — from
handling records, to supplying information, to reviewing and an-
alyzing documents (and situations), to advising, to negotiating, and
to following up decisions or actions. A full-blown staff has de-
veloped.43
The effect "is to cause the office of chief executive in its actual oper-
ations to reflect the functioning of many minds. ' ' 44
42 Ibid.
43 The Brookings Institution, "The Formulation and Administration of United States
Foreign Policy," United States Foreign Policy: Compilation of Studies, Number
9, Senate Committee on Foreign Relations 86th Cong., 2nd Sess. (Washington,
D.C., Government Printing Office, 1960), Vol. 2, 844.
*4 Kallenbach, 444.
APPENDIX B
THE OFFICE OF GOVERNOR IN CALIFORNIA
The same considerations which gave rise to the creation of the execu-
tive office of the President are relevant to an examination of the struc-
ture of California's chief executive.
While there is currently not an integrated executive office, the office
has developed over the years. Its present structure reflects changes
proposed during the last effort to reorganize the executive branch, an
attempt which took place in 1961.
At that time, it had been 30 years since the last reorganization of
the executive branch and the contention was made that the problems
which confronted the California Governor were analogous to those
faced by the President during the 1930 's. Consequently, in 1959, Gov-
ernor Brown appointed a Committee on the Organization of State
Government.
The committee proposed to strengthen the Governor's office by the
creation, directly under the Governor, of an executive department
headed by an executive officer. Within the executive department were
established the following units :
1. Budget unit
2. Management and organization unit
3. Program unit
4. Physical planning unit
5. Economic development unit
6. Consumer Counsel
7. Atomic Coordinator
The functions of the units, according to the committee, are outlined in
the excerpt reproduced below from the committee report.
Budget Unit
The key to successful application of the agency concept and to
best use of the executive department is placement of management
responsibility, and the necessary controls, more clearly in the Gov-
ernor and his key program officials, the administrators. One of the
most important and difficult areas is that of budgetary control.
The best way to explain the administration of this control is to
describe briefly the committee 's thinking with respect to budgeting.
General budget policy is determined by the Governor with con-
sultation and advice from his cabinet, one member of which is the
executive officer. The budget unit will be of considerable assistance
by preparing revenue estimates, policy objectives, and procedural
instructions. When these have been considered by the cabinet, and
the Governor has made the necessary decisions, the budget unit
issues instructions reflecting these decisions. Each administrator
then prepares the program budget for his agency, not a detailed
budget but one based on a broad definition of functions and activ-
ities. It is the administrator's proposal as to what should happen
(63)
64 ORGANIZATION OF THE EXECUTIVE BRANCH
to those programs for which he is responsible. The budget unit
conducts hearings to review these proposals, with major decisions
referred to the Governor. When these decisions have been made
and overall dollar limits assigned, the agency administrator is
responsible for preparing his detailed budget within these deci-
sions and limits. This detailed budget focuses attention on the
purposes for which money is appropriated. These detailed budgets
are reviewed in the executive department to see that they are
within previous understandings and then collated into a single
Governor's Budget. While the executive department makes a gen-
eral presentation of the Governor 's Budget to the Legislature, each
agency is responsible for explaining its program. After the budget
bill has been enacted into law, administration of the budget is a
basic responsibility of the administrator; however, major modifi-
cations require approval of the budget unit.
Management and Organization Unit
The purpose of this unit is to perform the necessary research
upon which to base sound policies and practices for the manage-
ment and organization of state government. It serves as a man-
agement consultant to the Governor and to agency administrators.
In so doing it conducts studies of major management problems and
recommends solutions and provides leadership and coordination
for similar units in the agencies. As a major part of its function,
the management and organization unit develops standards and
guides in such important management areas as organization, ac-
counting systems, internal auditing, and records management, and
provides personnel management liaison with the State Personnel
Board. It guides and encourages the development of workload
standards, work measurement practices, improved procedures, and
staffing ratios.
This unit also has responsibility for establishment of rules and
regulations for the reimbursement of claims against the state, and
for the administration of the employee suggestion system and work
improvement programs. It provides leadership in the development
of improved administrative techniques and operational procedures.
In all of its areas of responsibility it tries to have the manage-
ment research work done at agency or department level, perform-
ing itself only those tasks which are of a statewide nature or
involve more than one agency or, for other reasons, cannot be
adequately performed at operating levels.
Program Unit
This unit assures the development, coordination, and evaluation
of operational programs. It has responsibility for continuous re-
view of current programs and for the assessment of new or pro-
posed programs in terms of social and economic effect. It is at this
point that a balance will be maintained among such diversified
programs as the conservation of natural resources, treatment of
the mentally ill, and the construction of major public works.
The work of the unit will require close coordination with pro-
gram agencies and with fiscal, management, and physical planning
units. In common with other units in the executive department,
ORGANIZATION OF THE EXECUTIVE BRANCH 65
the program unit will provide leadership and coordination of pro-
gram planning at the agency level.
Physical Planing Unit
This office acts as the principal staff agency in matters concern-
ing the physical growth and development of the state and its
resources and is responsible for accepting and allocating or ex-
pending grants and gifts for the financing of state, regional, and
local planning.
Two primary features of this broad program are local planning
assistance and the preparation and maintenance of a comprehen-
sive, long-range, general plan for the physical growth and develop-
ment of the state. The latter is accomplished in cooperation with
state, local, regional, and federal agencies and utilizes the physical
development plans prepared by such agencies.
This office assists the budget division in the preparation of the
capital improvement sections of the annual budget. It is a central
repository for state, federal, regional, and local research studies,
plans, and project proposals relating to existing and future physi-
cal growth and development of the state and to the conservation,
use, and development of its resources.
Economic Development Unit
The function of this unit, as defined by the Legislature, is to
provide the leadership and coordination of public and private
effort necessary to the full realization of the economic potential
of the state. In discharge of this function the unit serves as a
central clearinghouse for economic information compiled or de-
veloped by other public and private agencies, makes such infor-
mation available to local organizations and industrialists, assists
local communities and organizations in assessing their economic
potential, and actively promotes the development and expansion
of business and industry within the state.
The chief of the unit serves as the Governor's principal staff
advisor on economic matters and as an ex officio member of the
Governor's Business Advisory Council.
Consumer Counsel
The Consumer Counsel is responsible for advising the Governor
on all matters affecting the people of the state as consumers and
for recommending to the Governor and the Legislature the enact-
ment of legislation necessary to protect and promote the interests
of the people as consumers. In carrying out his functions, the
Consumer Counsel may appear before government commissions,
departments, and agencies on behalf of consumers' interests, make
such studies and investigations as appear appropriate, and issue
reports to the people.
Atomic Coordinator
The Atomic Coordinator is responsible for advising the Governor
with respect to atomic development within the state and coordi-
nates the activities of the state relating to atomic energy and other
3— L-418
66 ORGANIZATION OF THE EXECUTIVE BRANCH
forms of radiation. This involves cooperation with other states and
with the federal government.
The Atomic Coordinator also serves as the principal member
of the Governor 's Committee on Atomic Activities.45
The overall effect was to more sharply define the role of the Gov-
ernor's office as the focal point for the management of state gov-
ernment.46
This is one approach to organization of the executive office. It is to
be contrasted with the existing structure under which many of the
responsibilities which are to be vested directly in the Governor's office,
other than the personal staff, have been assigned by law to the Depart-
ment of Finance.
ACTIVITIES OF THE DEPARTMENT OF FINANCE
The Department of Finance has statutory responsibility for all mat-
ters concerning the financial and business policies of the state (Section
13070, Government Code). Under this authority, the director is
responsible for:
Financial planning and economic forecasting.
Formulation through the executive budget of the state's annual
operating program.
Development of an adequate revenue structure and necessary use
of bonded debt to meet the expenditure obligations of state gov-
ernment.
Control of fiscal operations through program review, budgetary
restraints, and internal audits to conserve the fiscal integrity of the
state.
Coordinating and stimulating the development of new programs
and operational systems to meet public needs within the fiscal
ability of the state, and encouraging more efficient and economical
government operations and the obsolescing of unproductive pro-
grams to conserve state funds.
Coordinating of physical and economic planning at all levels of
government in California.
Managing and developing the public lands of the state.
In the administration of his fiscal and management responsibilitie
the director is necessarily an active member of 28 boards and commis
sions.
To accomplish its primary role of seeing that the Governor's pro-
grams and policies are put into effect in the most efficient and economi-
cal manner, the Department of Finance is organized into eight separate
units :
1. The budget division prepares the annual budget for presenta-
tion to the Legislature. After budget enactment, this division
maintains continuous surveillance over the operations of state
agencies to assure that programs are conducted in accordance
with legislative and executive intent.
45 Governor's Committee on Organization of State Government, The Agency Plan
for California, December 1959, 15-17.
« Ibid., 14.
>
ORGANIZATION OF THE EXECUTIVE BRANCH 67
2. The audits division conducts a postaudit of all state agencies
to discover and report unauthorized, illegal or irregular expendi-
tures, or unsound financial practices, and make sure state agen-
cies are faithfully discharging their responsibilities.
3. The program and policy evaluates state programs and policies
in order to eliminate obsolete programs and develop new pro-
grams to meet emerging public needs. This office also assists
the Governor's legislative secretary in the preparation of the
Governor's legislative program and serves as a special con-
sultant staff to the Governor's office, the Director of Finance,
the cabinet, and the agency administrators.
4. The special assistant to the director for systems and ADP : Ad-
vises the director on the status of systems studies proposed and
under contract; develops policy guidance on requirements for
management information and control systems; represents the
Director of Finance in formulation of policies and plans in-
volving other states, federal, and local jurisdictions ; and serves
as executive secretary to the Governor's Automatic Data Proc-
essing Advisory Committee.
5. The Office of Planning is responsible for preparation and main-
tenance of a comprehensive state development plan, and the
coordination of public works programs undertaken by the state
with federal and local agencies. This office also provides plan-
ning assistance to local and other public agencies.
6. The Economic Development Agency provides leadership and
coordination of public and private efforts to promote industrial
and commercial expansion in California. To this end, the agency
studies business conditions and provides an information service
to prospective businesses and industries which may be con-
sidering locations within the state.
7. The State Lands Division administers approximately 3,500,000
acres of public lands in accordance with policies established by
the State Lands Commission. This activity includes leasing these
lands for oil, gas, and mineral exploitation, which provides a
major source of state revenue.
8. The department also maintains an office in Washington, D.C.,
to represent the state 's interests before the federal government.47
7 The above material on the Department of Finance is derived from a memorandum
dated December 21, 1966, prepared by the department's program and policy
office at the request of the committee.
. DEPARTMENT OF REVENUE
Two years ago this committee reported to the 1965 Legislature on the
need for a Department of Revenue with responsibility for tax collection
| functions currently divided among the State Controller, the Board of
Equalization and the Franchise Tax Board.48
This proposal did not originate with the committee. "For more than
35 years legislative committees and special commissions have consist-
ently recommended unification of revenue collection ' ' 49 and legislation
to effect those recommendations has been unsuccessfully placed before
the Legislature with unfailing regularity.
The Revenue Department which was envisioned by the committee in
the 1965 report did not include all tax collection functions. No change
was recommended in the constitutional responsibility of the Board of
Equalization for equalizing county assessment levels and valuation of
public utility property for local tax purposes. There was also no change
recommended in the Controller's responsibility for supervision of de-
linquent and tax-deeded properties.50
Also excluded were the tax collecting functions of the Department of
Motor Vehicles, the Department of Employment and the Horse Racing
Board in the proposed department. The administration of some taxes,
the committee stated, was so ' ' closely integrated with other administra-
tive functions as to make their consolidation of questionable value."
48 Assembly Committee on Government Organization, California's Tax Administration:
The Need for a Central Revenue Department, January 1965. The committee re-
port contains a brief review of the history and development of California's tax
administration, a summary of the organization of the existing structure, a sur-
vey of developments in other states, a review of the findings of previous studies
and the committee's arguments in support of revenue consolidation.
*IMd, 9.
60 Ibid, 45.
(71)
72 ORGANIZATION OF THE EXECUTIVE BRANCH
Included in this category, along with the three units mentioned above,
was the "revenue collected by virtually every agency through issuing
licenses or charging fees. ' ' 51
The distribution of revenue-collecting functions among several agen- 1
cies reflects the product of an administrative structure that developed i
in response to specific fiscal crises. The 1965 committee report concluded \\
that significant economies would result from consolidation because the
present structure "has perpetrated inefficient and uneconomical use of
personnel and facilities. ' ' 52
Without exception, every state official with major responsibilities for
tax administration testified that substantial savings would be realized
through unification of most tax collection functions.
Even Board of Equalization member John W. Lynch, who favors
consolidation under the board rather than a director appointed by the i
Governor, agreed that consolidation would save money :
It would save a great deal of money. It would be more efficient and
more economical. No one on the board quarrels with that . . . Any
consolidation would be more efficient, more economical.53
The only disagreement expressed by those testifying before the com-
mittee on the potential economies which could be anticipated from
consolidation of revenue-collecting functions, related to the amount of l!
savings involved and whether it was likely that administrative reorga-
nization could advance beyond the consolidation of different taxes •
within a central agency to include integration of tax-collecting activities
common to more than one tax.
The potential for savings from an integrated approach to administra-
tion has been the subject of some differences of opinion, particularly as
it applies to specific functions of administration, such as auditing. Dur-
ing the interim period prior to the 1967 Legislature, the committee
requested, through the auspices of the Joint Legislative Audit Com-
mittee, a report of the office of the Auditor General on the feasibility of
combining the work of tax auditors.
Auditor General William H. Merrifield 's conclusion was that it would I
be beneficial to integrate the field auditing activities of the Franchise \
Tax Board, the Board of Equalization and the State Controller.54 The \
conclusion was based on the following findings :
1. The existing separate tax administrative agencies each have a i
history of field auditing integration.
2. The audit selection process could be coordinated and improved
upon through the use of a combined management information
system.
3. A more economical use of personnel could be developed under a
combined management.
4. The same administration that is responsible for the collection of
the revenue should also be responsible for the audit of that
61 Jbid.
62 Ibid, 10.
™Ibid, 32.
64 Letter report from the office of the Auditor General to members of the Joint Legis-
lative Audit Committee, December 2, 1966. For a complete copy of the report,
see Appendix.
ORGANIZATION OF THE EXECUTIVE BRANCH 73
revenue; therefore a department of revenue would provide a
means for the integration of the field auditing activities.55
Auditor General Merrifield also pointed out that ' ' combined manage-
ment must exist before the field auditing activities of the Franchise Tax
Board, the Board of Equalization and the Controller's office can be
integrated/' 56
In the view of this committee, the conclusion that combined manage-
ment is necessary before certain of the functions of tax administration
can be successfully integrated is well justified. In many areas, and per-
haps auditing is one, the full integration of these activities may not be
achieved until after long experience and extensive planning. But it is
equally valid to note that the experience and planning which are neces-
sary won 't be begun until a Department of Revenue is adopted.
Even before a Department of Revenue begins to function, detailed
management planning is necessary to insure an orderly transaction and
development of a plan for organization of the department, appropriate
staffing, budget and many other considerations. For this reason, there
should be a transition period provided in the statute creating the new
department.
In addition to the potential economies which will result from con-
solidation, the committee support of the Department of Revenue pro-
posal was based on the taxpayer convenience which would result from
being able to deal with one agency rather than the confusing situation
of having to deal with as many as four separate agencies in the payment
of taxes. A Department of Revenue would also concentrate responsi-
bility for administration in the chief executive through his Director of
Revenue and an administrative appeals procedure could be established
independently from other administrative functions of tax collection.
In recognition of these arguments, the committee continues to endorse
the recommendations contained in the 1965 report :
(1) That a Department of Revenue be established with responsi-
bility for the statutory state tax collection functions presently
exercised by the State Controller, the Board of Equalization,
and the Franchise Tax Board.
(2) That the Department of Revenue be administered by a Di-
rector of Revenue appointed by the Governor with Senate
confirmation and removable by the Legislature for cause.
For many years one of the most sensitive and controversial areas of
tax administration has been the appraisal procedures involved in the
administration of the inheritance and gift taxes. Since the committee
recommendation included the transfer of the administration of these
taxes from the State Controller to the Department of Revenue, con-
sideration has been given to alternatives to the existing method of
assessment and collection of these taxes. The 1965 report favored mov-
ing toward a system of self assessment. The committee position was
based on the fact that certain assets have a fairly exact and easily
ascertainable market value. The consequences of this approach present
a number of alternatives in the administration of the Inheritance and
Gift Tax Law. While the committee supports reform of the existing
"Ibid.
"Ibid.
74 ORGANIZATION OF THE EXECUTIVE BRANCH
system, it is recognized that various alternatives might be pursued as
improvements. It is also clear that none of the changes need await the
establishment of a Department of Revenue.
In conclusion, there is little which can be added to the findings and
conclusions of past studies. The committee agrees with the observation
of the Commission on California State Government Organization and
Economy :
It is clear that further documentation of the conclusive evidence
on record would be repetitious — the logic of a . . . Department of
Revenue for California has been well established . . . Clearly, the
time has come to set aside those considerations that have blocked
constructive action in the past.57
67 Commission on California State Government Organization and Economy, Letter re-
port to Hon. Edmund G. Brown, Hon. Hugh M. Burns and Hon. Jesse M. Unruh,
December 28, 1964.
APPENDIX
December 6, 1966
Honorable Milton Marks, Chairman
Assembly Committee on Government
Organization
State Capitol
Sacramento, California
Dear Milton :
Please find enclosed a letter report from the office of the Auditor
General covering the feasibility of combining the work of government
tax auditors. This report is furnished at your request.
Our report states its conclusion that if a Department of Revenue
were created, it would be beneficial to integrate the auditing activities
of the major tax collection agencies which are the Board of Equaliza-
tion, the Franchise Tax Board and the State Controller.
We are pleased to provide this information for your committee and
I trust you will not hesitate to call upon us again whenever we can be
of service.
With my warm best wishes,
Sincerely
Vincent Thomas
December 2, 1966
Members of the Joint Legislative
Audit Committee
State Capitol
Sacramento, California
Gentlemen :
We have reviewed the organization, scope, and procedures of tax
revenue auditing in the State of California's principal tax administra-
tive agencies, consisting of the Board of Equalization, the Franchise
Tax Board, and the State Controller.
The purpose of our review was to determine the feasibility of com-
bining the tax auditing in such a way as to reduce the number of
separate audits being made by the state of a taxpayer's records.
This review was undertaken in accordance with a request made of
you by the Assembly Committee on Government Organization.
CONCLUSION
It is our conclusion that if a Department of Revenue were created,
it would be beneficial to integrate the field auditing activities of the
Franchise Tax Board, the Board of Equalization and the State Con-
troller.
Our conclusion is based on the following findings.
FINDINGS
1. The existing separate tax administrative agencies each have a
history of field auditing integration.
(77)
78 ORGANIZATION OF THE EXECUTIVE BRANCH
2. The audit selection process could be coordinated and improved
upon through the use of a combined management information
system.
3. A more economical use of personnel could be developed under
a combined management.
4. The same administration that is responsible for the collection
of the revenue should also be responsible for the audit of that
revenue; therefore a department of revenue would provide a
means for the integration of the field auditing activities.
COMMENTS
HISTORY
The Franchise Tax Board, the Board of Equalization, and the State
Controller have made substantial organizational changes in their own
auditing activities over a period of years.
For example, at one time the Franchise Tax Board had two divisions,
the personal income tax division and the corporation tax division, which
operated independently of each other. The two divisions now have been
fully integrated.
Likewise, a similar change has been made by the Board of Equaliza-
tion in the sales tax, the transportation tax and the use fuel tax audits.
Those taxes are now audited concurrently. The excise taxes that the
Board of Equalization administers such as the motor vehicle fuel tax,
the beverage taxes, and the cigarette tax are audited independently of
the sales and use taxes. However, excise taxpayers, while few in num-
ber, do pay other state taxes such as income taxes; therefore, excise
taxes should be included in any further consideration of integrating
tax audits.
The Controller's office also has made organizational changes in both
the inheritance and gift tax division and the tax collection and refund
division.
Even though each agency has successfully taken steps to upgrade its
own auditing activities, no attempts have been made to integrate the
auditing activities of the respective agencies.
In 1964 an interdepartmental tax committee was organized with the
main purpose being to review and increase the cooperation among the
participating agencies. (Agencies involved are the Franchise Tax
Board, the Board of Equalization, the Department of Employment, and
the State Controller. Because of the federal participation, the Depart-
ment of Employment has been purposely excluded from this report.)
However, that committee has not considered any integration of the
auditing activities.
AUDIT SELECTION
The audit selection process could be improved upon through the use
of a combined management information system. Such a system could
be developed if the tax collecting agencies were combined into a de-
partment of revenue.
Regardless of the classification of a taxpayer, having all of the differ-
ent types of tax returns filed available in a central location would give
an auditor a better insight into the taxpayers ' operations. In some cases
it may not be economically feasible to audit a taxpayer for all of the
ORGANIZATION OF THE EXECUTIVE BRANCH 79
taxes paid, but having a complete tax history readily available would
be helpful in determining the audit scope of any particular tax under
review.
A combined management information system could provide for both
an office and a field determination as to which taxes should be audited.
Also a field determination could be made as to what other types of tax
returns should have been filed by the taxpayer.
The collection and the compliance activities could be coordinated and
improved upon through this combined management information system.
Collection and compliance activities are directly related to auditing;
the compliance unit is responsible for informing the taxpayers of the
various provisions of the tax laws, and the collection unit is responsible
for following up the audit findings.
PERSONNEL
In order to make the determinations previously mentioned, all per-
sonnel involved would have to have at least a general knowledge of all
applicable tax statutes.
Management of a department of revenue, by the use of pilot studies,
in both the rural and metropolitan areas, could develop the most eco-
nomical methods of auditing the different taxes. When two or more of
a taxpayers ' taxes are selected for audit the number of auditors and
the number of visits to a taxpayer's office necessary to complete the
assignment would be contingent upon, but not necessarily restricted to,
the complexities of the taxes involved, previous experience with the
taxpayer, and the location of the records to be audited.
Furthermore, in order to develop an effective supervisory level in a
combined tax agency, staff men should gain proficiency in the applica-
tion of all pertinent tax statutes.
ADMINISTRATION
The same management that is responsible for the revenue collection
activities should be responsible for the audit of that revenue. This is
essential in any operation so that the audit selection, the audit scope,
and the audit findings can effectively be coordinated and controlled.
This, in essence, describes the present organizational arrangement. We
believe that a combined management must exist before the field auditing
activities of the Franchise Tax Board, the Board of Equalization and
the Controller's office can be integrated.
Sincerely yours,
William H. Merrifield
Auditor General
IV. DEPARTMENT OF GENERAL SERVICES
On October 1, 1963, the Department of General Services officially
began functioning as a separate entity within the excutive branch of
California state government. The legislative authorization for the estab-
lishment of a separate department with responsibility for the central
staff or "housekeeping" functions of government followed many years
of studies suggesting the need for such an agency.
Since the creation of the department by the 1963 Legislature, a
number of legislators have expressed concern over the manner in which
the department has carried out its responsibilities. Legislation was even
placed before the 1965 session which questioned the necessity of the
Department of General Services as a separate entity and proposed that
these functions be placed back under the supervision of the Director of
Finance.
As a result of this concern, this committee was authorized to proceed
with a comprehensive review of the programs administered by the
Department of General Services. This study is in accord with the major
responsibility of the Legislature to undertake periodic review of the
reorganizations it enacts to determine whether further improvements
in organization are possible and to evaluate the extent of accomplish-
ments.
The first issue before this committee is whether the concept of a
central staff services department performing the so-called "housekeep-
ing" functions for the various state agencies was administratively and
organizationally sound.
A Department of Finance intradepartmental communication dated
October 3, 1962, from Eobert L. Harkness to Director of Finance Hale
(83)
84 ORGANIZATION OF THE EXECUTIVE BRANCH
Champion outlined the proposal for creation of the Department of Gen-
eral Services and set forth the advantages and objectives which could
reasonably be expected to result from centralizing the staff services :
1. Permit application of uniform standards and policies in ad-
ministrative matters common to state government.
2. Promote economy through large-scale buying of materials and
supplies.
3. Provide the highly qualified specialists that individual agencies
cannot justify on their own staffs.
4. Enable management personnel responsible for major program
areas to devote their time to the principal mission of their units
rather than to housekeeping services.
5. Provide the economies of mechanized mass handling.
On December 30, 1965, the Department of General Services published
a report ("Progress Report: First Two Years of Operation") which
was designed to indicate the accomplishments made by the agency in
achieving its objectives.58 "Progress," the report indicated, "has been
made in a number of different ways, such as handling increased work-
load without adding staff, raising the quality level of services rendered,
introducing improvements resulting in a substantial savings to other
departments and to the state as a whole, and improvements in manage-
ment and internal administration." During three days of hearings of
the committee,59 representatives of the department appeared before the
committee to present detailed information on the action taken by the
department to improve central staff services.
In the course of the committee inquiry, selected areas of department
activity were given specific attention.60 The first of these reviewed was
property acquisition and leasing procedures of the Department of Gen-
eral Services as outlined in a report of the office of Auditor General to
the Joint Legislative Audit Committee. While the report found prop-
erty acquisition procedures and controls to be " generally satisfactory, ' '
many specific deficiencies were noted.
One of the specific leases cited which resulted in a law suit against the
State of California for breach of contract was the lease for the Criminal
Identification and Investigation Building in Sacramento. The low bid-
der on October 10, 1960, was J. Keith Kenworthy at $16,000 per month.
Charles E. Brown was the second lowest bidder at $18,000. The leasing
unit experienced considerable trouble with Kenworthy and at the end
of March, 1961, Kenworthy still had not started construction and was
asking for a two-month extension. The leasing unit refused to grant the
extension and requested new proposals from various Sacramento real-
tors for construction of the C.I. & I. building. Charles E. Brown sub-
mitted a proposal of $17,000 per month, but a lower proposal of $16,500
was also received.
The Auditor General's report indicates that the records do not show
what further negotiations took place but that Charles E. Brown was
68 Department of General Services, Progress Report: First Two Years of Operation
(Sacramento), December 30, 1965.
69 February 16, 17 and March 2, 1966, in Sacramento. For a review of the depart-
ment's presentation, see the Progress Report and the transcripts of the commit-
tee hearings.
60 An excellent series of newspaper articles by Lou Cannon, which were published by
the San Jose Mercury, are included as Appendix C.
ORGANIZATION OF THE EXECUTIVE BRANCH 85
awarded the lease at $16,000 per month. The comments of the Auditor
General on the Criminal Identification and Investigation Building lease
are as follows :
1. The financial ability of Kenworthy should have been more thor-
oughly reviewed and a performance bond obtained.
2. The files are inadequate with regard to the soliciting procedures
of the second lease proposals in March 1961. Apparently, the
proposals were requested orally, no deadline was mentioned, no
correspondence requesting proposals was written, and no news-
paper advertisements were used.
3. The files do not indicate whether the March, 1961 bidders were
all given the same treatment. Charles E. Brown submitted a
proposal of $17,000 per month but signed a lease for $16,000 per
month.
The files do not show whether any negotiations were made with the
persons submitting the proposal of $16,500 per month. Any de-
parture from the acceptance of the lowest proposal should be
thoroughly justified in the files.61
In a letter to Assemblyman Vincent Thomas, chairman of the Joint
Legislative Audit Committee, dated December 31, 1965, from Eobert L.
Harkness, Director of the Department of General Services, he indicated
that the department was taking ''positive steps " to implement the rec-
ommendations of the Auditor General. Director Harkness also re-
sponded that the seven leases that were cited by the Auditor General
to illustrate poor procedures were negotiated prior to the creation of
the Department of General Services. With respect to the specific lease
for the Criminal Identification and Investigation building, the response
was simply that "the appellate court made an award in favor of the
state and that therefore the actions of state officials have been found
proper by the courts.' '
The Auditor General also criticized the lease for the Mental Health
Building which was also awarded to Charles E. Brown. The principal
objection was that "there was inadequate competition ' ' for the lease.
The director's reply to this criticism was that "there was adequate
competition which is borne out by the excellent rate obtained. Offers
submitted by the successful lessor . . . were voluntary offers and were
considerably higher than the final bid. The area of search was, in our
opinion, limited only as necessary to assure efficient operations of the
tenant agency. The minor changes in the specifications were made neces-
sary by recent experience in another locality and it was certainly not
desirable to go ahead with construction which had proven unsatisfac-
tory elsewhere. ' '
A second area of criticism of departmental activity has focused on
the Office of Procurement's purchasing of new automobiles. The de-
partment's Progress Report indicates that following through on a rec-
ommendation made by the Commission on California State Government
Organization and Economy, sizeable cost reductions were made in the
purchase of new automobiles by changing the time for bid submission
to more closely match the time when new vehicles are actually delivered
61 Office of the Auditor General Report on Review of Property Acquisition and Leasing
Procedures, 5.
86 ORGANIZATION OF THE EXECUTIVE BRANCH
and placed in service. The report cites a reduction in the unit cost of
1965 models of $197 per car as compared to the low bid for the previous
year for a total saving of $123,125 for the cars purchased.
A further investigation by the ' ' Little Hoover Commission ' ' revealed
that specifications for California Highway Patrol cars favored Chrysler
Corporation. All of the cars furnished the California Highway Patrol
since 1958 (except 1962) were supplied by a single Dodge dealer, John
Drew of Sacramento.
The commission study produced revisions in the 1967 specifications.
The recent purchase of highway patrol vehicles under the new specifi-
cations resulted in savings of nearly $600,000 for the current fiscal year
and even the bid submitted by John Drew was lower than his bids of
previous years.
A further criticism of departmental policies has resulted from the
difficulty of obtaining adequate information on past leasing and pro-
curement records. Under the department's records management pro-
cedures, records relating to leasing and purchases are being removed as
early as two years after they are filed. This policy make adequate in-
quiry into department procedures most difficult and conflicts with the
generally prevailing practice in private industry where such records
must be kept for tax purposes.
The committee also reviewed the facts surrounding the storage of
vehicles seized by the state under the narcotics seizure program. The
department, following the suggestions that such confiscated cars be
stored under the freeway to release valuable undercover auto parking
area in downtown Los Angeles contracted with a private individual
(Vierters Automotive Service) who leased the space under the freeway
from the Division of Highways for $350 per month with a rebate for
improvements of $110 per month. The Department of General Services
then paid storage costs to the lessee of approximately $2,500 per month.
The committee evaluation of Department of General Services accom-
plishments as set forth in their Progress Report, along with a survey of
criticisms leveled at departmental operations by such independent ob-
servers as the Auditor General and the ''Little Hoover Commission, ' '
was supplemented by responses from each agency administrator to a
letter from committee chairman Milton Marks.62 The purpose of the
committee letters was to elicit responses from the agencies relying on
the department for performance of central staff services to assist the
committee in evaluating the level of service offered by the department
by "comparisons to the operational levels which had previously ex-
isted" and to call attention to any problem areas where there had been
difficulties in the "transition to the present central staff services sys-
tem." 63
One of the recurring problem areas evident in the responses to the
committee letter involved the approval of contracts by General Services.
Director Harkness indicated that the Governor's cabinet was aware of
the problem and was undertaking a reevaluation of the legal processes
involved in contract approval. He also indicated that the statutory Gen-
62 Letter from Hon. Milton Marks to each administrator of an operating agency,
October 19, 1965 (the letter and the responses are included as Appendix A).
63 Ibid.
ORGANIZATION OF THE EXECUTIVE BRANCH 87
eral Services advisory council, composed of members nominated by-
agency administrators, was involved in a similar study.64
With respect to most of the other agency comments, Director Hark-
ness indicated that "they seem to revolve around level of staffing and
inability to render all of the services desired, ' ' which he indicated was
"a budget problem and as we are able to anticipate workload increases
and adequately present them in the budget, improvements in service
will result."65
SUMMARY
This survey of the performance of the Department of General
Services is not intended as a comprehensive analysis of the adequacy
of all of the central staff services for which the department has a
responsibility. In this connection, continued review of specific pro-
grams by the Assembly Ways and Means and Senate Finance Com-
mittees and the Legislative Analyst as part of the analysis of the
Budget Bill, as well as special studies of certain programs by the
Auditor General or the "Little Hoover Commission, ' ' should be a sig-
nificant factor in providing a continuing evaluation of those programs.
The principal issue before the committee was whether the existing
structure of a separate department for central staff services as enacted
by the Legislature in 1963 is organizationally sound. To the extent
that criticisms of department activity have shown the need for im-
proving procedures, the committee encourages such improvements. The
illustrations of specific examples included in this report relate almost
entirely to management and demonstrate both the need for reforms in
such areas of responsibility as property acquisition and leasing, pur-
chasing and contract approval, as well as an acknowledgment by the
department of the need to undertake those reforms.
With respect to the main issue of the appropriateness of the organi-
zational structure itself, it is essential to note that many of the criti-
cized activities took place prior to the creation of the Department of
General Services and that since 1963, these programs have been han-
dled by many of the same people who had similar responsibilities
when they were administered within the Department of Finance.
The committee concludes that the premises upon which the creation
of the Department of General Services was established are valid objec-
tives and are results which can be expected from the current organi-
zational structure.
The positive result has been the fact that the Director of Finance has
been relieved of many administrative responsibilities which were not
related to his primary budgeting and program and policy functions.
The committee further concludes that the criticism of specific opera-
tions of the department relate almost entirely to management rather
than the organizational structure itself. In this respect, placing these
responsibilities under a single director appointed by the Governor
encourages greater responsibility to both the Governor and the Legis-
lature. When these services were provided as a part of the Depart-
ment of Finance, they were not receiving the attention which the
Legislature has focused upon them since the department was created.
This alone has been a significant result of the reorganization.
•* Letter from Hon. Robert L. Harkness, Director of General Services, to Hon. Milton
Marks, March 1, 1966 (see Appendix B for full text of letter).
"Ibid.
88 ORGANIZATION OF THE EXECUTIVE BRANCH
It is the conclusion of the committee that the establishment of a de-
partment with responsibility for administration of the many "house-
keeping" functions of state government has made it possible for the
Legislature to more closely fix responsibility for these functions. The
fact that many of the activities complained of had their origins within
the Department of Finance and prior to the creation of the new De-
partment of General Services went unnoticed, supports this conclusion.
The conclusion that the action of the Legislature creating a Depart-
ment of General Services was based on sound organizational principles
which should provide a more efficient and economical administration
of central staff functions cannot be taken as an unqualified endorse-
ment of the administration of the department. It is clear that ineffi-
ciencies in administration can exist despite the soundness of the or-
ganizational structure. Continued vigilance by the Governor and the
Legislature are necessary to insure improvements in the management
of the Department of General Services.
The greatest difficulty encountered by the committee in this evalua-
tion was determining specific cost comparisons on programs as they
were administered both prior to and following the establishment of
the department. The committee has been unable to develop any reliable
data to afford such comparisons. For the most part, this results from
the method of funding General Services programs. In most cases a
program is funded in part by a charge to other agencies which are
appropriated from that agency 's budget, and the cost of the remainder
of the program is accounted for by a direct appropriation to the De-
partment of General Services. Examples of this method of funding to
a greater or lesser degree are: Building Maintenance and Protection,
Communication Maintenance and Service, Transportation Services,
Office of Procurement, Property Acquisition Service, Office of Local
Assistance, Office of Administrative Procedure, Administrative Serv-
ices, Central Office Services, Facilities Planning Service and Legal
Services. The funds for Systems Analysis, Management Planning, the
Building Standards Commission, Insurance Office and Merit Award
Board are completely funded from direct appropriations to General
Services and two programs — the Office of State Printing and the
Office of Architecture and Construction — are funded entirely from
appropriations to the user agencies.
This shared approach of funding makes comparisons much more
complicated because fluctuations in the charges to the user agencies
may not accurately reflect the cost of the program. The committee sug-
gests serious study be given to completely funding General Services
programs from appropriations to the user agencies.
APPENDICES
APPENDIX A
LETTER ADDRESSED TO EACH ADMINISTRATOR
OF AN OPERATING AGENCY
October 19, 1965
Dear Agency Administrator :
The Assembly Committee on Government Organization has been au-
thorized by the Assembly Rules Committee to proceed with a compre-
hensive review of the programs administered by the Department of
General Services. As you know, the department was created as a result
of legislation enacted by the 1963 Legislature following many years of
study and recommendations supporting the creation of a single agency
with the responsibility for central staff services.
It is our intention to review the reorganizational changes enacted in
1963 to determine whether further improvements are possible and to
evaluate the extent of present accomplishments. In order to facilitate
our study we would appreciate it if you would provide the committee
with your comments on the central staff services provided by the de-
partment to the agencies under your supervision. With this in mind,
enclosed is a copy of a memorandum prepared by Robert L. Harkness
titled " Proposal for Creation of a General Services Department" (Oc-
tober 3, 1962), which was presented as a justification for the 1963 re-
organization and the report of the Department of General Services
which was submitted to a subcommittee of Ways and Means (April 6,
1965) in response to the committee's request for specific material to
provide a basis for evaluating the activities of the department.
Obviously the committee is anxious to evaluate specific improvements
measured by comparison to the operational levels which had previously
existed and examples from the experience of your agency would be
most helpful. In addition, the committee would appreciate your sug-
gestions as to any improvements which are necessary or areas where
you have experienced problems in transition to the present central staff
services system. Your comments and suggestions will be useful to the
committee in outlining a specific course for study.
If you have any questions or wish additional information, Mr. Judson
Clark, the committee consultant, will be available to discuss them with
you.
Sincerely,
Milton Marks
(91)
BUSINESS AND COMMERCE AGENCY
EDMUND G. BROWN
Department of Banking Governor
Division of Corporations Stafe of California
Department of Insurance
Division of Real Estate BOARD OF INVESTMENT
Division of Savings and Loan
January 24, 1966
Assembly Committee on Government Organization
State Capitol
Sacramento, California
Attention: Judson Clark
Dear Mr. Clark :
Attached is the Business and Commerce Agency report on the sub-
ject of Government Organization — Department of General Services.
The departments within the Business and Commerce Agency were
asked to provide comments on the central staff services provided by the
Department of General Services. They were also asked to submit sug-
gestions as to any improvements which are necessary or areas where
problems have been experienced in the transition to the present central
staff services system.
If we can be of any further assistance, please let us know.
Sincerely,
Milton G. Gordon, Administrator
Business and Commerce Agency
By: John E. Hempel
Chief Assistant Keal Estate Commissioner
(02)
itate of California Department of Alcoholic Beverage Control
Memorandum
To : Hon. Milton G. Gordon Date : November 8, 1965
Administrator File No. :
Business and Commerce Agency-
Ill Capitol Mall
Sacramento, California
From : James 0. Keimel
Subject : Department of General Services.
The principal divisions of the Department of General Services with
which the Department of Alcoholic Beverage Control has dealings are :
1. Office of Administrative Procedure
2. Transportation Service
3. Fiscal — Accounting Office
4. Facilities Planning
5. Office of State Printing
6. Property Reutilization, Office of Procurement
7. Office of Procurement (purchasing)
8. Legal Services
9. Property Management and Services
1. Office of Administrative Procedure
The Legislature transferred our hearing officers and hearing report-
ers to the Office of Administrative Procedure in 1961. At the time of
the transfer, this department had four hearing officers and four report-
ers in southern California. The Office of Administrative Procedure had
three hearing officers there. They now have 13 hearing officers and 11
hearing reporters in southern California. Our caseload has remained
fairly static for several years. We are not aware of the number of hear-
ings conducted for other agencies.
2. Transportation Service
This Division of General Services has been quite cooperative and
helpful. It appears to be curtailed in its operations by budget limita-
tions in 1965-1966. This department is turning its undercover cars over
to General Services by legislative request. The freezing of funds for re-
placement cars prevents Transportation Service from making cars
available to outlying offices on a permanent assignment. This results in
some expenses carried by Transportation Service previously passed on
to operating agencies.
3. Fiscal — Accounting
This office does not, in our opinion, operate as well as it did under the
Department of Finance. It appears there may be a lack of communica-
tion between operating units and accounting office.
(93)
94 ORGANIZATION OF THE EXECUTIVE BRANCH
4. Facilities Planning
Service received from both Leasing and Long Eange Planning and
Current Space Planning have generally been good both before and
after the Department of General Services was formed. Their difficulty
in maintaining a full staff of lease agents has been detrimental in cer-
tain instances.
5. Office of State Printing
Service is good but sometimes slow. This is undoubtedly because of
certain work peaks.
6. Property Beutilization, Office of Procurement
This organization is cooperative and helpful, but, apparently, has no
trucks of its own. Property it desires to obtain frequently remains in
our offices for extended periods of time.
7. Office of Procurement (Purchasing)
The service from this office is generally excellent. This office has saved
us considerable money by combining our orders with like ones from
other departments.
8. Legal Services
Service continues about the same as when in the Department of Fi-
nance.
9. Property Management and Services
Service at headquarters level has been good. There are sometimes
indications of lack of communication between building managers and
headquarters.
James Reimel
Director
>tate of California
Memorandum
To : Mr. Milton G. Gordon, Date : November 8, 1965
Administrator File No. :
Business and Commerce Agency
111 Capitol Mall
Sacramento, California 95814
From : California Districts Securities Commission
Subject : Committee on Government Organization
This will acknowledge receipt of your memorandum dated November
1, 1965, in which you requested comments and/or suggestions on the
central staff services provided by the Department of General Services.
This agency has experienced no problems in connection with the
present central staff services system, and so far as we are concerned,
find the system satisfactory.
T. P. Stivers
Executive Secretary
(95)
STATE OF CALIFORNIA
Los Angeles 12
INTERDEPARTMENTAL COMMUNICATION
To : Mr. Milton G. Gordon, Administrator November 5, 1965
Business and Commerce Agency
Board of Investment
Division of Real Estate
111 Capitol Mall
Sacramento, Calif.
From : California Horse Racing Board
State Building 908
Charles L. Harman, Secretary
Subject: Assembly Committee on Government Organization
This is in reference to your letter dated November 1, 1965, regarding
the central staff services now being provided by the Dept. of General
Services.
To date, the California Horse Racing Board has not experienced
any problems generally in the transition of the present central staff
services. The purchasing function in our department appears to be
efficient, and we are receiving good service. Therefore, our current
experience indicates a very satisfoctory working relationship with this
system.
We will continue to evaluate the present accomplishments and, if
further improvements are possible, we will advise.
Vincent Santopietro
Assistant Secretary
(96)
State of California
Memorandum
Date : November 16, 1965
To : The Honorable Milton G. Gordon
Administrator
Business and Commerce Agency
1015 "L" Street
Sacramento, California 95814
From : Department of Insurance — Chatham F. Odum
1407 Market St., San Francisco 94103
Subject : Committee on Government Organization
Reference is made to your November 1, 1965, letter concerning a
comprehensive review by the Assembly Rules Committee of the pro-
grams administered by the Department of General Services.
Our San Francisco and Sacramento offices are located in leased build-
ings, and our Los Angeles and San Diego offices occupy space in state-
owned buildings. The only recurring central staff services provided in
leased quarters is custodial and we have not noticed any appreciable
change since activation of the Department of General Services. In both
Los Angeles and San Diego, central staff services provide both custodial
and telephone switchboard support. We have not experienced any ap-
preciable change in custodial services; however, reduction in the level
of telephone service in our Los Angeles office has seriously hampered
our operation and we plan to request authority to reestablish our own
switchboard in the near future.
For your added information, we now make limited use of the central
records storage area in San Francisco and plans are underway to take
advantage of the storage area in the basement of the state building in
Los Angeles.
Chatham F. Odum
Administrative Service Officer
(97)
4— L-418
JOHN A. O'KANE
Superintendent of Banks
JAMES AHLF
Chief Deputy
EDMUND G. BROWN
Governor
State of California
STATE BANKING DEPARTMENT
111 SUTTER STREET
Suite 2125
San Francisco 94104
YU kon 1-8530
107 SOUTH BROADWAY*
Suite 6105
Los Angeles 90012
MA dison 0-4760
San Francisco 4, California
November 5, 1965
Mr. Milton G. Gordon, Administrator
Business and Commerce Agency
111 Capitol Mall
Sacramento, California 95714
Be: Committee on Government Organization
Dear Mr. Gordon :
This is in reply to your letter of November 1, 1965, requesting gen-
eral comments on the programs administered by the Department of
General Services since it was created by the 1963 Legislature.
Our principal contact with General Services has been in manage-
ment planning. We have found General Services in this area to be
cooperative and helpful.
As a general comment, it is our feeling that a considerable amount of
unnecessary work and expense in various agencies can be eliminated by
limiting General Services' approval and supervision to major matters.
Yours very truly,
John A. O 'Kane
Superintendent of Banks
Albert L. Cryor
Chief Bank Examiner
(98)
STATE OF CALIFORNIA-BUSINESS AND COMMERCE AGENCY
EDMUND G. BROWN, Governor
DEPARTMENT OF INVESTMENT
DIVISION OF CORPORATIONS
SACRAMENTO 95814-PRINCIPAL OFFICE
1020 N STREET
SAN FRANCISCO 94103
1460 MISSION STREET
LOS ANGELES 90012
107 S. BROADWAY
SAN DIEGO 92101
5068 STATE OFFICE BLDG.
CHARLES E. RICKERSHAUSER, JR.
Commissioner
Los Angeles, California
November 9, 1965
Honorable Milton G. Gordon
Administrator
Business and Commerce Agency
111 Capitol Mall
Sacramento, California 95814
Be: Committee on Government Organization
Dear Milton :
This is in reply to your memorandum of November 1, 1965, request-
ing material for submission to the Assembly Interim Committee on
Government Organization.
Our division traditionally deals with the Department of General
Services only in the areas of automobile assignments, physical facili-
ties for division offices, procurement of office supplies and procurement
of office equipment. I am advised by our staff that we have not en-
countered any substantial changes in these areas as a result of the
reorganization of the Department of General Services by the 1963
Legislature. Those on our staff who deal more directly with these
problems have advised me, however, that they have found more clear-
cut definitions as to which offices should be contacted in order to ac-
complish certain objectives, and I have been given to understand that
this is the result of the 1963 legislation.
We have found two areas recently where our relationships with the
Department of General Services indicate a need for improvement, but
these areas are not such as may be compared with how they might
have been handled under the pre-1963 organizational structure. The
two areas to which I refer are as follows :
1. We have attempted to project, for budget purposes and other-
wise, the space needs of the division in its various offices for the next
few years. In doing so we find that the coordination has not been
entirely satisfactory even among the members of the Board of Invest-
ment and the Department of Finance was not able to indicate with
any certainty the coordinated plans for the movement or enlarging of
offices in the immediate future. This is a problem which may bear dis-
(99)
100 ORGANIZATION OF THE EXECUTIVE BRANCH
cussion among the Division of Keal Estate, the Department of Insur-
ance and the Division of Corporations, with respect to our Los Angeles
facilities, and where it would appear that the Department of General
Services might give more direction.
2. The Division of Corporations is presently involved in a program
for the modification of the facilities which house its Los Angeles office.
This program has consumed a period of approximately nine months
so far, and we are not yet ready to request bids. Although the . co-
operation which we have received during the past month has been most
helpful, an inordinate amount of time was required during the early
development of this program. In addition, the Department of General
Services was unable to make preliminary estimates of the costs which
might be encountered so as to give the necessary guidance to the divi-
sion in making its budget arrangements. Preliminary estimates of the
modification were made, but the final estimates showed an increase of
approximately 144%, rendering the initial estimates useless and com-
plicating the division's budgeting for the current year. This may rep-
resent an isolated instance not worthy of note, but discussions with
the Department of General Services indicated that the problem may
be more widespread.
In view of your request for only general comments at the present
time, the foregoing specific recommendations may be premature. They
are included here as the only contribution which the division has to
offer in response to your memorandum of November 1. If we may fur-
nish additional information, please do not hesitate to call upon us.
Sincerely,
Jerald S. Schutzbank
Chief Deputy Commissioner
State of California Division of Real Estate
R/E Form 703
Memorandum
To : Milton G. Gordon January 25, 1966
Commissioner
From : John E. Hempel
Chief Assistant Commissioner
Committee on Government Organization
This is in response to the letter regarding the central staff services
provided by the Department of General Services.
The key members of the Division of Real Estate's staff in regulatory
operations, licensing and accounting agree the separation of General
Services from the Department of Finance has generally been good. The
new procedures adopted regularly show they are alert to improving
services. For example, pool cars are kept in good shape, they are now
available at airports and there are better controls over possible areas
of abuse.
The Office of Administrative Procedure under the Department of
General Services is well-organized and gives better overall service.
The billing methods followed by the O.A.P., for their hearing serv-
ice, could be modified so that the total bill is not submitted to the
agency at the end of the fiscal year. If billed quarterly, we could plan
better within our hearing budget allotment.
The methods used for arranging leases for quarters should be re-
viewed.
John E. Hempel
Chief Assistant Commissioner
(101)
State of California
Memorandum
To : Milton Gordon Date : November 10, 1965
Department of Keal Estate File No. :
111 Capitol Mall
Sacramento, California
From : Division of Savings and Loan
540 Van Ness Avenue, San Francisco 94102
Subject : General Comments Re Operations of General Services
At the operational levels, the Division of Savings and Loan has been
generally dealing with the codification officer of Administrative Pro-
cedure, Insurance Officer, Facilities Planning, Legal Services, Office of
Procurement, Systems Analysis, Printing Office and Transportation
Services.
From the division's viewpoint, the common characteristic of per-
formance shared by many of these agencies is the slowness in getting
things done. For items of special interest, the division almost always
has to keep a check with the agency concerned so that the action re-
quested will be performed within time limits. This characteristic pre-
dates the establishment of the Department of General Services, but still
is in evidence. The outstanding exceptions are the codification officer
and the insurance officer who provide timely and thorough advice and
assistance when called upon.
Very truly yours,
Gareth W. Sadler
Savings and Loan Commissioner
Frederick M. Eammler
Administrative Assistant
(102)
EDMUND G. BROWN
enry W. Simonsen Governor Virginia Danielson, Secretary
President ^^ EX brook 7-2253
:. L. Gartland, Jr.
avid N. Lillevand
OFFICE OF
State Board of Pilot Commissioners
World Trade Center, Room 321
SAN FRANCISCO 11, CALIFORNIA
November 4, 1965
Mr. Milton G. Gordon, Administrator
Business and Commerce Agency
1015 L Street
Sacramento, California 95814
Dear Mr. Gordon :
We have received your memorandum of November 1st concerning the
projected study by the Assembly Committee for Government Organiza-
tion of services provided by the Department of General Services.
Our board maintains a contractual arrangement with the Depart-
ment of Professional and Vocational Standards for fiscal and personnel
services, including assistance in transactions with the Department of
General Services. We therefore cannot make comments or recommenda-
tions as requested.
We have brought this matter to the attention of our fiscal officer, Mr.
Donald 0. Otten, and believe he will incorporate our board's answer
with his department's reply to the Assembly Committee.
Very truly yours,
Board of Pilot Commissioners
By Virginia Danielson
Secretary to the Board
(103)
State of California Department of Professional and Vocational Standards
Memorandum
To : Hon. Milton G. Gordon Date : November 10, 1965
Agency Administrator
Business and Commerce Agency
111 Capitol Mall, Room 324
From : Division of Administration
Subject: Committee on Government Organization — General Services
To provide the Committee on Government Organization with the in-
formation requested by your memo of Nov. 1, 1965, I contacted various
members of our staff who have knowledge of the subject matter. Areas
where improvement would be helpful are :
Leasing Services
Property Management Services
Printing Plant Services
Management Consultant and Data Processing Services
Automotive Management Services
Additionally, improvements should be made in communications,
Architectural and Office Machine Services. Examples of the kind of
improvements we feel would be helpful are :
Leasing Services
We suggest guidelines be established to permit state agencies within
perimeters, authority to procure sites for leased quarters, with final
lease approval to be reserved to the Department of General Services.
Communication Services
A review should be made of communications equipment required to
be registered with the Communication Service Unit. In short, certain
items now registered should be eliminated and charges made only on
the basis of services rendered rather than upon items registered.
Property Management Services
Review the cost accounting involved in making charges against spe-
cial fund agencies, particularly the overhead factor and portal-to-
portal charging. By having tradesmen report directly to and leave di-
rectly from the actual jobsite, from one-half to one hour a day could
be gained in productive labor whereas this labor is currently being
charged for while the time is consumed in traveling to and from the
job and the headquarters office.
Services in providing maintenance for leased quarters have deterio-
rated due, we are told, to budget restrictions. This has lead to our being
informed that General Services will no longer perform or provide al-
terations and maintenance to these quarters ; however, they still reserve
the right to approve the services we must secure for ourselves. This
leads to inefficiencies and delays in providing such necessary services.
(104)
ORGANIZATION OF THE EXECUTIVE BRANCH 105
We suggest some blanket means of approval be had whereby we would
be authorized to secure and perform services with such advance author-
ization.
Architectural Services
Provisions are made for contingencies in new construction and in
major alterations; however, minor change orders require elaborate
approval procedures; these tend to hold up such construction and
alterations and result in costs which in many cases more than offset
the slight additional cost entailed by the change order. We suggest that
within limits, change orders be permitted to be initiated by preap-
proval so that work may proceed in a more efficient manner.
Office Machine Services
Billings made for these services are in accordance with the number
of machines rather than on the maintenance services performed. We
suggest the billing procedure used be re-examined.
Automotive Management Services
These services were being steadily improved until the recent budg-
etary cutback forced restrictions on the use of vehicles and facilities.
This action has resulted in some operational handicaps. Charges made
for parking should be re-examined as they often exceed what other
garaging facilities would cost. We suggest that some maximum be
established for parking charges for any one vehicle for any one month
or some other equally acceptable alternate.
Management Services
In the past it was possible to obtain management services for special
projects and for supplementing departmental staffs from manpower
available within the Division of Organization and Cost Control. The
change in concept coupled with budget restrictions, no longer makes it
possible for us to obtain this type of service. We feel a need for a cen-
tral pool of management specialists who would be available for use for
special assignments, where due to the "crash nature" of some projects,
it is not feasible nor practical to try to augment a department's own
staff. This would especially apply to those smaller units of government
who have no staff of their own.
Data Processing Services
Until the augmentation of staff takes place in the Department of
General Services, there are not enough persons to assist departments
in making "in-depth" studies of data processing needs.
We feel improvements in meeting both data processing and manage-
ment consultant needs could be had by permitting approval of the use
of outside qualified consultants within the framework of a blanket
appropriation for General Fund agencies and authorization for special
fund agencies (where surpluses exist).
106 ORGANIZATION OF THE EXECUTIVE BRANCH
Printing Plant
We suggest a return to former or some improvement in present
budget procedures which would permit more flexibility in staffing the
printing plant. Present budgeting procedures (we are informed) have
ilted in backlogs and delays detrimental to good service. Quality
of product is excellent — delivery of average jobs too slow.
We can furnish specific problems for the committee's consideration
if they desire them. We are appending some illustrations which may
serve to point up some of the reasons behind our general comments
concerning improvements.
If we can be of any further help to the committee in any of these
areas, we will be happy to do so upon request.
Harold J. Powers
Director
STATE OF CALIFORNIA EDMUND G. BROWN, Governor
EMPLOYMENT RELATIONS AGENCY
SACRAMENTO 14 January 10, 1966
Honorable Milton Marks, Chairman
Committee on Government Organization
California State Legislature
State Capitol
Sacramento, California 95814
Dear Milt :
Your letter of October 19 states that you are making a comprehen-
sive review of the programs administered by the Department of Gen-
eral Services. You ask for comments and suggestions regarding the
nature of service which has resulted from the reorganization which
established the Department of General Services and for any sugges-
tions for future improvements. Staff members of the Department of
Employment and Industrial Kelations who deal with General Services
have been consulted for comments and ideas, as requested in your
letter.
1. State Administrative Manual
In the opinion of the fiscal staff, this manual seems to be more
up to date and responsive to our needs than was true prior to the
organization of General Services.
2. Insurance
We feel that there has been an improvement in relations with the
insurance adviser's office. Information seems to be ready and avail-
able more expeditiously than in previous years.
3. Property Acquisition
It is our opinion that the work of this group has improved. Ap-
praisals have been speeded up and other acquisition activities han-
dled more efficiently.
4. Budget
Since the Department of General Services was split out from the
Department of Finance it has been reported by our staff that the
budget process works more smoothly. Budget analysts of the De-
partment of Finance seem to have more time available for review
and assistance on budget problems.
5. Overhead
The cost of services provided seems to be trending upward. We
have particular reference here to overhead costs that are added to
services. For example, general overhead costs have increased from
3 percent to 12 percent over the past several years. In addition,
certain services include a shop overhead of 18 percent. We know
(107)
108 ORGANIZATION OF THE EXECUTIVE BRANCH
i appreciate that salary and wage costs show an upward trend,
lo rents, supplies, etc. It may be that these elements of overhead
increases. However, some review and study of overhead
would seem to us to be warranted.
6. Leases
The Department of Employment has a large number of local offices
ated in many communities throughout the state. While a number
of our buildings are state-owned, there are many of our premises
that are Leased. Therefore, leasing arrangement and clearance with
the Department of Finance and the Department of General Serv-
ices are important items to us. With the budget function in Finance
and the lease function in General Services, clearance with two
departments is necessary. It is suggested that some improvement
might be possible in coordinating clearances required with these
two departments. Some review of the clearance procedures might
reveal methods of expediting this operation.
7. Printing
Our relations with the printing plant have improved. Service is
good and at the same time unusual job requirements are handled
more expeditiously. The printing plant staff seems to be more
understanding of our needs and problems.
8. Pool Cars
The Department of Employment has had relatively small need for
use of cars from the automotive pool. However, in those instances
where we have had a need, the service has been excellent. The help
and advice of automotive management people regarding cars per-
manently owned or assigned to the Department of Employment
have been very good.
9. Repairs, Alterations, and Building Maintenance
We have found the maintenance staff in San Francisco and Los
Angeles to be very helpful on small alterations and repair jobs.
It is much better to be able to use this service than to have to make
contracts with outside contractors for jobs of very limited scope.
While our overall experience has been very good, we have noted
instances of inconvenience to ourselves when the mechanics or
building tradesmen have been called off of our job to work on some
other building problem with an apparently higher priority. This
may be unavoidable, but it is nevertheless inconvenient and dis-
rupting.
We have some concern over cost accounting and billing methods
on these jobs. It would be our suggestion that a study be made to
sec whether streamlining and improvement of the cost accounting
procedures related to this work would be possible.
10. Office Machine Repair
We are very pleased with this service. The work is good and the
pension to new machine types has improved the service. Our
procurement -roup feels that where this service is provided, the
quality of the repair work is better and it is available at lower
ORGANIZATION OF THE EXECUTIVE BRANCH 109
cost than is generally true where contracts are made with office
equipment concerns. Further, the availability of this service elimi-
nates the preparation and negotiation of numerous small contracts
for maintenance and repair. The negotiation and preparation of
the contracts are probably quite costly in comparison to total cost
of maintenance and repair work when provided by office machine
companies.
11. Contracts
Quite a number of procurement and service contracts are negoti-
ated each year with outside vendors. Such contracts are cleared
with the legal staff of the Department of General Services. Our
experience reflects that this clearance works quite expeditiously,
and in our opinion, has improved since it has been under the direc-
tion of the Department of General Services.
12. Facilities Planning
The Facilities Planning Section has, within the limited funds and
personnel available, performed in a most responsible manner. This
section has provided more services for the Department of Indus-
trial Kelations than it has for the Department of Employment.
It is their opinion that more personnel and funds are required by
the Facilities Planning Section to perform a completely satisfactory
job. It would appear that the present personnel are most capable,
but the extremely heavy workload causes delays which are incom-
patible with an efficient operation.
If we can be of further assistance, please feel free to call on us.
Sincerely,
Albert B. Tieburg
Administrator
STATE OF CALIFORNIA
EDMUND G. BROWN, Governor
Health and Welfare Agency
PAUL D. WARD, Administrator
State Capitol, Room 1020, Sacramento 95814
Bonorable Milton Marks February 8, 1966
California State Legislature
State Capitol Building
Tamento, California 95814
Dear Milt:
This is in reply to your letter of October 19 asking for our comments
rding the Department of General Services. I am sorry that we
have delayed so long in replying but we had some question about how
we should handle this and this resulted in a delay in getting adequate
information for our reply.
In general, we believe the new Department of General Services has
made substantial progress in improving services to our departments.
We have found that an attitude of cooperation and consideration is
prevalent in a genuine effort to meet special requests and special re-
quirements resulting from new programs or emergency situations.
One area where we continue to have some problems is around the
approval of contracts. This is not to suggest that there has been no
improvement in service. If measured by earlier experience, this service
also has improved. However, the expansion of programs that require a
variety of contracts appears to have created a substantial additional
workload and as I am sure you are aware of the number of approvals
that must be obtained for each contract (Finance, General Services and
the Personnel Board) make it difficult to gain quick approval except on
a one-time crisis type of situation. In this type of instance where the
issue is sufficiently important, exceptional service is the rule. However,
I am sure you can recognize this cannot happen in too many cases or
the total process will be bogged down by rushes. Our concern is that
any speedup in the process of executing contracts can result in a sav-
ings to the state in that the date of execution frequently determines
the date in which federal participation in the cost of the contract may
become available.
May I suggest two areas for your consideration that might improve
this seemingly cumbersome process. First, that the legal requirements
for approval of contracts be examined with the view of simplifying
them with respect to some of the more routine types of contracts.
Second, that serious consideration be given to whether adequate legal
staff is provided the Department of General Services in the light of a
volume of contracts that appears to be growing more rapidly than
some other aspects of governmental operations.
Thank you for giving us an opportunity to express our views on the
effectiveness of this now department. As you can see, in general, we
are well satisfied with the results of your legislative efforts in establish-
ing this agency.
Sincerely, pAUL jj Ward
Administrator
(110)
STATE OF CALIFORNIA EDMUND G. Brown, Governor
PUBLIC SAFETY AGENCY
SACRAMENTO
December 2, 1965
The Honorable Milton Marks
California Assembly
State Capitol
Sacramento, California 95814
Dear Milton :
In reply to your letter of October 19, 1965, I am enclosing herewith
the comments of the four departments in the Public Safety Agency in
regard to the staff services provided by the Department of General
Services.
Cordially,
Bradford M. Crittenden
Administrator
(111)
State of California
Memorandum
Date : November 16, 1965
To: The Honorable Bradford M. Crittenden
dnunistrator, Public Safety Agency
2 190 First Avenue, Sacramento
From: California Disaster Office
Subject : Review of Department of General Services Programs
Tn response to your memorandum of October 27, 1965, the following
comments are offered :
This agency is assisted by the Department of General Services in
four principal areas:
1. Executive and Administrative Services (Personnel Office)
2. Physical Facilities Planning and Development (Office of Architec-
ture and Construction)
3. Property Management (Communications Service and Transportation
Service)
4. Technical Services (Office of Procurement)
The level of service provided, as compared to that received from
other agencies before the Department of General Services was created,
appears to be much the same, with certain exceptions noted below:
1. Executive and Administrative Services:
This agency originally entered into contractual arrangements with
the Department of Finance to provide civil service employees to this
agency, as mutually agreed upon between the agencies. There has
been no significant change in services rendered since this function
was transferred to the Department of General Services.
2. Physical Facilities Planning and Development :
Tli is agency receives engineering reports reflecting damage incurred
by local political jurisdictions as a result of natural disasters and
also receives services in connection with construction projects. There
has been no apparent change in service since these functions were
transferred from the Department of Public "Works to the Depart-
ment of General Services.
3. Property Management :
a. Vehicles:
The agency has had difficulty in obtaining sufficient assigned ve-
hicles from the state vehicle pool for agency operations. This
shortage of supply of vehicles has occurred since the Department
of General Services was established.
(112)
ORGANIZATION OF THE EXECUTIVE BRANCH 113
b. Communications:
This agency has noted two major areas involving services rendered
with which we have had difficulty :
(1) The costs of service have been steadily increasing, whereas
the services rendered have not increased at the same pace.
(2) It appears that the Communications Service tends to control
the agency's communications programs, rather than perform
services. Since the function of the Department of General
Services in this field is that of service, we believe that the
control function should be eliminated.
4. Technical Services :
The level of service has remained at the same level as that we re-
ceived prior to the transfer of functions to the Department of Gen-
eral Services.
John W. Gaffney,
Director
, ^ .., Public Safety Agei*
State of California
Memorandum
Date: November 16, 1965
To: Bonorable Bradford M. Crittenden
Administrator, Public Safety Agency
2490 First Avenue
tramento, California
Prom : Department of Veterans Affairs
Subject: Legislative Review of Department of General Services
Program
Ymi have asked for this department's comments and suggestions con-
rning improvements or areas in which we have experienced problems
in the recenl transit ion of the Department of General Services to the
presenl central staff services system.
As we understand it. the Department of General Services was estab-
lished in October 1963 for the purpose of centralizing to a greater
degree service and supply activities separate from program and budget
planning and fiscal control functions of the state government. "When
the new department provides services on a centralized basis more effec-
tively and efficiently than the many operating units can provide such
rvices for themselves, the basic objective of making maximum contri-
bution possible toward the operating efficiency and economy of all
agencies, departments, and other segments of our state government will
have been achieved.
Although individual departments, such as ours, will, of course, not
be directly involved with all the services and activities of the Depart-
ment of Genera] Services, its influence will indirectly manifest itself in
diversified areas, such as employee parking facilities, contract pur-
chased items, economics and increased efficiency in communications, and
master rental contracts to mention a few. Of course, there is no way
for us to determine whether any of the improvements that have taken
place since the new department became operational would or would
not have occurred even without the change. If some method could be
devised whereby billings to individual agencies for services such as
building maintenance, telephone charges, pool car usage, and special
work order charges could be accelerated to a more current basis, a
tangible service will have been performed.
John Handsaker
Administrative Deputy Director
(114)
State of California
Memorandum
Date : November 16, 1965
File No.
To : Honorable Bradford M. Crittenden
Administrator, Public Safety Agency
P.O. Box 898
Sacramento, California
Attention Mr. H. A. Rosa, Assistant to the Administrator
Subject : Legislative Review of Department of General Services Pro-
grams
From : State Fire Marshal — Sacramento
Pursuant to your request, we are submitting a preliminary report
incorporating comments relating to the present central staff services
system of the Department of General Services.
At the outset, it is difficult to properly comment upon problems,
differences in services, if any, and areas of needed improvement, since
a relatively short period of time has ensued since inception of the
organization. In general, and with one exception, there has been no
noticeable change in services rendered to the State Fire Marshal.
The single exception is in connection with the functional aspects of
the Building Standards Commission. The concept of this commission
is excellent. It is the means by which conflict, duplication, and overlap
of building regulations within the Administrative Code are eliminated.
There is little doubt as to the need for the process.
Due to the framework of the commission, however, state agencies,
required by statutory provisions to adopt and enforce building regula-
tions, are finding increasing difficulty in processing proposed regula-
tions through the commission within reasonable time limitations. This
is particularly true in cases where the enforcing agency, after making
a finding of an emergency in accordance with the Administrative Pro-
cedure Act, is subject to the determination of a commission committee
whether or not an emergency does in fact exist.
The net effect of this kind of delay can, in many instances, cause a
tremendous dollar loss and an unnecessary burden to designers, build-
ers, and owners affected by the regulation or lack of regulation.
It is our opinion that the same degree of control over building regu-
lations can be effected by the commission without maintaining the
present "red tape" burden. We believe the commission should favor-
ably consider permissive adoption, repeal, or amendment of any admin-
istrative building regulation by a state agency after that agency makes
a finding of an emergency (in accordance with the Administrative
Procedure Act) without being subject to a prior determination by the
commission of whether or not an emergency does in fact exist. Such
emergency adoption, repeal, or amendment would then be made subject
to the commission 's findings relating to conflict, duplication, or overlap.
I hope the above comments will serve to assist in the further im-
provement of the Building Standards Commission's functions.
Glenn B. Vance
State Fire Marshal
(115)
State of California
Memorandum
Public Safety Agei
To:
From :
Subject :
Date : 16 November 1965
File No. :
The Honorable Bradford M. Crittenden
Administrator
Public Safety Agency
P.O. Box 898
Sacramento, California
Military Department — Office of the Adjutant General
P.O. Box 214334— Sacramento, Calif. 95821
rislative Keview of Department of General Services Pro-
Lira ms
The Military Department has not been subjected to any appreciable
increase or decrease in services nor have any problem areas been en-
countered by the transition of the Department of General Services to
the present central staff services system.
Clarence D. Smith, Jr.
Brigadier General
Assistant Adjutant General
(116)
EDMUND G. BROWN
HUGO FISHER GOVERNOR OF OFFICE OF THE ADMINISTRATOR
ADMINISTRATOR CALIFORNIA RESOURCES BUILDING
NINTH AND O STREETS
Department of Conservation
Department of Fish and Game
Department of Parks and Recreation
Department of Water Resources
State Reclamation Board
State Water Quality Control Board
State Water Rights Board
Regional Water Pollution
Control Boards
THE RESOURCES AGENCY OF CALIFORNIA
Sacramento, California
January 10, 1966
Honorable Milton Marks, Assemblyman
Twenty-First Assembly District
Chairman, Committee on Government Organization
504 Buss Building
235 Montgomery Street
San Francisco, California
Attention : Mr. Judson Clark
Committee Consultant
Dear Mr. Marks:
In response to your request I am submitting comments concerning
programs administered by the Department of General Services.
In order to prepare an answer in the most meaningful way I con-
sulted with major units of the Resources Agency and the views ex-
pressed in this letter are an interpretation of the views held by
departments, boards, and commissions in the agency. As a general
comment, I should like to say that the Department of General Services
has, in many instances, improved on services as they were rendered
when organizationally attached to the Department of Finance. The
improvement stems from the increased attentions such functions have
received as part of the Department of General Services. When these
same functions were carried on in the Department of Finance they
were secondary to the fiscal and budget activities and quite naturally
did not receive the type of management and supervisory attention that
more pressing responsibilities of the Department of Finance received.
Increased management attention to general services has improved
such services. This is not to say that there have not been problems. A
mistake often made in large organizations is staffing a general service
function for a minimum rather than a maximum workload. While this
may seem to be fiscally prudent, actually, minimum staffing has the
opposite effect. Large backlogs of work build up and operating depart-
ments, frustrated in their attempts to get work done through central
services, find other ways of performing their required functions.
Further, great amounts of employee time is wasted.
(117)
118 ORGANIZATION OF THE EXECUTIVE BRANCH
m lei me move to the specific. Functions of General Services as
provided to tl Agency are discussed in the following para-
graphs. Tli ^ncnt of these services is made in the light of relation-
ship of performance to the needs of operating departments in the Re-
sou _cency.
Airplane service— Airplane services provided by the Department of
Genera] Services are excellent but should be expanded. Many hours of
valuable employee time could be saved by further development of this
economical type of air transportation.
Architectural services — Architectural services continue to improve
under the leadership of the new State Architect. The office is perform-
ing in a timely way and the work is both imaginative and practical.
Automotive management — Typically all central motor pools are
criticized by users. The efficiency of such pools cannot be assessed on
the basis of such criticism. For the most part, the transportation needs
of Resources Agency employees seem to be met by transportation man-
agement, but at least two of the departments in the Resources Agency
feel that a much better job could be done if employees in automotive
management could develop a greater attitude of service and an interest
in program accomplishment. I tend to believe that the automotive serv-
ices remain at about the same level of effectiveness as in the past.
Building maintenance — In the Resources Building we have had ex-
cellent building maintenance. We were moved from previous locations
with great efficiency and had excellent cooperation from the Depart-
ment of General Services and all others involved. We have had minor
complaints but experience seems to indicate that the Resources Build-
ing is better maintained than other buildings in which the present
occupants have worked and that the service is effectively and efficiently
executed.
Central duplicating — There has been a central duplicating unit in
the state for many years. The quality of work done by this unit has
been very satisfactory but the backlog has been so great that only
materials which have no specific deadline are entrusted to central dupli-
cating. This unit is a good example of a unit that is managed in a
"pennywise and pound foolish" manner. The unit should be equipped
with the most efficient machinery and be staffed with a maximum staff
in order to provide service in a timely manner. There will always be a
need for small duplicating services close to the office requiring the
work. Central duplicating services can be successful, but only if they
are performed promptly.
Communication services— Departments in the Resources Agency re-
quiring large and widespread communication services find this to be
the greatest area of weakness in the new Department of General Serv-
We recognize the need for a central communcation service. This
service should be geared to assisting and improving the communications
operations, particularly for departments with emergency operations
such as the Division of Forestry during the fire seasons and the Depart-
ment ot Water Resources during the flood seasons. Communication
services should develop standards and be in a position to consult and
advise operating agencies in the same manner that purchasing now
ORGANIZATION OF THE EXECUTIVE BRANCH 119
does. Operating departments should not have to deal with the Depart-
ment of General Services insofar as budgeting for communications
requirements are concerned. This is an area that is of great concern
because of the potential hazard to life and property caused by opera-
tions geared to the past rather than to the present. A new look at this
function is in order.
Data processing — Becently, great improvement has been evidenced
by General Services in the field of automatic data processing. The
direction now being taken seems to be the right one. Presently, this
function is woefully understaffed. The ADP area is one in which the
state can effect large savings if competent staff and proper equipment
judicially located can be provided. In the last legislative session moves
were made to improve the staffing and the services of the ADP func-
tion. In view of the magnitude of the job that faces the state, continu-
ing attention should be given to improving automatic data processing,
particularly in the area of staffing. In the staffing area attention should
be given to both improved quality and increased quantity of personnel.
Employee parking — The Kesources Agency moved to its new building
more than a year ago, bringing a large population to an area of town
that did not have adequate parking facilities. Many difficulties were
experienced but in my opinion the Department of General Services did
an outstanding job in quickly and efficiently solving major parking
problems faced by occupants of the building.
Legal services — We have great respect for the chief counsel and the
majority of staff in the legal section of the Department of General
Services. Having said this, we must point out that departments, boards,
and commissions unanimously agree that as presently organized the
legal section is required to be all things to all people and is one of the
greatest bottlenecks to action remaining in state service. It should be
profitable to reexamine the functions of this office. In cases where
review of contracts, major service agreements, and other legal docu-
ments is necessary, such review might very well be better performed
in the Attorney General's office. Greater delegation should be given to
organizations having their own legal advisers. The placement of the
function in General Services seems historical rather than logical. The
Department of General Services has need for a legal staff to assist
the State Architect and other service units within the department. The
Director of Finance also has a need for "in house" legal assistance
but the legal services in the department might very well apply only
to General Services and the Department of Finance.
Management planning — In the reorganization of the Departments of
Finance and General Services the organization and cost control unit
underwent a change. Departments have missed some of the services of
the old organization and cost control unit. We understand that General
Services now has plans to move in the direction of increased services
to departments by competent management analysis and we would
encourage them to do so.
Merit Award Board — The Merit Award Board has developed an
award system that has been helpful in improving state service. One
improvement that might be made would be developing authorization
120 ORGANIZATION OF THE EXECUTIVE BRANCH
individual agencies and departments to develop their own non-
>gnition systems which would contribute to and enlarge
the ids program.
of Administrative Procedure— In general, the contact we have
had with the Office of Administrative Procedure has been most satis-
ory. The office is quite service oriented and, insofar as their serv-
oaed by the various departments of the agency, have been quite
sfaetory.
Printing- -A very noticeable improvement has been made in the
printing services received by our departments. Not long ago a tre-
mendous backlog existed in publications required by departments, the
-];it ure and the general public. Today the printing plant is meet-
sonable schedules and great credit should go to persons respon-
sible for this improvement.
Property acquisition — The property acquisition activities in General
Services has been expanded by incorporation of other small acquisition
units from operating departments. There appear to be some problems
which are not being met by this unit, although in fairness we must
say that it is too early to make a judgment. It is hoped that the
property acquisition unit can be staffed with a sufficient number of
qualified people to render adequate service to the organizations they
serve.
Purchasing — The purchasing division in General Services has been
doing a very outstanding job. For example, the purchasing division
was most helpful in assisting the Department of Water Resources in
working out most difficult problems connected with the purchase of
heavy equipment and machinery for the huge generating plants and
pumps needed in the State Water Project. The purchasing division has
kept within reasonable lead times on their purchases and has been able
to provide the departments with a timely and useful service.
Records management — The statewide records management program
is now well underway and seems to be contributing to efficiency and
economy of operation.
Telephone book— The latest edition of the state telephone book shows
great improvement and General Services should be commended and be
encouraged for efforts in this direction.
Xerox master contract — The master contract for renting xerographic
equipment seems to be working well.
Summary— The Department of General Services has been in exist-
ence for only a short while. Even during its shakedown period a num-
>f services have improved appreciably. Careful attention to central
ices provided by the department can certainly lead to greater
efficiency in state government. In all large organizations, public or
private, central services have been used and have contributed to effi-
ciency of operation when they have been equipped and staffed to carry
on these services effectively, efficiently and with dispatch.
Successful central services have the need for good management con-
tinually working under an orientation of serving well segments of the
organization utilizing such services. Central service units have been
ORGANIZATION OF THE EXECUTIVE BRANCH 121
unsuccessful and have not contributed to savings in those cases where
they have not been service oriented, and where adequate equipment
and staff have not been available. A look at improving the Department
of General Services with the above in mind would appreciably add to
the efficiency and economy already contributed by that department.
I appreciate the opportunity to comment on this matter. I hope the
remarks from this agency will prove helpful to you.
Sincerely yours,
Hugo Fisher
Administrator of Kesources
TRANSPORTATION AGENCY
The Honorable Milton Marks December 30, 1965
■mblyman
ntgomery Street
Snn Francisco 4, California
Dear Mr. Marks :
I am sorry to have delayed so long in responding to your letter re-
questing our comments and suggestions concerning the central staff
provided by the Department of General Services.
In general, the services provided by the Department of General
Services to the Transportation Agency are considerably more limited
in scope than those provided by General Services to most state agencies.
Tuple, because of the volume and special nature of its work, the
irtment of Public Works itself performs many of the housekeeping
and operational functions supplied by General Services to some other
te agencies. For this reason, we are not in a position to advise you
fully concerning the level of centralized services now being performed
by General Services in most of the vital areas of activity that would P
tend to be most productive of increased efficiency as a result of central-
ization (e.g., real estate acquisition, real property management, data
processing, etc.). No doubt the comments of the other state agencies
would provide you with more information concerning the level of such
centralized services now being provided by the Department of General
Services.
In those limited areas of activity with which the Transportation
Agency does come into regular contact with the Department of General
Services (e.g., purchasing, communications, printing services, the Office
of Architecture and Construction), it appears that such services are
better coordinated than previously as they affect assistance to client
agencies, and that certain improvements in procedure and service have
been made. The progress during the first year or so of organization
appears to follow very closely the progress made by the U.S. General
Services Administration, which was, incidentally, the first new agency
recommended by the federal Commission on Government Reorganiza-
tion (the Hoover Commission) which was put into operation by the
federal government. In the 15 years that the U.S. General Services
Administration has been operative a long list of improvements has been
made, and at the same time the agencies served have been freed up to
concentrate more on their own programs and less on housekeeping.
We look forward to the adoption of many additional improvements
in the general services field as these improvements can be studied and
applied.
It should be noted that in one special respect, the establishment of
the Department of General Services has been of considerable organiza-
tional and operational advantage to the Transportation Agency. By
(122)
ORGANIZATION OF THE EXECUTIVE BRANCH 123
its assuming responsibility for the operations of the Office of Architec-
ture and Construction it has made it possible for all departments of
the Transportation Agency to concentrate all of their effort in carrying
out the transportation-oriented functions of government that are prop-
erly the responsibility of the Transportation Agency.
If we may be of any further assistance to you concerning this matter,
please advise.
Respectfully,
Eobert B. Bradford
Administrator of Transportation
EDMUND G. BROWN
Governor
Corrections
RICHARD A. McGEE /^§\ Youth Authority
Administrator /fe^flgfl Adult Authority
Board of Trustees,
California Institution for
STATE OF CALIFORNIA
Youth and Adult Corrections Agency
State Office Building No. 1
SACRAMENTO 14
Hon. Milton Marks, Chairman § January 10, 1966
in 1)1 y Committee on Government Organization
Sf;ite Capitol
Sacramento, California
C Mr. Marks:
This is in reply to your letter of October lb wM*sh asked for our
comments and suggestions on the operating results of the reorganiza-
tion which established the Department of General Services in 1963.
In summary, we have found that services have, generally speaking,,
either maintained the satisfactory level at which they operated priori
to creation of the new department or, in cases where the services were!
less than satisfactory before, have tended to improve under the depart-
mental organization.
Specific comments as to particular services follow. Services which
are not mentioned are in our opinion being performed at a satisfactory
level.
1. Office of Architecture and Construction. The operations of this
activity are being improved and certain innovations such as the
-'ablishment of workshops on good design are commendable. There
is a need for further definition of the functions of the division in-
ternally and as they relate to the space utilization unit of the facili-
ties planning service and the building standards unit of the
administrative services division of the Department of General Serv-
ices. Thought might be given to a client-centered rather than func
tion-centered form of organization.
We understand that some organizational changes are now under way
and hope that they will alleviate the problem.
2. Legal services. The quality of legal services provided is excellent
although at times we encounter delays which may be the result of
insufficient staff in relation to workload. The problems of our par-
ticular agency are complicated by the fact that we are one of the
few large agencies in state government which do not have one or
more administrative advisers within its own organization.
Some further delegation of authority for contract approval might
be considered based on development of guidelines and further train-
ing of staff in the agencies.
(124)
ORGANIZATION OF THE EXECUTIVE BRANCH 125
3. Facilities planning. This service has not been established for a suffi-
cient period of time to make possible a definitive evaluation of its
services but we have found the attitude of the personnel to be
cooperative and we feel that the idea of improving coordination
between leasing and space planning is basically sound. As men-
tioned above, we feel that the definition of functions performed by
the space utilization unit should be reevaluated.
4. Data processing. The Department of General Services has improved
tremendously in this area and insofar as we can see is closely in step
with the statewide effort toward improved automated data processing.
Much yet remains to be done but the department has the necessary
leadership and we are confident that we will receive increasingly
better service as we work toward improved utilization of the con-
cepts of modern information systems.
5. Communications service. The leased line (ATSS) service has im-
proved substantially and is now to the point where there appear to
be sufficient leased lines to handle most calls without undue delay. In
addition to the toll saving, I am sure that the availability of leased
lines has encouraged executives to use the telephone in many cases
where a letter would customarily be required, and that this has been
both efficient and economical. It is suggested that the current ap-
proach to strictly monetary evaluations of identifiable costs and
savings in ATSS additions be modified by recognition of these hid-
den savings.
6. Transportation service. Is it doubtful in my mind if a state pool
car operation which must be performed within strict budgetary limi-
tations can ever provide service which is entirely satisfactory to its
clientele. I wonder, therefore, if a fresh approach which would
strongly encourage utilization of private cars might not make it
possible to substantially reduce the size of the state pool. Perhaps
some intermediate plan where the state would furnish a car to an
individual on a shared expense basis might be worth investigation.
This is sometimes done by private firms and the employee pays for
that portion of the mileage which is for his own convenience while
the firm pays for that portion which is company business. Obviously
under these conditions existing insignia identifying the car for offi-
cial use only would have to be changed, and the car could not be
licensed on an exempt plate basis.
Another alternative which we would recommend for consideration
is to make much more use of the practice of leasing non-state-owned
cars for individual trip use. It might be interesting to compare the
unit cost of a master contract with one of the large national car
rental services with the unit cost based on the entire expenditure
for operating the state pool, including overhead, amortization of
buildings, and all factors.
One general point which I would like to discuss is what appears to
be an increasing tendency to decentralize functions to the using agen-
cies. Examples are consideration of decentralizing lease contracts and
current decentralization of allocation of parking spaces and permitting
ORGANIZATION OF THE EXECUTIVE BRANCH
lubpurchafl directly to vendors under blanket contract. In
in favor of decentralization but the problem is that we
n.,t thereby qualify for additional staff to handle the additional
jommend that before there is further decentralization
ul evaluation be made of the added responsibilties in terms of
requirements, and that wherever appropriate the decentrali-
ecompanied by an increase in staff as required to accomplish
the obj' of the decentralized program.
Sincerely yours,
Kichard A. McGee
Administrator
Youth and Adult Corrections Agency
APPENDIX B
LETTER FROM DIRECTOR OF GENERAL SERVICES
RESPONDING TO AGENCY ADMINISTRATORS' LETTERS
Honorable Milton Marks
Chairman, Assembly Committee on
Government Organization
State Capitol
Sacramento, California
Dear Mr. Marks :
From an analysis of the agency administrators' letters to your com-
mittee in response to your questions regarding the activities of the
Department of General Services for the past two years, I would like
to report to you the status of our approach to the major areas men-
tioned in their letters.
In the area of legal services, the substance of their comments is the
time it takes for final contract approval. In effect, they ask that there
be a reexamination of the legal processes.
In response to their request, the following steps have been taken.
The Governor's cabinet through its cabinet secretary, Jim Alexander,
has asked that the present contract review team, which was working
on methods for greater delegation, be expanded to include broader
representation from the state agencies and expanded in scope to cover
such reexamination.
The statutory General Services advisory council composed of mem-
bers nominated by agency administrators together with members ap-
pointed from industry has implemented the cabinet's request, and there
has been created a special seven-member advisory committee to :
— review adequacy of published standards and guidelines used to
instruct all agencies in how to prepare sound contracts.
— consider delegation of routine and minor contract approval to
operating departments to the maximum extent possible but provide
for post audit by General Services
— consider the extent of jurisdiction and review by General Services.
Under what circumstances do we have concern for other than
"legal" matters
— consider the specific suggestions on attachment A.
Their findings and recommendations will serve as the basis for
improving and expediting contract approval.
In the area of space planning and leasing, the substance of the
administrators' concern was leasing coordination, clearance procedure,
staffing, cost estimates, delays and delegation.
In this regard the entire facilities planning which includes space
and leasing has been reorganized with a new chief appointed, training
course implemented, and a complete new manual of procedures has
been prepared, adopted and issued by the director with the approval
(127)
128 ORGANIZATION OF THE EXECUTIVE BRANCH
of the Director of Finance. Increased staffing has been included in
'a Budgel and is presently being discussed with the legis-
lati viewing the budget.
Basically, the recommendations and procedures will:
— accomplish better coordination and simplification of activities con-
than one unit of the Department of General Services.
—make a clear statement of basic principles and procedures to be
followed by the staff of facilties planning and by other agencies
in acquiring leased facilities.
— make a greater delegation to certain larger agencies for negotiat-
ing (heir own leases in accordance with approved standards.
— improve competition among prospective lessors where premises
must be built to suit state requirements.
— make for better coordination between the Departments of General
and Finance with respect to authorizations for obtaining
additional space required. In the future this will be cleared by
Finance on an annual basis after the final budget has been ap-
proved by the Legislature.
— improve advance planning for space requirements of the various
state agencies.
Attached is a copy of the new manual instructions to all state agen-
cies on leasing policies and procedures and a copy of the findings and
recommendations of the "task force" which was the basis of the
instructions.
In the area of transportation services, the agencies express concern
with shortage of available cars in our central pool. This may or may
not be a temporary situation brought about by the necessity for us
to reduce the total annual miles driven. We approached this by re-
questing agencies to implement a closer review of the use of state cars.
We required a supervisor's approval for automobile use. This was done
to accomplish an elimination of low-priority mileage in order to meet
the legislative 5 percent cut in the transportation services budget We
anticipated the mileage reduction and disposed of 250 overage and
obsolete vehicles. The situation may be only temporary and full ad-
justed by the year's end. Attached is our management memo to aU
agencies on this subject.
Most of the other comments by the administrators seem to revolve,
around level of staffing and inability to render all the services desired.
Jnt^n0ftC°UrSi'i1Sim0Stly a budget problem and as we are able to
a tcipate workload increases and adequately present them in the
budget, improvements in service will result
wiHhbe]\;v^nfr ^ °PP2rtuni^ *<> P^sent this information, and I
dVscussion at y°Ur committee meetings for further
Sincerely yours,
Robert L. Harkness
Director
ORGANIZATION OP THE EXECUTIVE BRANCH 129
SUGGESTED COMMITTEE CONSIDERATIONS
1. What transactions are subject to undue waits and delays.
2. Where the delays occur — in legal services, elsewhere in General
Services, in the Department of Finance, or due to clearance with
Attorney General, State Personnel Board, etc.
3. Determine cause of delay :
a. Are the contractors poorly prepared and therefore require much
revision
(1) Are the purposes of the contract unclear
(2) Is the state left exposed to contingencies
b. Are backlogs accumulating around certain types of transactions,
around certain members of the staff, or for transactions of certain
agencies.
4. What transactions should be entirely exempt from General Services
review.
5. What transactions can be handled by operating departments subject
to review on a post audit basis.
6. For what types of transactions can standards be developed so that
agencies can do a better job of contract preparation subject to
General Services review or even make it possible to delegate ap-
proval of contracts prepared within the standards.
7. How can legal services teach agencies how to prepare good contracts
— through periodic skull sessions, General Services sponsored train-
ing programs for agency personnel, etc.
8. What is the legal responsibility of the Department of General Serv-
ices in the approval of contracts?
5— L-418
Stat* of California
Memorandum
Revenue and Management Agen
Robert L. Harkn Date : December 21, 1965
Director of General Services File No. :
Prom : Departmenl of General Services
orce Progress Report on Leasing
This report is in response to your request that an analysis be made
of the Department of General Services leasing activities. The report
i n organized as follow
I. Proposed policies to be contained in the State Administrative
Manual.
1 1. ( Organization.
ill. Procedur
IV. Interna] Operations: Under this broad heading are subsections
(»n management information and production control, communica-
tions and file management, and in-service training.
To accomplish this review, personnel were interviewed in the leasing
and Bpace utilization units and the legal section. We also interviewed
sons in the Departments of Motor Vehicles, Highway Patrol, Em-
ployment, and Finance who are directly concerned with leasing prac-
i policies, and procedures. For additional background we contacted
and obtained Literature from the Safeway Stores, Inc., Post Office De-
partment, federal General Services Administration, Los Angeles County,
New York State, and Pacific Telephone and Telegraph Company.
All of the personnel contacted in the course of this study have been
rative and helpful. Many of the recommendations are, in
in Large part upon ideas contributed initially by the chief
and • (f of facilities planning service.
Arthur W. Collins, Chairman
Task Force on Leasing
I. Proposed policies to be contained in the State Administrative Manual
Bi sed en our review of leasing activities statewide, we have con-
cluded that existing lease policies are inadequate for either facilities
planning or other state agencies. The State Administrative Manual
8AM has a se< tion on property which is inadequate as a general
guide on Leasing. In addition, the Facilities Planning Leasing Man-
ual is in need of revision and should be consolidated with the Master
and Space Planning Manual. We are therefore in the process of
preparing policies to be contained in a subchapter on leasing in the
State Administrative Manual. Major features to be contained are:
1. A statement clarifying that the Department of General Services
is the final authority on leasing and that all requests will be sub-
(130)
ORGANIZATION OF THE EXECUTIVE BRANCH 131
mitted to the department for execution or approval unless specifi-
cally exempted, prior to committing the state.
2. A general policy statement indicating when leasing of real prop-
erty will be authorized.
3. A section outlining general responsibility and procedures for
lease negotiation. This section will indicate in general terms which
leases will be negotiated by Facilities Planning and which by
other agencies.
4. Several sections will be devoted to explaining the procedure for
requesting space. This wrill indicate the forms to be used, the
steps to be taken, and the approvals required.
5. A section indicating when new construction under leasing is
authorized and a listing, in order of preference, of the acceptable
methods to be used. The preferable method will be the assignable
option technique. This technique will allow all proposers to make
proposals on the same site, which will be selected by the State,
and removes land cost as a competitive factor. This method should
greatly increase the number of proposals and provide better leases
for the state.
6. A section providing detailed instructions on the use of the above
methods.
7. A section outlining the method for soliciting sealed proposals.
This section will require sufficient notice, a specific deadline, and
ample time for preparation of proposals. The agency soliciting
proposals will be required to develop a fair market rental figure
to compare proposals against. Should no satisfactory proposal be
received within acceptable range of the estimated fair market
rental, all proposers will be given the same opportunity to amend
their proposals. Proposers will be required to submit proof of
their ability to perform. Successful and unsuccessful proposers
will be so notified in writing. When an agency solicits proposals,
it will be required to submit to facilities planning a list of all
persons notified, a copy of any advertising, and copies of all
proposals received.
8. A requirement that the successful proposer obtain the services of
a licensed architect to design any building constructed for prime
occupancy by the state under a lease agreement.
9. Several sections outlining policy on options, lease terms, lease
provisions, and services, to be included in any lease.
10. Statements on state policy on rental overlap, alterations, termina-
tions, and renewals.
11. Statements on state policy on inspections and disqualification of
proposers.
. Organization
Consolidate the space utilization unit with the leasing unit to create
a current planning section.
This change will require a major reorientation of the present role
of both the lease agent and the space utilization analyst. The opera-
tion, after being consolidated, will lend itself to the use of a common
ORGANIZATION OF THE EXECUTIVE BRANCH
class which will be besl suited for the specialized functions facilities
planning service performs, and will assure a better qualified and
more flexible staff. We recommend that a single class of facilities
planning analyst be established.
To assist the chief of facilities planning in managing the facilities
planning service, the organization should have two senior facilities
planning analyst positions. The seniors occupying these positions
would share responsibility for all technical and administrative func-
tions and management of all activities which relate to the facilities
planning service. Assignment of work to the seniors would be on a
geographical basis. Assignment of work to the facilities planning
analyst under a senior's supervision would be based on a further
breakdown of the broad geographical area. This would help develop
an improved knowledge of the real estate market over the entire
state and help establish definite responsibility for state-owned and
leased premises.
In addition to the primary assignment by geographical area, each
facilities planning analyst would be assigned responsibility for
liaison for one or more operating departments. This assignment will
include working with the department involved to prepare space
standards for the space needs peculiar to that department. This
double assignment will result in specialists for geographical areas,
while at the same time retaining a contact person to interpret the
needs of the various departments.
To assist the chief of facilities planning in carrying out his re-
sponsibilities, we also recommend that a new position at the jour-
neyman level be established with the working title of staff facilities
planning analyst. This position will be assigned to plan for further
improvements within facilities planning service, develop and revise
interna] working procedures, develop statewide space standards
coord unite budget preparation, coordinate paperwork and forms'
management, maintain the Department of General Services Facil-
ities Planning Manual, and prepare recommended revisions to the
Mate Administrative Manual. (See Exhibit I for detailed position
responsibility statement for senior, staff and journeyman facilities
planning analyst.)
It is probable that a full-time position cannot be devoted to this
|y>H|roin the present limited staff. However, if the new positions
0 he 19G6-67 fiscal year are authorized, one of these positions
should be used for that purpose as soon as possible.
Procedures.
B< via the system by which space is requested and approved.
To jl,.f,nnme how space request documents are processed in the
pwsenl system, a detailed flow chart was prepared showing the
p ' ZZT^ f.lT the "AdVanCe SpaCe Recrement
Report, Form 9 the "Space Request to Department of General
In' Si „ T 6' and thG "Standard LRaSe Agreement," Form
'" ■**», ■ t»me sample was taken to find out how long it takes
ORGANIZATION OF THE EXECUTIVE BRANCH 133
between each step in the procedure. As a result of these flow charts
and the time sample, we concluded :
• Too much time is required between each step in the pro-
cedural flow of documents.
• There is duplication in review between the Department of
Finance, space utilization, leasing, and legal services.
• The present policy for approval of lease documents is incon-
sistent with the general principle of placing administrative
responsibility at the lowest level qualified to accept it.
We, therefore, recommend that the present system be revised as
shown in the flow chart in Exhibit II. The major changes from the
present system are as follows :
A. The advance space requirement report, Form 9, will he retitled
"Space Requirements Report" and forwarded to the Department
of General Services senior facilities planning analyst prior to
being forwarded to the Department of Finance budget division.
Under the present procedure, the Department of Finance re-
views the Form 9 prior to General Services.
The purpose for this change is to insure that information con-
tained in the Form 9 is adequate for the Budget Division to
make a logical decision. This review will include a determina-
tion by the Senior Facilities Planning Analyst of the full im-
plications involved on the space request, being certain that he
knows what the agency is planning to do and why, seeing that
the space request conforms with this plan and the overall pro-
gram of the agency, and relating the request for the facility
to the State Building Program. This change will:
• Establish General Services as the focal point for controlling
all documents in the lease process.
• Provide the Department of Finance with more complete
information as to the proposed transaction to permit them
to review the financial and program implications.
• Require the requesting agency to document its program
requirements more carefully. To accomplish this, it is pro-
posed to require agencies to submit a freehand sketch of
the space layout required.
Greater emphasis will be placed on preparing a complete an-
nual program for space requirements. In this connection, it is
proposed that facilities planning service initiate the process by
preparing for each state agency a detailed listing of all rental
obligations currently of record. This will require a data proc-
essing system discussed later in this report. When completely
established, this should permit annual approval by the Budget
Division of the proposed program in a manner similar to that
in effect for budgeting of equipment. Thereafter, budget divi-
sion will not need to review individual proposals unless they
are a change from the approved annual program.
].|| ORGANIZATION OF THE EXECUTIVE BRANCH
B. Tin senior facilities planning analyst will be assigned respon-
sibUity for making the decision as to whether the agency or
a, hi nil Services should handle a proposed lease transaction.
The decision is now made by a lease agent. This decision level
is too low in the organization structure and cannot properly
reflect all factors which need to be considered in making such
a decision.
C. Tin requesting agency will be required to accept or reject the
proposal lease conditions prior to the actual preparation of the
hast document.
The present procedure is to have the agency approve the lease
document after the lessor has signed the lease. This is undesir-
able both from a procedural and timing standpoint. The agency
should approve the conditions of the proposed lease at the time
the negotiations are completed and the lessor has verbally
approved the terms. This approval should be at a sufficiently
high level in the agency to avoid the necessity for further ap-
provals after the lessor has signed the lease.
1). The responsibility for approval of all leases will be assigned to
tin Department of General Services' assistant director.
The assistant director is now responsible for approval of Form 6
which is the authorization to the leasing section to prepare the
lease document. The final approval of the lease rests with legal
services for leases under $10,000 and three-year term. The
deputy director approves all leases exceeding these amounts.
Since the establishment of the chief of facilities planning po-
sition, there is no justification for the assistant director to retain
this line control over preparation of lease documents. It is the
responsibility of the chief of facilities planning to make this
decision and to ultimately recommend to the assistant director
consummation of the lease.
To facilitate the final review of the lease agreement, a trans-
mittal and signoff sheet has been prepared. (See Exhibit III.)
The form will provide the assistant director information con-
cerning who has officially prepared and reviewed the agreement.
B. The space request to Department of General Services, Form 6,
wUl be retitlecl " Lease Negotiations Summary Report" and
should describe the terms of the lease.
It is our intent to require the negotiator to certifv that the
precontract aegotiation conditions fully satisfy the Department
General Services' policies, procedures and space standards
requirements, and the lessor is agreeable to the terms set forth
'» the Form 6. Based upon the information contained in the
form (, concerning the proposed lease and the certificate by
tne negotiator, the agency will then approve or reject the con-
amons ol the lease by signing or rejecting the Form 6.
Since the Form 6 will contain all the information about the
proposed facility to be leased including acceptance by the les-
ORGANIZATION OF THE EXECUTIVE BRANCH 135
sor, agency, and negotiator, it will expedite preparation of the
actual lease document.
IV. Internal Operations.
Management Information and Production Control
A management information and production control system has been
designed to furnish the director's office, the chief and staff of
facilities planning, and the agencies concerned, sufficient informa-
tion to properly direct the facilities planning program. When in
full effect, this system will:
1. Provide the basic data necessary for each state agency to prepare
an annual program for space requirements.
2. Provide a means of recording and expediting requests for space
changes.
3. Furnish management reports, including sufficient detailed infor-
mation to determine workload, staffing, and production factors.
4. Facilitate the preparation of special reports concerning existing
leases, space assignments, and requests for changes as required
for current and long-range planning. (See Exhibit IV for a
description of proposed reports to be prepared.)
This system will be accomplished by assigning a transaction number
for each request which is pending as of December 31, 1965, and
received subsequently, and recording necessary information re-
quired to classify the type of request, location of the proposed
premises, and finally the major factors of the approved lease or
space assignment. The system will consist basically of tabulating
cards (which will later be converted to electronic data tape), the
periodic reports produced by the tabulating cards, and a visible
board to record daily progress on the assigned projects.
It has been generally established that the data processing section
of the Department of General Services does not have available ca-
pacity for this additional tabulating system. However, the Office
of Architecture and Construction presently employs a programmer
whom we believe is capable of absorbing this additional work with-
out any additional out-of-pocket cost. It is our recommendation that
the architecture programmer be assigned to install this tabulating
system and to have the necessary work accomplished by the Divi-
sion of Highways or other state facilities having sufficient capacity.
It is anticipated that the major advantage of this proposed system,
that of providing basic information for an annual program, will
be available before July 1966 when the Department of Finance calls
for preparation of the 1967-68 Support Budget.
Reimbursements for Expenditures
At the present time the facilities planning service is supported by
a General Fund appropriation with approximately $20,000 in re-
imbursements received on work orders of the space utilization sec-
tion. These reimbursements consist of an hourly rate charged for
the architect's time and charges for services of the Office of Ar-
chitecture and Construction in reviewing mechanical and electrical
ORGANIZATION OF THE EXECUTIVE BRANCH
drawings and specifications. Tn addition the remaining costs, par-
ticularly of the leasing section, are charged to special fund agencies
I of the annual pro rata fiscal charges. This is based upon
• arbitrary weighting of the number of leases by agency. There
have been complaints from some agencies that they are double
•<1 under this method.
Under the recommended procedure each analyst working on a
particular transaction would keep track of the time expended on
tli.it transaction regardless of what phase he was doing. It would
thus I).- practical to establish a system similar to that used by the
property acquisition service to obtain reimbursements for all work
accomplished by the facilities planning service other than that of
genera] planning such as long-range plans which could not logically
be charged to any particular agency or any particular construction
work order. Since the ability to accomplish this will in effect be a
byproduct of the rest of the recommended system, a decision will
not have to be made until preparation of the next support budget
requesl as to the method of reimbursement to be used.
Communications and File Management
1. Establish a formal means of issuing policy and instructions to
the facilities planning staff.
There is no formal means by which the chief of facilities planning
can communicate policies, procedures, and instructions to the
facilities planning staff.
A formal notice series should be created and called facilities
planning notice. Each facilities planning notice would be
assigned a consecutive number, which consists of the last two
digits of the calendar year, plus a consecutive number which
starts over each calendar year (e.g., 65-01, 65-02, etc.). The notice
would be signed by the chief of facilities planning. The facilities
planning notice series would serve as an interim system for issu-
ing and amending facilities planning policies, procedures, and
instructions. These notices would later be issued as revisions to
the Facilities Planning Manual.
2. Establish (Ic finite control concerning use of form letters.
Form letters which affect basic policies and procedures must be
under control at all times. There are a number of informal form
letters in facilities planning service. These, in many cases, were
prepared and issued without the purpose, intent, or use being
clearly understood. All form letters should be approved by the
chief of facilities planning.
• \. .1 dictionary of standard leasing terminology needs to be pre-
lum d and included in the State Administrative Manual.
Leasing is a relatively complex operation and common terminol-
ogy is desirable to eliminate misunderstanding on what is meant
by the various technical terms used in the profession.
ORGANIZATION OF THE EXECUTIVE BRANCH 137
4. In-service training program for all facilities planning service
and agency personnel handling space planning matters should
he initiated in the following areas:
a. Objectives and responsibilities of facilities planning service.
b. Public relations.
c. Leasing policies and procedures.
Continuing attention should be given to the improvement of
employees' skills and job knowledge. Assistance from the depart-
mental training officer should be obtained to implement this
recommendation.
6— L-418
EXHIBIT I (Parti)
SENIOR FACILITIES PLANNING ANALYST j
Function , ,
The senior facilities planning analyst under general administrative
direction of the chief of facilities planning shares responsibility for,
and participates in, a coordinate capacity in all technical and admims-
trative functions and in management of all activities which relate to
facilities planning service. This includes development of program and
policies, maintenance of good public relations, and making of inde-
pendent decisions within approved program and policies of General
Services as they relate to state space requirements.
Responsibilities and Authority
Within the limits of the approved program and policies of facilities
planning, Department of General Services, the senior facilities planning
analyst is responsible for, and has commensurate authority to accom-
plish fulfillment of the duties listed in this statement. The senior facili-
ties planning analyst may delegate portions of his duties to employees
under his supervision, but may not delegate his overall responsibility
for the satisfactory completion of work assigned to him.
• Provides supervision for the planning, direction and coordination
of all work activities assigned to facilities planning which relate
to the senior facilities planning analyst sphere of responsibility.
• Prepares and recommends to the chief of facilities planning state-
wide leasing policies or changes in existing policies.
• Determines whether requests for space from the state departments
and agencies to General Services contain sufficient information to
prepare a lease or an assignment of space. This includes a deter-
mination of the full implication involved in the space request,
being certain that he understands what the agency is planning to
do and why, seeing if the space request conforms with this plan
and the overall program of the agency, and relating the request
for the facility to the state building program.
• Assigns work to the facilities planning analysts under his super-
vision, establishes work schedules and priorities and insures the
completion of the work within the schedule.
• Provides direction for preparation of leases, including assign-
ment of lease transaction codes.
• Reviews and approves facilities planning analysts' recommenda-
tions to the chief of facilities planning to prepare lease documents
for approval by the Director of General Services.
• Keeps informed of availability of space, financing rental rate
levels, and leasing conditions in all locations of the state.
• Keeps informed of leasing problems experienced by agencies and
assists in developing appropriate policies to obviate such problems.
(138)
EXHIBIT I (Part 2)
FACILITIES PLANNING ANALYST
Function
The facilities planning analyst, under general administrative direc-
tion of the senior facilities planning analyst, is responsible for the
complete review and analysis of space requests for facilities either
state or privately owned, and when required the negotiation of any
leases necessary to obtain such facilities.
Responsibility and Authority
Within the limits of the approved program and policies of facilities
planning, Department of General Services, the facilities analyst is
responsible for, and has commensurate authority to accomplish, the
fulfillment of the duties listed in this statement.
• Performs all work required for handling all lease transactions for
the geographical area assigned. This includes negotiating leases,
preparing leases and all related documents, and reviewing and
making recommendations concerning proposed leases and docu-
ments.
• Obtains all approvals required to consummate a lease including
lessor, agency and legal approval.
• When required, authorizes preparation of plans and specifications
by Office of Architecture and Construction to be used for develop-
ing preliminary plans and specifications in securing lease quarters.
• Assists other state agencies in a consulting capacity wherever
professional advice is needed concerning leasing policy, proce-
dures, and activities.
• Reviews leases negotiated by other agencies and recommends
leasing policies and procedures to be followed.
• Determines availability of space, financing rental rate levels, and
leasing conditions in all locations of the state.
• Keeps senior facilities planning analyst informed of leasing prob-
lems experienced by agencies and assists in developing appropri-
ate policies to obviate such problems.
(139)
EXHIBIT I (Part 3)
STAFF FACILITIES PLANNING ANALYST
Function
The purpose of the staff facilities planning analyst is to assist the
chief of facilities planning in discharging his responsibilities by assist-
ing him in planning for improvements, developing and revising internal
working procedures, development of statewide standards concerning
housing of n on institutional state employees, coordination of budget
preparation, paperwork and forms management, maintenance of the
Department of General Services Facilities Planning Manual, and pre-
paring recommended revisions to the State Administrative Manual. The
stair' facilities planning analyst reports to and is under the direction
of the chief of facilities planning.
Relationship and Duties
• Implement and coordinate the task force's instructions on facili-
ties planning service.
• Develop all necessary policies and procedures to provide the facili-
ties planning services staff information about work methods and
procedures, time reporting, and administrative policies of facili-
ties planning service.
• Responsible for revision and maintenance of the Facilities Plan-
ning Manual and the issuance of revision whenever required.
• Responsible for development of statewide space utilization and
art layout standards.
• Responsible for administering the facilities planning services re-
lease system. This includes preparation of internal directives on
policies and procedures and general information for the chief of
facilities planning, maintenance of the Department of General
Services administrative order system, and the State Adminis-
trative Manual.
• Preparation of special reports and studies concerning facilities
planning activities as required.
• Responsible for maintenance of paperwork and forms manage-
ment and merit award program.
(140)
BASIC DECISION POINTS
Proposed
EXHIBIT II
(Part 1)
1. Agency determines need.
2. Notifies General Services
3. Prepares data for budget.
Advanced Space Report
completed. (Form 9)
lease for State.
Advance Notice
Space request reviewed v
for data content. \
Transaction Number and
Code assigned.
Negotiation responsibility
established.
Assignment of Fac. Pig. Anal.
PROPOSED FLOW OF LEASE DOCUMENTS
i m
Fhnaber i
■Igoing & returning
FACILITIES AHALYST
2/c
2. DeC«rolne. Begotli
Uaponalbllttlaa.
3. Aaalgna Fac. Anal.
4. Forward* to Ftaani
EO/6 «1 1
L 2/c _J
" V
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EXHIBIT II
(Part 2)
PROPOSED FLOW OF LEASE DOCUMENTS
(Agency negotiated )
EXHIBIT II
(Part 3)
FACILITIES ANALYST
CONTROLLER
■T77
Prepares Porn 9
"Advance Space
Required" Including
necessary sketches -
1. Assigns Transaction
Number & Code.
2. Prepares New Lease
Pile & Record Pile.
1. After Reg. i
pie ted. prepares
Meg. Suaaaary Porn
S/c
agreement .
approve 1 .
1. Reviews program.
Determines
negotiation
responsibilities.
3. Forwards to Finance
-*+-
1. Reviews & Approves.
2. Returns to G/S.
•<>
Prepares "Lease
Transmittal Por»"
9036.
3. Retains copy.
(Attaches "\
lease file J
1. Approves & signs
all copies.
2. Retains copy.
1. Been— unds approval.
1. auth. lease
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^Original Copy
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EXHIBIT IV
The following reports will be published by facilities planning on a
continuing basis :
Report No. 1
Report No. 1 will be prepared monthly for all transactions and
will contain the following items:
a. Transaction number
b. Transaction code
c. Agency
d. City
e. Agent assigned
This information will be arrayed in the following manner:
I. Transactions received during the reporting month
II. Transactions completed during that month
III. Transactions on hand prior to that month in 30-60-90-etc-day
increments
IV. Cumulative listing of transactions completed from beginning of
fiscal year.
Reports Nos. 2 and 3
Reports Nos. 2 and 3 in addition to the above information will also
contain for each lease :
f . Term of lease
g. Number of square feet assigned or leased
h. Price per square foot
i. Monthly rental
j. Annual rental
k. Building number
I. Type of space assigned or leased
m. Estimated occupancy of space
n. Any options to renew lease and number of days of notice required
o. Any cancellation privileges and number of days notice required
p. Building information (misc.)
q. Name and address of lessor
r. Address and number of spaces of any parking which is available
Report No. 2 will contain the above information for transactions
completed during the prior month and will also have a cumulative
listing with this information for all transactions completed since the
beginning of the fiscal year.
Report No. 3 will contain the master list of all space assignments
and leases in effect as of end of fiscal year. Report No. 2 will be a
monthly supplement to update the annually prepared Report No. 3.
(142)
ME OF CALIFORNIA-REVENUE AND MANAGEMENT AGENCY EDMUND G. BROWN, Governor
PARTMENT OF GENERAL SERVICES
CRAMENTO
December 30, 1965
Management Memo 65-42
TO: All State Agencies
SUBJECT : Leasing of Real Property, Policies and Procedures
Effective immediately, the State Administrative Manual is revised to
contain the attached subchapter outlining the state's policies on leasing
of real property and the procedures to be followed in requesting and
obtaining space. Sections 8617, 8617.1, 8617.2, 8617.3, and 8617.4 of
the State Administrative Manual are hereby repealed.
To insure that changes in the leasing policies and procedures are
called to the attention of those concerned, the State Administrative
Manual sections attached to this memorandum should be reviewed by
all key personnel concerned with leasing.
All agencies should revise their existing procedures to comply with
these new policies and procedures.
Robert L. Haekness
Director of General Services
I concur:
Hale Champion
Director of Finance.
STATE ADMINISTRATIVE MANUAL
PROCUREMENT OF PHYSICAL FACILITIES
Facilities Planning
General 1370
Purpose 1370.1
Services Offered to Client Agencies 1370.1
Space Procurement Policies and Procedures 1380
Adherence to Policies and Procedures 1381
Legal Authority 1382
General Leasing Policy 1383
Responsibility for Leasing 1384
Lease Requirements and Conditions 1385
Lease Term 1385.1
Options 1385.2
Janitorial Services 1385.3
Utilities 1385.4
Fair Employment Practice Clause 1385.5
Hold Harmless Clause 1385.6
Prevailing Wage Clause 1385.7
Escalation Clause 1385.8
Subsequent Expenses for Alterations 1385.9
Overlap in Rental 1385.10
Terminations 1385.11
Renewals 1385.12
(143)
144 ORGANIZATION OF THE EXECUTIVE BRANCH
New Construction Under Leasing Authority 1386
Procedures — Assignable Option Method 1386.1
Procedures — Site Proposal Method 1386.2
Procedures — Lease Proposal Method 1386.3
Solicitation of Sealed Proposals 1387
Disqualification of Proposers 1388
Zoning and Property Control 1389
of Private Architect 1390
Inspection 1391
Leasing Procedures 1392
Request for Space 1392.1
Negotiation for Space by Agency 1392.2
Preparation of Lease Document 1392.3
Procedure for Space Procurement, General Services Negotiated 1392.4
Procedure for Space Procurement, Agency Negotiated 1392.5
GENERAL 1370
Purpose 1370.1
The purpose of facilities planning service of the Department of General
Services is to plan and provide adequate space for all client state agencies
as requested and approved.
Services Provided to State Agencies 1370.2
To fulfill this responsibility, facilities planning provides to its clients the
following services :
1. Forecasts future space needs and assists in determining whether these
needs will be met by state construction or leasing from private owners.
2. Maintains an inventory of existing state-controlled office space.
3. Develops policies, procedures, regulations and methods governing the
assignment, reassignment, and utilization of space.
4. Develops basic state leasing policies, procedures and standards to
obtain maximum utilization of space.
5. Negotiates leases of real property for state use and approves leases
negotiated by other state agencies not exempted by law.
6. Assigns and reassigns space in state-owned and leased buildings.
Space Procurement Policies and Procedures 1380
Adherence to Policies and Procedures 1381
The policies and procedures on leasing of real property as contained
in this subchapter are to be followed in all instances. Any proposed devia-
tion from these policies and procedures must be immediately submitted in
writing to the Department of General Services and approval obtained
before proceeding.
Legal Authority for Leasing 1382
^ Government Code Section 14669 authorizes the Director of General
Services to hire or lease any real or personal property for the use of any
agency, including the Department of General Services, if he deems it to be
in the best interests of the state.
All requests for the leasing of real property or personal property such as
prefabricated structures, except as exempted by law or in writing by the
Department of General Services, will be submitted to the Department of
General Services for approval prior to committing the state.
GENERAL LEASING POLICY 1383
The policy of the Department of General Services is to adequately house
the activities of state government in state-owned or leased quarters. Ad-
ditional leases of privately owned space will be authorized when it is deter-
mined by the Department of General Services that :
a. Needs cannot be met satisfactorily in space presently owned or leased
by the state.
b. The terms of the proposed lease are most favorable to the state, with
due consideration to agency program needs, and at rental rates not in
excess of those prevailing in the community for comparable facilities.
ORGANIZATION OF THE EXECUTIVE BRANCH 145
RESPONSIBILITY FOR LEASING 1384
Department of General Services
The Department of General Services will :
1. Review all leases negotiated by other agencies for compliance with
established policies and procedures and for reasonableness of rate.
2. Negotiate all major leases — a major lease is any lease with an annual
rental of $10,000 or more.
3. Negotiate metropolitan area leases regardless of rental amounts except
as exempted below.
Other Agencies
The following agencies are authorized to negotiate all their own leases
subject to the approval of the Department of General Services :
1. Department of Motor Vehicles.
2. Department of California Highway Patrol.
3. Department of Employment.
Specific authority for other agencies to negotiate their own leases will be
made at the time the space requirement report, Form 9, is received. This
determination will be based upon the availability of qualified agency leasing
staff and the estimated annual rental of the lease.
See Section 1291 for other specific exemptions.
LEASE REQUIREMENTS AND CONDITIONS 1385
Lease Term 1385.1
Lease term is the period of occupancy of the premises from the initial
date to the last day of agreed occupancy.
When a lessor agrees to construct a building according to state plans and
specifications or perform major renovations in an existing building, state
policy permits a lease term of 10 years, cancellable by the state any time
after the fifth year. Leases which require new construction so located that
the building cannot be used for usual commercial purposes may be written
for 15 year term, cancellable by the state any time after the 10th year.
Where minor alterations are proposed on any property or where adequate
facilities to meet the needs of an agency are at a premium, a noncancellable
lease term for as long as five years is permissible.
When agency needs indicate probable additional space requirements be-
fore five years and the lease contains an option to hire such additional space
it is permissible to negotiate these leases for firm terms not exceeding five
years.
Terms in excess of the above must be fully justified to the Department of
General Services.
Options for Additional Term or Space 1385.2
In lieu of including options to extend the term, state policy is to provide
for a longer term and include a right to cancel the lease after a specified
term. (See Section 1385.1.)
STATE ADMINISTRATIVE MANUAL
PROCUREMENT OF PHYSICAL FACILITIES
A longer term with cancellation rights offers the following benefits :
1. Allows continued occupancy when expected expansion does not ma-
terialize.
2. Facilitates cancelling leases after other lease arrangements have been
made.
3. Provides flexibility in cancelling or renegotiating after the firm term
if the market has decreased below the rental provided in the lease.
4. Enables lessors to obtain better financing although the lease is cancel-
lable at the end of a specified period.
Options for additional space for agencies with a history of predictable
expansion of space requirements are encouraged. This is also applicable to
master leases.
Janitorial Services 1385.3
Leases will require the lessor to furnish janitorial services.
246 ORGANIZATION OP THE EXECUTIVE BRANCH
1385.4
' Lease! will normally require the lessor to pay all utilities except tele-
phone Any provision which requires the state to pay utilities in a privately
owned building, unless separate meters are used for the state, must be fully
justified on the Form 9. An estimation of cost must be included.
Fair Employment Practices Clause 1385.5
A fair employment practices clause is included in all state leases where
the state is the tenant.
Hold Harmless Clause 1385.6
A "hold harmless" clause in favor of the lessor in any state lease or
agreement is not permitted.
Prevailing Wage Clause # 1385.7
An approved prevailing wage clause will be included in all leases where
the lessor constructs a new building or performs alterations, estimated to
cost $10,000 or more, in an existing building.
Escalation Clause 1385.8
The policy of the Department of General Services is not to permit escala-
tion clauses in leases during the firm term of the lease. In guaranteeing
reimbursement for taxes or services and utilities, the state is relieving
property owners of increased costs which are part of the normal operation
of business and should be anticipated in establishing rental levels.
Subsequent Expenses for Alterations 1385.9
After a lease has been executed or approved by the Department of Gen-
eral Services and initial alterations and improvements have been provided
for, no additional expenses for alterations or improvements to the premises
will be allowed unless justified on the basis of absolute and urgent necessity.
Overlap in Rental 1385.K
In determining the effective date of leases for facilities which will replace
existing leased facilities, sufficient overlap will be provided between the
termination date of the existing lease and the effective date of the new
lease to allow time for moving. No additional overlaps will be permitted.
Terminations 1385.1!
Agencies will notify facilities planning, Department of General Services,
at least 60 days prior to the expiration of a lease or time specified for ex-
ercising an option as to their intention to vacate the premises or to con-
tinue the occupancy on a month-to-month or other basis.
Unless it is otherwise provided in the lease, the lessor legally is entitled
to receive notice of termination at least 30 days prior to the date when such
termination shall become effective in order to terminate a month-to-month
tenancy. The Department of General Services will serve notice of termina-
tion, upon request of agencies, to lessors of premises leased by the Depart-
ment of General Services.
Renewal 1385.1:
An officer designated by the agency occupying premises under leases con-
taining renewal options shall notify Facilities Planning, Department of
General Services, of intention to exercise the option at least 60 days
prior to the date the option must be exercised. Failure to notify the
Department of General Services may result either in losing the option or
in unneccessary extra cost to the state if the rental is increased.
NEW CONSTRUCTION UNDER LEASING AUTHORITY 1386
A lease involving new construction by the lessor will be authorized only
when adequate space cannot be obtained in existing facilities at a reason-
able cost to the state. When new construction is approved, one of the
following methods will be used for site selection:
a. First choice — Assignable option — Secure an assignable option on an
acceptable site on a form approved by General Services. This tech-
nique allows all proposers to make proposals on one site and re-
moves land cost as a competitive factor.
b. Second choice — Site proposal — Prospective developers are invited to
submit specific sites for consideration. Each of these sites is inspected
for acceptability. Persons in control of the accepted sites are then
invited to submit lease proposals.
ORGANIZATION OF THE EXECUTIVE BRANCH 147
c. Third choice — Lease proposal — Prospective lessors are invited to sub-
mit lease proposals on any sites within a defined geographic:! 1 area.
The agency must submit reasons for using any technique other than the
assignable option.
Procedures — Assignable Option Method 1386.1
Any agency negotiating a lease under the Assignable Option method will
follow the procedures outlined below :
1. Define acceptable geographic area and determine minimum site re-
quirements.
2. Select the desired site considering relative cost and location.
3. Appraise the selected site to determine that the asking price is rea-
sonable. This appraisal may be brief, but must be supported by some
indication of market value such as comparable sales in the area.
The appraisal can show a "range of market value."
If the asking price exceeds the "range of market value" and the seller
refuses to lower the price, the site must be rejected.
4. Make an economic analysis of probable rent to determine if the proj-
ect is feasible.
5. Obtain signed assignable option from owner using the Department of
General Services' standard option form. A payment of $10 for an
assignable option is the current policy. The option period should be
sufficient to give the successful proposer 30 days to exercise the option
after award.
6. Obtain preliminary title reports and analyze to make sure there are
no encumbrances which might hinder the state's use of the property.
7. Prepare "proposer's package" to include:
a. Preliminary plans and specifications.
b. Proposal form.
c. Sample lease.
d. Transmittal letter outlining project terms and indicating assign-
able option conditions.
8. Advertise for lease proposals in local newspapers. Where project size
warrants, advertisements should be placed in large metropolitan pa-
pers and newspapers of statewide circulation, such as the Wall Street
Journal. "Proposer's packages" should be sent to all who show inter-
est and to any parties who have previously indicated an interest. All
requests for lease proposals shall specify a deadline, after which no
further proposals will be accepted. Ample time should be allowed for
prospective proposers to prepare well-considered proposals.
9. Offers should be opened at a previously announced time and place so
that all interested parties may attend.
10. Offers should be analyzed and compared with the previously prepared
economic analysis. If the low offer is within the "acceptable rental
range" and acceptable in other respects, the agency should recommend
that the Department of General Services accept the proposal and
notify the proposer of this recommendation. See Section 1387 for
general sealed proposal instructions.
11. Prepare lease documents and have successful proposer sign lease. For-
ward lease to General Services for approval or execution.
Procedures — Site Proposal Method 1386.2
Any agency negotiating a lease under the site proposal method shall
follow the procedures outlined below :
1. Define acceptable geographic area and determine minimum site re-
quirements.
2. Advertise for site proposals in local newspapers. Mail brochure to all
who show interest and to any parties who have previously indicated
an interest. Brochure should contain all requirements and should
specify a deadline after which no further proposals will be accepted.
Ample time should be given to allow as many proposers as possible
to submit site proposals.
3. Inspect and evaluate all proposed sites. Select acceptable sites. Notify
all parties who submitted sites of approval or rejection.
ORGANIZATION OF THE EXECUTIVE BRANCH
!. Make an economic analysis of probable rent to determine if the
project is feasible.
5. Send "propoeer'a package" to include :
a. Preliminary plans and specifications.
b. Proposal form.
c. Sample lease.
d. Transmittal letter outlining project terms.
(5. Follow procedure for assignable option method, Section 1386.1 begin-
ning at Step 9.
Procedures — Lease Proposal Method 1386.3
Any agency negotiating a lease under the lease proposal method shall
follow the procedures outlined below:
1. Define acceptable geographic area and determine minimum site re-
quirements.
2. Prepare plans and specifications.
3. Make an economic analysis of probable rent to determine if the
project is feasible.
4. Prepare "proposer's package" to include :
a. Plans and specifications.
b. Proposal form.
c. Sample lease.
d. Transmittal letter outlining project terms.
5. Follow procedure for assignable option method, Section 1386.1, begin-
ning at Step 8.
SOLICITATION OF SEALED PROPOSALS 1387
To assure maximum response by prospective lessors on space needs re-
quiring new construction, newspaper advertising and other notices to inter-
ested individuals and groups shall be made requesting sealed proposals. All
notifications shall specify a deadline, after which no further proposals will
be accepted. Ample time should be allowed for prospective proposers to
prepare well-considered proposals.
All details, terms, and specifications should be carefully considered before
proposals are solicited. A fair market rental figure for the proposed con-
struction shall be developed prior to proposal opening.
If there are material changes in the terms or specifications, all proposals
should be rejected and new proposals solicited with opportunity for all
proposers to submit new proposals.
No proposer shall be given preferential treatment or privileged informa-
tion. If low proposal is within acceptable range of the estimated fair
market rental and acceptable in other respects, it should be accepted. All
proposers will be given the same opportunity to lower their proposals when
no proposal is within acceptable range of the estimated fair market rental.
All proposers shall be required to submit proof of their financial ability
to perform. No contract shall be awarded until the agency and General
Services are satisfied that the proposer can perform.
The successful and unsuccessful proposers shall be so notified in writing.
When agencies are authorized to solicit proposals, they shall submit to
facilities planning a list of all prospective proposers notified, copies of any
advertising, and copies of all proposals received.
DISQUALIFICATION OF PROPOSERS 1388
A proposer will be disqualified when :
1. He is unable to submit proof of his financial ability to perform or
provide a performance bond.
2. After proposal opening, he is unable or unwilling to perform on condi-
tions and rates specified and agreed.
ZONING AND PROPERTY CONTROL 1389
When the state acquires an assignable option, the negotiating agency
will assume responsibility for assuring that the property is zoned for the
intended use.
When the site proposal or lease proposal methods are used, the proposer
must get a Letter from local zoning officials indicating that zoning for the
intended use will be approved on request. The proposer also must certify
that he has control of the property which he submits as a site.
ORGANIZATION OF THE EXECUTIVE BRANCH 149
USE OF A PRIVATE ARCHITECT 1390
Buildings to be constructed for prime occupancy by the state under a
lease agreement shall be designed by an architect registered to practice
under the Business and Professions Code of the State of California. The
architect's preliminary design will be subject to approval by a board con-
sisting of a representative from each of the following state agencies: the
tenant agency, the Office of Architecture and Construction, and facilities
planning service of General Services.
The architect shall also prepare the instruments of service such as
drawings and specifications, and supervise the construction.
STATE ADMINISTRATIVE MANUAL
PROCUREMENT OF PHYSICAL FACILITIES
INSPECTIONS 1391
Facilities planning will assume responsibility for inspections of construc-
tion and improvements on leases which they negotiate when new con-
struction is required or alterations are estimated to cost $10,000 or more.
Tenant agencies are responsible for inspecting and assuring that alterations
costing less than $10,000 are performed according to specifications.
When an agency conducts negotiations, they are responsible for inspec-
tions.
Any agency responsible for inspections must certify to the Department
of General Services that the construction or alterations have been per-
formed in accordance with specifications.
LEASING PROCEDURES 1392
Request for Space 1392.1
Any agency requiring space will notify the Department of General Serv-
ices in writing on space requirement report, Form 9.
Upon approval of the Form 9 by the Department of Finance and the
Department of General Services, facilities planning service will determine
and notify the agency whether (1) facilities planning will conduct negotia-
tions for the required space or (2) authorize the agency to locate accept-
able space.
Negotiations for Space by Agency 1392.2
Agency negotiations for space may be conducted only after the facilities
planning service has indicated this authority on an approved Form 9.
When the agency has located space which meets their requirements and
1. conditions in proposed lease are the same as authorized in the Form 9
(terms, cancellations rights, area, and type of space),
2. proposed effective date will not overlap term of existing lease except
to provide sufficient time for moving purposes,
3. proposed lease is the most favorable to the state,
4. quality of proposed space is consistent with need and meets quality
standards of state,
5. value of parking is comparable to value of similar parking facilities in
the area, and
6. net rate per square foot is reasonable,
they shall prepare a negotiations summary report, Form 6, summarizing
terms and conditions of proposed lease, quality of proposed space, and solici-
tation and advertising efforts. This report will be attached to the lease
agreement and included in the facilities planning lease file.
If any one of the following three conditions exists :
1. the rental exceeds 10 percent above the amount approved in the
Form 9,
2. the area is more than 10 percent above the area approved in the
Form 9, or
3. the noncancellable term is greater than that on the Form 9,
the agency must forward the lease negotiations report, Form 6, to facilities
planning for obtaining approval from the Department of Finance prior to
preparation of the lease agreement.
150
ORGANIZATION OF THE EXECUTIVE BRANCH
Preparation of the Lease Document 1392.3
Department of General Services' approval of the Form 9 authorizes the
agency to prepare a standard form for leases, Form 1. Agencies should
inform prospective lessors that no lease is valid unless executed or ap-
proved by the Department of General Services.
After the agency has prepared the Form 1 and obtained the lessor's
signature, it should be submitted to the Department of General Services
for final review and approval or execution.
Procedure for Space Procurement, General Services Negotiated 1392.4
General Services —
Facilities Planning
Agency
General Services —
Facilities Planning
Agency
Finance
Legislature
BUDGET PREPARATION
1. Initiates annual rental schedule report for each
agency listing current rental obligations of the
agency for the current budget year, rental obliga-
tions which expire during the current budget
year, and pending space requirement reports,
Form 9, in two copies. Retains one copy and for-
wards the second copy to agency.
2. a. Reviews and corrects the annual rental sched-
ule report indicating changes anticipated,
b. Returns updated report to facilities planning,
General Services, for review.
3. a. Reviews report for technical adequacy, amount
of space proposed, and cost per square foot,
b. Approves report and returns to agency for
inclusion in budget.
4. Includes "Annual Rental Schedule Report" in
agency budget and forwards to Department of
Finance.
5. a. Reviews agency annual rental schedule report
for compliance with fiscal and budgetary poli-
cies,
b. Includes report in Governor's Budget.
6. Considers agency rental schedule report as a part
of the agency budget.
SPACE REQUIREMENT NOTIFICATION
Agency 7. a. Prepares space requirement report, Form 9,
in quadruplicate. Retains one copy and for-
wards the original and two copies to General
Services, facilities planning.
Note : It is the responsibility of the initiator
to prepare any sketches necessary to intelli-
gently describe the layout desired and to in-
clude these sketches with the Form 9. If more
than a sketch is needed, a request for plans
should be made a part of the space require-
ment report.
b. Forwards space requirement report, Form 9,
to General Services, facilities planning.
8. a. Reviews agency request for space.
b. Determines whether the Department of Gen-
eral Services or the agency will negotiate the
lease and so notifies the agency on a copy of
the Form 9.
C Obtains Department of Finance approval when
necessary.
LEASE NEGOTIATION— GENERAL SERVICES NEGOTIATED
Lease Negotiator 9. a. Performs all work required for handling lease
transactions including requesting Office of Ar-
chitecture and Construction to prepare any re-
quired plans and specifications.
General Services —
Facilities Planning
ORGANIZATION OF THE EXECUTIVE BRANCH 151
b. Obtains lessor's approval of proposed terms.
c. Prepares lease negotiation summary report,
Form 6, in triplicate.
d. Signs the negotiations summary statement
portion of the Form 6 and forwards the origi-
nal and one copy to the requesting agency for
their approval of proposed terms.
Agency 10. a. Reviews and approves or rejects lease terms.
b. If approved, returns original Form 6 to Gen-
eral Services, facilities planning. Retains copy
for encumbrance of funds.
Note : The copy retained for encumbrance
must be forwarded to facilities planning prior
to the time the facilities planning analyst
recommends approval of the lease. The origi-
nal Form 6 should not be retained by the
agency longer than 10 working days.
LEASE AGREEMENT
General Services — 11. a. Prepares lease agreement in quintuplicate.
Facilities Planning Forwards original and four copies to the lessor.
Lessor 12. a. Reviews, approves, and signs all copies.
b. Retains one copy and returns the original
and three copies to facilities planning.
General Services — 13. a. Approves lease.
Facilities Planning b. Notifies agency, Controller, and lessor of ap-
proval by distribution of signed copies.
Procedure for Space Procurement — Agency Negotiated 1392.5
See Section 1392.4 for budget preparation and space requirement notifi-
cation (Steps 1 through 8).
LEASE NEGOTIATION— AGENCY NEGOTIATED
Agency 9. a. Performs all work required for handling lease
transactions including requesting Office of Ar-
chitecture and Construction to prepare any
required plans and specifications.
b. Obtains lessor's approval of the proposed
terms.
c. Prepares lease negotiation summary report,
Form 6, in duplicate.
d. Indicates approval of proposed terms by sign-
ing the negotiations summary statement por-
tion of the Form 6.
Agency (official) 10. a. Reviews and approves or rejects lease terms.
b. If approved, authorizes preparation of lease
agreement and encumbrance of funds.
LEASE AGREEMENT
Agency 11. Prepares lease agreements in quintuplicate. For-
wards original and four copies to the lessor.
Lessor 12. a. Reviews, approves, and signs all copies.
b. Retains one copy and returns the original and
three copies to the agency.
Agency 13. Prepares lease transmittal, Form 9036, attaches
to lease documents along with the lease negotia-
tion summary report, Form 6, and forwards to
the General Services facilities planning for ap-
proval and consummation.
General Services — 14. a. Approves lease.
Facilities Planning b. Notifies agency, Controller, and lessor of ap-
proval by distribution of signed copies.
APPENDIX C
NEWSPAPER SERIES
ORGANIZATION OF THE EXECUTIVE BRANCH
155
The following is reprinted from the San Jose Mercury of
Monday, January 23, 1967
A MERCURY INVESTIGATION
'Super Service' GSD
Plagued With Abuses
By LOU CANNON
Mercury Sacramento Bureau
(First of a Series)
SACRAMENTO— The new Reagan ad-
ministration is about to launch a major
reform in a "super service" department
which was formed to foster efficiency and
economy in state government, but has
run aground on the shoals of duplication,
waste and rising costs.
With the creation of the Department
of General Services (GSD) three years
ago, a "new era" in the management of
the state's business was begun, contends
the department's glowing progress report.
A Mercury investigation into the GSD
found that this "new era" includes ques-
tionable leasing activities, bidding irreg-
ularities and recurrent complaints of
inefficiency.
Official records and a series of inter-
views with people both in and out of
GSD gave this picture of the department
that was formed to centralize state serv-
ices:
• An Auditor-General's report, com-
pleted late in 1965 but never made public,
discovered seven cases of questionable
building lease activity in the GSD and
its predecessor service in the Department
of Finance.
• Two of the questionable leases cited
by the Auditor-General were negotiated
with a Sacramento businessman who sub-
sequently served as director of a land
development firm. Another director and
stockholder of the same firm was GSD Di-
rector Robert L. Harkness, whose status
under the new Reagan administration
is currently clouded. Reports within the
past week indicate that he is about to be
relieved of his post as departmental direc-
tor and shunted into a less sensitive job
compatible with his civil service status in
the Department of Finance.
• GSD spending increased by $8.2 mil-
lion from its first year in 1963-64 to
$57.6 million three years later, an in-
crease of nearly 17 percent. Department
employment climbed from 4,150 to 4,473.
• The GSD-managed State Fair con-
tinues to lose money. The 1965-66 fiscal
year net loss was $256,641 despite tax
revenues of $474,014 received from horse-
racing.
• State parking, centralized when the
GSD was born, has been divided among
four offices. The man who headed the cen-
tralized parking charged in a successful
court case that he was fired because he
"made too many faces red."
• Unauthorized use of state cars is
widespread. "Anybody can get a car,"
complained Sen. (then Assemblyman)
Tom Carrell (D-San Fernando) at a
hearing last year.
• An investigation by the Little Hoover
Commission made public in the San Jose
Mercury disclosed a near-monopoly in
bidding for California Highway Patrol
cars and specifications that discouraged
competitive bidding. The GSD's office of
procurement conducted the bidding, which
is still under investigation by the Attor-
ney General's office.
• A private party, Viertel's Automotive
Service, struck it rich at state expense
by renting land from the Division of
Highways under a Los Angeles freeway.
A Little Hoover Commission report
showed that Viertel's made $43,935 dur-
ing the past fiscal year for towing and
storing cars confiscated by the state in
narcotics cases on the state-owned land,
which was rented for only $4,680 a year.
• Janitorial service costs the GSD 40
percent more per square foot than it
does the federal General Services Admin-
istration, Legislative Analyst A. Alan
Post found. Post, who unsuccessfully
urged a budget cut last year, is now push-
ing for adoption of federal standards and
a savings of $500,000.
• Reports by the Department of Fi-
nance, the Legislative Analyst and the
State Personnel Board have revealed
costly absenteeism at the state printing
plant, well above the normal rate for the
industry.
"There undeniably were abuses of
sick leave at the printing plant," con-
cedes deputy director Stanley B.
Fowler. "But we think we have cor-
rected them."
156
ORGANIZATION OF THE EXECUTIVE BRANCH
Harkness and Fowler contend that the
GSD has responded favorably to legisla-
tive criticisms of the department. Further
says Harkness, some GSD critics have
magnified the department's supposed
shortcomings "for their own purposes."
The Mercury investigation found strong
points as well as weak ones in the state's
super service department. Auto inspec-
tion procedures have been improved so
that the state now scraps cars when it
is no longer profitable to repair them,
rather than at an automatic mileage
point.
The same Auditor-General's report
which raked GSD leasing policies over
the coals found property acquisition to be
"generally satisfactory."
The state printing plant, despite its
absenteeism problems, has made signifi-
cant savings in the printing of textbooks.
And the implications of illegal con-
flict-of-interest against Harkness and
assistant director Arthur Collins arising
from the stockholder interests they
shared with Sacramento developer
Charles E. (Duke) Brown remain
totally unproven.
The GSD won a major victory when
an appeals court overturned a $123,000
verdict against the state for the depart-
ment's award of a leasing contract to
Brown.
But the Mercury also found that the
GSD, set up to streamline government,
has instead contributed to state govern-
ment's ever-rising cost. Charged with both
service and control, the GSD has stressed
the former and downpedaled the latter.
The results include a rising tide of
legislative resentment.
The Legislature, acting on a recom-
mendation of the Little Hoover Commis-
sion, created the GSD in 1963 out of the
Department of Finance.
Hale Champion, Director of Finance
under ex-Gov. Edmund G. Brown, backed
the move which was intended to allow the
Finance Department to concentrate on
policy and control matters and free the
<;si> for day-to-day operations of govern-
ment.
"If you become deeply enmeshed in
operations, you can't concentrate on
policy," Champion said. "The Depart-
ment of Finance is a lot better opera-
tion since it's no longer involved in the
things GSD has to do."
These things include 20 separate serv-
ices, among them state communications
transportation, property acquisition (ex-
cept highways) leasing, building stand-
ards, office and administrative services
purchasing, printing, "systems analysis "
hearings officers for public agencies, state
insurance, merit awards and the State
Fair.
The GSD took over the Office of Archi-
tecture and Construction from the De-
partment of Public Works.
From the first the new super service
department engendered legislative sus-
picion, some of it inevitably reflecting the
traditional conflict between different
branches of government.
Exasperated by unproven claims of
savings, the Assembly Ways and
Means Committee imposed a percentage
slash on the GSD budget in 1965. But
the department budget soared again in
1966.
Harkness maintains that economies
effected by his department show up in
savings for the agencies involved, not the
GSD. But most of the agency budgets
have steadily risen, also.
After weathering the first gales of leg-
islative skepticism the GSD encountered
a more serious storm in 1964 with public
disclosure that Harkness served as a
member of the board of directors of
Northern California Developers, a firm
that had holdings near the since-developed
Capitol Mall.
Land developer Duke Brown, a fre-
quently successful competitor for state
business, later emerged as a director for
the firm.
Harkness owned 2,000 shares of the
stock, which was initially capitalized at
$10 a share. His deputy, Collins, owned
500 shares.
The GSD director purportedly acquired
his stock while holding a lesser position
in the Department of Finance. He denied
any conflict-of-interest at the time and
maintains the same position today, though
he is reluctant to discuss the issue.
His reluctance is not shared by Collins,
who has kept his stock. The assistant
GSD director showed the Mercury a list
of original shareholders, a list that in-
cluded the names of another former Fi-
nance Department aide, an employe of the
Mental Hygiene Department and a Dem-
ocratic Party official in Sacramento
County who since has been named a
Superior Court judge by former Gov.
Brown.
Also on the list were four individuals
and one investment firm that Collins said
have done business at one time or an-
other with the state.
Harkness traded his stock for land in
Sacramento. He said at the time the
issue erupted that he had stopped serv-
ing as a director 10 months before.
ORGANIZATION OF THE EXECUTIVE BRANCH
157
Both Gov. Brown and Champion
strongly defended their subordinate at the
time.
Recalling the incident, Champion says
Harkness "acted honorably and didn't do
anything wrong."
"With foresight Bob would have been
wise to get rid of the stock when he was
named director," Champion added. "But
no situation came up that confronted him
with a conflict."
At the time of disclosure, the Hark-
ness role in the land development com-
pany drew this comment from Assembly
Ways and Means Committee Chairman
Robert Crown (D- Alameda) : "There is
nothing illegal, but I do certainly feel it
is unethical."
Duke Brown to this day remains one
of the most influential Sacramento area
builders. When Gov. Ronald Reagan
set up recruiting headquarters on the
Capitol Mall less than a week after
election, Brown turned his plush quar-
ters in the IBM building there over to
the fledgling state chief executive.
A Reagan official called the action "a
semi-donation."
The state leases that resulted in the
conflict charges involved Duke Brown,
who was not included on the original
May 23, 1961, list of shareholders dis-
played by Collins. Brown built the Crim-
inal Investigation and Identification and
the Mental Hygiene buildings for the
state.
The CII building led to the initially-
successful suit against the GSD. Brown,
the second low bidder, had been awarded
the contract only a week before Collins
acquired his Northern California Devel-
opers stock.
Procedures in contracts for both the
CII and Mental Hygiene buildings were
criticized in the auditor-general's report.
To answer implications that he had not
actually purchased the stock, Collins pro-
duced financial records of other stock
sales plus a canceled check.
One of the stocks sold by Collins to
purchase the Northern California De-
velopers stock was the blue-chip Ford
Motor Co., currently selling at about
$46 a share on the New York Stock
Exchange. Northern California Devel-
opers stock has since slumped to as
low as $1 a share.
Collins, who said he bought the stock
against Harkness' advice because he
thought his boss "knew a good thing
when he saw it," says he intends to keep
his shares until the price goes up.
Asked why Harkness advised against
buying it, Collins says : "He knew I
didn't have too much money."
Ownership of a large amount of stock
in a company with holdings near the Capi-
tol might have constituted a conflict-of-
interest, Collins conceded in an inter-
view.
"But our share of the thing was
peanuts," Collins said. "We would
have had to be plain, damn fools to
try to enrich ourselves in that way."
Refusal to sign contracts with Brown
because of the businessman's interest in
Northern California Developers would
have "penalized the state," Collins said.
The auditor-general's report relates this
story :
The leasing unit of the Department of
Finance, now called Facilities Planning
Service in the GSD, received some 12
proposals for constructing the CII build-
ing. G. Keith Kenworthy submitted the
low bid of a $16,000 per month rental to
the state.
The state failed to obtain a perform-
ance bond from Kenworthy, who after a
disagreement with leasing unit officials
finally submitted satisfactory drawings for
the building on Jan. 25, 1961.
Brown wrote a letter to the leasing
unit on Feb. 24 stating that he was aware
the state was having trouble with Ken-
worthy and renewing his earlier offer of a
$17,000 rental.
At the end of March, Kenworthy had
not started construction and the leasing
unit under Collins declined him an
extension. Brown was awarded the con-
tract for $17,000 despite a lower offer
from another bidder of $16,500.
"The records do not indicate how the
proposals were solicited or whether a
deadline was specified," the report states.
Kenworthy sued in June and Brown
completed the building in September.
On Aug. 17, 1962, after negotiations,
the leasing unit canceled the five-year
lease with Brown and signed a 10 year
lease for $13,500 a month.
In 1962 Brown won the award to build
the Mental Hygiene Building in Sacra-
mento, which afterward was leased to the
state at a total rental of $1,680,000.
The auditor-general's report, in review-
ing the latter award, commented that the
state had specified a very limited area
for the building and had given bidders
only 12 days to obtain the necessary
details.
15S
ORGANIZATION OF THE EXECUTIVE BRANCH
"It is our opinion that there was not
adequate competition for the Depart-
ment of Mental Hygiene lease," the re-
port signed by Auditor-General William
II. Merrifield concluded.
To this day the state continues to lease
the Mental Hygiene Building from Brown.
But the CI I lease had an unusual sequel.
After a legislative committee found that
the sprinkler system in the CII building
was constructed so that water would pour
over criminal records automatically if a
fire occurred, the CII moved into other
quarters.
Shortly before the move, Brown sold
the building to Los Angeles buyers.
The news of the sprinkler system, re-
ported in the Mercury, was happily picked
by a columnist for the San Quentin
prison newspaper who asked the obvious
question :
"Anybody got a match?"
ORGANIZATION OF THE EXECUTIVE BRANCH
159
The following is reprinted from the San Jose Mercury of
Tuesday, January 24, 1967
The 'Disappearing' State Records
By LOU CANNON
Mercury Sacramento Bureau
(Second in a series on the costly path
of the state's "super service" agency —
the Department of General Services.)
SACRAMENTO— "One of our most
effective economy programs is paper man-
agement," contended former State Fi-
nance Director Hale Champion.
The program, better known to some
state officials as the records removal
policy, enables state agencies to remove
piles of useless records that would
otherwise clog state office space.
But the policy also has allowed state
agencies to destroy purchase order rec-
ords less than five years old and to throw
out some bid records after one year.
The Mercury encountered the policy
last year while investigating California
Highway Patrol bidding, monopolized for
seven of the last eight years by a single
Sacramento area bidder.
Though Department of General Serv-
ices (GSD) officials cooperated with the
Mercury investigation, records of CHP
car purchases before 1962 simply were
not available. E. J. Petersen, the state's
principal buyer, said they had been de-
stroyed.
Similar records are kept by most
businessmen at least seven years in
accordance with federal and state tax
laws.
The records removal policy, when vig-
orously pursued by an agency, makes it
impossible to discover the origin of a
questionable buying practice, for all prac-
tical purposes, most written records be-
fore 1962 ceased to exist.
Any possible use of this policy to con-
ceal or cover up improper practices is
compounded by the fact that the agency
itself determines how long records are re-
tained.
The GSD, set up to centralize state
government and improve its business
practices, has nominal control over rec-
ords removal but rarely exercises it.
Neither John Berke, who administered
the policy, nor Robert C. Woodall, the
analyst who actually reviews the records
destruction lists, can recall a single case
where an agency has been told to keep
records it wanted to destroy.
"Generally speaking, our problem is
the opposite," Woodall said. "They're try-
ing to keep the records beyond their use-
ful life."
Woodall said the records removal policy
conducted by the GSD's office of procure-
ment calls for purchase orders to remain
two years in the open file and three years
in the archives before they are destroyed.
Each type of bid document has a separate
schedule of its own, some as brief as one
year.
The policy was staunchly defended by
Champion, who was agency overseer of
the GSD and direct boss of department
director Robert L. Harkness.
"I'll always err on the side of throwing
out paper," Champion said.
However, the ex-finance director con-
ceded that the specific schedule adopted
by the Office of Procurement for purchase
orders and bid forms might be incorrect.
"You shouldn't set one standard for
business and another for government,"
Champion said.
Under questioning Berke also said he
thought purchase orders should be kept
longer. But he said he lacked specific
knowledge of any controls imposed by the
GSD.
The comments of Berke and Champion
at best illustrate a common problem in
the department set up to streamline and
centralize state government services.
The GSD is so big, so unwieldy and
so reluctant to exercise its control func-
tions that not even the officials in charge
seem aware of the effects of their own
policies.
The Mercury investigation into the
GSD, established as a super service de-
partment three years ago, also found
that few state purchases have ever been
reviewed by the GSD to see if monopoly
bidding or other restrictive practices
exist.
Competition and inspection of the files
by the bidders tends to prevent restrictive
purchasing practices, maintains Stanley
B. Fowler, chief deputy director of the
GSD in charge of purchasing.
Fowler said the GSD "prequalifies"
bidders by requiring them to file a
statement of their financial ability and
capability to perform. Qualified poten-
3 GO
ORGANIZATION OF THE EXECUTIVE BRANCH
tial bidders then receive all invitations
to bid on the product they supply.
The state deals primarily with manu-
facturers and wholesalers and, by and
... purchases at highly competitive
prices,*' warns a document for bidders
supplied by the Office of Procurement.
"Usually retailers have difficulty in com-
peting for state business."
The OHP ear bidding showed that the
-usually" statement has some important
exceptions. Disclosure by the Mercury
that a single Sacramento area Dodge
dealer had furnished all of the CHP cars
for seven of eight years, often without
competition, also cast doubt upon the
GSD belief that bidding practices will
remain fair and competitive without re-
view.
Changes in CHP car specifications
came about only after the Little Hoover
Commission invited representatives of
major automotive manufacturers to meet
with Harkness. The resultant competitive
bids saved $600,000 for the state, and put
the CHP into Oldsmobiles for the first
time in years.
Soon after the CHP bid opening,
Assemblyman Vincent Thomas (D-San
Pedro), chairman of the Joint Legis-
lative Audit Committee, has said he
would launch an inquiry into state
purchasing practices.
The Thomas committee received — but
did not publicly distribute — copies of an
auditor-general's report into GSD leas-
ing practices completed late last year. A
copy of that report obtained by the Mer-
cury shows sharp criticism by the audi-
tor-general of seven specific building
leases negotiated by the GSD or its pred-
ecessor unit in the Department of Fi-
nance.
In several cases the auditor-general
singled out difficulties in finding out what
happened from GSD files.
"Most of the files are inadequate;
they do not indicate investigations and
findings relative to the best spaces at
the lowest possible prices," the report
stated.
The report found that the GSD failed
to give all bidders equal opportunity on
an office building in Redding, had signed
a lease for a Department of Employment
building in Los Angeles that "may not
have been in the best interest of the
State," and had allowed the Board of
Equalization to abandon a lease on its
New York office in favor of plusher quar-
ters without adequate justification.
In the Los Angeles case the report dis-
covered that the department had acted
despite the advice of an employe in its
own leasing unit who suggested two
other less-costly locations.
"I personally don't want to approve
it — think it smells," the report quoted
the employe as saying. His approval was
never obtained.
In still another Los Angeles con-
tract, the Public Works Building, the
state "paid in excess of $40,000 for
unoccupied space," the report said.
The report concluded with 11 specific
recommendations, eight of them intended
to improve the procedures on sealed bids.
One of the 11 points specified that "no
bidder be given preferential treatment or
privileged information."
Assistant GSD Director Arthur Col-
lins told the Mercury: "They never have
been given preferential treatment."
But GSD officials, including Collins,
admit that many of the auditor-general's
other criticisms are valid and contend
they have been met.
"I got the message in the auditor-gen-
eral's report," said Vaughn Miller, the
GSD's facilities planning chief. "We went
to work on it right away."
Miller said the report lagged behind
the GSD's awareness of its own leasing
faults, some of which he said were cor-
rected before the 16-page document was
published. On the other hand, the GSD
was not anxious to make the report pub-
lic.
"We certainly didn't rush to the
newsstands with copies," Miller said.
Harkness said the GSD took the criti-
cisms as "a bible" even though he "hesi-
tated to say that all of them were true."
Instead of sampling GSD contracts,
Harkness said, the auditor-general picked
out certain specific ones.
"They went to those and they just
analyzed hell and breakfast out of those,"
Harkness said.
During the course of a three-hour in-
terview Harkness showed a reluctance to
discuss only two issues. One concerned
leases negotiated by the state with
Charles E. (Duke) Brown, a leading Sac-
ramento builder who became a director of
Northern California Developers, Inc., a
firm that owned property near the
Capitol Mall.
Harkness also was a stockholder and
once a director in the same company, a
disclosure that aroused sharp criticism in
the Legislature late in 1964. The GSD
director, who bought his stock before he
became head of the state's property
acquisition department, won strong back-
ing from Champion and former Gov. Ed-
mund G. Brown.
ORGANIZATION OF THE EXECUTIVE BRANCH
161
Subsequently, Harkness traded his
stock for some Sacramento land. He
considers the issue closed, and he
doesn't want to bring it up again.
The only other issue that Harkness de-
clined to discuss in detail is the con-
troversial case of the state parking
facilities analyst, laid off by the GSD for
"lack of work" even though the depart-
ment has added more than 300 employes
in three years.
The dismissed parking specialist, A.
Lynn Stewart, charged that the GSD had
arranged an administrative survey to fire
him because he knew too much.
Representing himself in a Superior
Court case, the legally-inexperienced
Stewart defeated the considerable legal
resources of the Department of General
Services.
162
ORGANIZATION OF THE EXECUTIVE BRANCH
The following was reprinted from the San Jose Mercury on
Wednesday, January 25, 1967
52
Wed., Jan. 25, 1967 San Jose Mercury
Stewart Firing A Thorn In GSD's Toe
By LOU CANNON
Mercury Sacramento Bureau
(Third in a series on the costly three-
year path of the state's "super service
agency" — the Department of General
Services. Tuesday, the agency's director,
Robert Harkness, teas replaced by Gen.
Andrew Lolli. Story, Page 2.)
SACRAMENTO— When the fledgling
Department of General Services (GSD)
winged out of the Department of Finance
nest in 1963 with 4,150 employes and
a $49.3 million budget, anxious sentinels
on the ground floor of state government
hoped for a smooth flight.
But expectations that the GSD, an
agency charged with the streamlining
of many state government services,
would make it on its own were sharply
dashed only a few months after the
department first tried its wings.
Surprisingly, the GSD's downfall came
because it decentralized one of the few
state services that were already operat-
ing on a coordinated basis. The issue,
one that would cause gurgles of sympa-
thy from many city managers and county
administrators, was parking.
A. Lynn Stewart, an experienced and
highly-recommended traffic engineer, went
to work for the State of California on
March 31, 1961 as its sole parking facili-
ties analyst.
When the GSD was born in October
1963 it acquired both Stewart and his
parking analyst position. Neither sur-
vived a year in the fast growing depart-
ment, but Stewart's firing for "lack of
work" became a touch-stone for the agen-
cy specifically charged with economizing
shite government services.
Today an official veil of secrecy shrouds
the ttrange case of A. Lynn Stewart.
Despite growing complaints about cost-
ly state parking lot developments in the
LOO-block capitol plan area and else-
where, neither former GSD Director Rob-
ert L. Darkness nor Assistant Director
Arthur Collins would discuss the Stewart
case or the question of centralized park-
ing.
Nor would any of Stewart's several
friends in state government talk about
the case on the record. The ones that
talked at all insisted on doing so out-
side the confines of GSD buildings, a
precaution that they insisted would
prevent electronic eavesdropping.
(Harkness says he would never permit
such devices to be used.)
The one exception to the no-talk rule
is Stewart himself. Since his layoff he
has talked persistently, both on and off
the record. To the consternation of the
GSD bureaucracy, he did his most effec-
tive "talking" in court.
The story Stewart tells in a volumi-
nous Personnel Board and Superior
Court record little resembles the picture
of non-political efficiency painted by
Harkness in his testimony before vari-
ous legislative committees.
Stewart's tale, largely supported by
state records and interviews with GSD
employes, is of a bureaucracy rife with
professional jealousy and careful of step-
ping on the wrong toes. By everyone's
admission, including Stewart's, he was
not careful.
When Stewart arranged to have a
state parking lot built near the State
Capitol for less than $10,000, GSD
yanked the project out of his hands
and paid $23,000 to have it built un-
der the jurisdiction of the State Of-
fice of Architecture and Construction.
Stewart complained.
The GSD's reaction to the complaint
was to reassign Stewart himself to the
state architectural office. There, he sat
for several weeks without being given
any work to do.
The record shows that Stewart played
a role in obtaining better parking facili-
ties for government employes, as the
state's representative on the Inter-Gov-
ernmental Civic Center Parking Commit-
tee for Los Angeles. He was removed
by Harkness three months after GSD
was formed and succeeded on the com-
mittee by Collins.
And the record presents Stewart's con-
tention, never refuted by GSD, that he
was laid off because the department or-
dered an administrative survey and came
ORGANIZATION OP THE EXECUTIVE BRANCH
163
in with "predetermined recommendations"
abolishing Stewart's job.
As Stewart tells it in the Person-
nel Board report, the man who made
the study, administrative analyst Tom
Richards, made the mistake of first
preparing a report that failed to call
for elimination of the parking special-
ist's job.
Deputy Director John Stanford refused
to accept the study and ordered Rich-
ards to make another report, Stewart
testified.
"I just want to tell you that this idea
is to abolish your job and I think you
ought to start looking," Stewart said
Richards told him when he returned.
Stewart asked why and Richards pur-
portedly replied :
"You have made too many faces red."
Richards was never called to testify
by the GSD. Stewart lost his case before
the Personnel Board but he won it, with-
out an attorney, in Superior Court.
Ironically, the judge who issued the
ruling in Sacramento Superior Court was
Charles W. Johnson, the former depart-
mental secretary of former Gov. Edmund
G. Brown. Judge Johnson ruled that the
department had failed to show that Stew-
art had been fired for lack of work.
Today, more than two years after
Stewart's firing, a Mercury investigation
found :
• Parking responsibility fragmented
among four GSD offices — facilities plan-
ning, architecture, automotive and main-
tenance.
• Parking lot developments in the
capitol plan area that do not amortize
their costs, an apparent violation of leg-
islative directive.
• Growing waiting lists of employes
seeking parking spaces.
• Uncollected parking fee delinquencies
from 189 legislative employes totaling
$1,797. Non-legislative employes have
their parking fees taken in payroll deduc-
tions.
Judge Johnson's decision in Stewart's
favor has been appealed by the GSD, and
the District Court of Appeal is scheduled
to rule Feb. 16. Both Harkness and Col-
lins use this as an excuse for not com-
menting on the department's failure to
contralize the parking operation.
"We would be commenting in effect
on the court case if we did," contends
Collins.
After his "layoff" Stewart took a cut
in pay to work in the Division of High-
ways, then found a job in his traffic spe-
cialist's field at higher pay outside state
government.
A friend still working for the state
remembers him as a "highly efficient per-
son who rode roughshod over people who
had been active in state government too
long — they got him and they got him
beautifully."
Stewart issued a parting blast on April
16, 1965, in a lengthy memo to Collins,
in which he charged that the entire state-
wide parking program was "disorganized,
confused (and) irresponsible."
The memo remains unanswered. So,
also, do the costly questions posed by
the super service agency's handling of
state parking problems.
(Next— Reforming the GSD)
164
ORGANIZATION OF THE EXECUTIVE BRANCH
The following is reprinted from the San Jose Mercury of
Thursday, January 26, 1967
New GSD Chief Faces A Complex Task
By LOU CANNON
Mercury Sacramento Bureau
Last in a series.
SACRAMENTO— Some of the prob-
lems facing former Maj. Gen. Andrew
K. Lolli, the $23,500-a-year boss of the
state's sprawling General Service Depart-
ment (GSD) may give him some second
thoughts about the glories of civilian life.
Lolli, the retired commanding general
of the western North American Defense
Command, takes control of the state's
embattled "super service" department on
Feb. 1. Pie replaces Robert L. (Bob)
Harkness, the only director GSD has had
since its creation in 1963.
One of the problems facing Lolli was
illustrated by the complicated arrange-
ment used by the Ronald Reagan admin-
istration to remove Harkness from the
directorship.
Bumped Upstairs
The discoursive Harkness, a sometime
target of legislative criticism, is a Repub-
lican, appointed as a department head by
former Democratic Gov. Edmund G.
Brown, and also a career civil servant
with more than 38 years experience.
The Reagan administration wanted a
change of command at GSD, but in order
to avoid a "bumping" arrangement that
would have moved key Finance Dept. per-
sonnel from their posts, a new job of
assistant finance director was created for
Harkness.
It pays $24,336 a year and gives the
60-year-old Harkness, who started his ca-
reer as auditor for the Dept. of Mental
Hygiene in 1928, an $836 annual pay
boost.
Gov. Reagan's decision to spend some
money on a new job, in hope of major
savings in GSD, perhaps shows best of all
the difficulty facing the economy-minded
administration in translating its budget-
cutting theories into practice.
Despite Brown's pointing with pride
and Reagan's viewing with alarm in last
fall's election campaign, virtually all of
the career public servants except Hark-
ness remains in charge of the GSD's day-
to-day decisions under both administra-
tions.
Fowler Shifted
One such is Deputy Director Stanley
B. Fowler, who this week dropped down
a notch into an assistant directorship,
bumping Ray Long back into his former
civil service post in the Department of
Agriculture. The Reagan administration
is seeking a deputy director to replace
Fowler.
Fowler, perhaps the most knowledge-
able civil servant remaining in GSD, said
he was "not surprised" by the appoint-
ment of a retired general.
"I wouldn't have been surprised if they
named a doctor," Fowler said. "I served
under 15 directors in 18 years in the
Dept. of Employment, and I don't think
the background matters — it's the man."
Civil service prevents any mass reduc-
tions in state employment, as the Reagan
administration learned at an early date.
The system's obvious long-suit is con-
tinuity in government. Employees are on
the whole so well-insulated from "spoils
system" pressures that even Sacramento
County, with its legion of state employees,
gave Reagan a majority over incumbent
Gov. Brown.
Change Limited
On the other hand, the system has the
defects of its civil service virtues. Incom-
ing governors, including Reagan, are
sharply limited in the changes they can
make to carry out their programs.
Since savings cannot be made by any
appreciable personnel reduction, they will
have to come elsewhere if the Reagan ad-
ministration is to carry out its budget-
cut pledge. A search for savings is al-
most certain to include the controversial
areas of leasing, building and parking.
And the GSD, carved out of the Dept.
of Finance by Gov. Brown's administra-
tion in 1963, will have to learn to say
"no" to some of the requests of the many
state departments that it serves.
Avowed purpose of the department's
creation was to allow the Finance Dept.
to concentrate on the state's fiscal prob-
lems while freeing GSD to streamline and
centralize.
The streamlining, however, remains in
question. A Mercury investigation found
ORGANIZATION OF THE EXECUTIVE BRANCH
165
recurrent complaints of waste, duplica-
tion and questionable practices, particu-
larly in leasing activities.
Much Criticism
The legislative analyst fills pages of
his annual report with criticisms of the
GSD, and the (Little Hoover) Commis-
sion on Organization and Economy has
exposed deficiencies in bidding practices
and service contracts. Various legislative
leaders, some of them staunch supporters
of former Gov. Brown, took repeated pot
shots at Harkness and the GSD.
Part of the problem stemmed from the
inevitable legislative distrust for veteran
bureaucrats.
Part arose from the natural conflicts
that legislators get into with the execu-
tive department over projects they want
for their area, a classic example is the
state office building planned for San Jose
years before the GSD was born but still
unbuilt and now the responsibility of
that department.
Part of the problem derived from the
conflict-of-interest implications ("the only
charges of that kind in 38 years," said
Harkness) that the ex-GSD director faced
in 1964 after disclosure that he owned
stock and served as director of a land
company with holdings adjacent to the
Capitol Mall.
GSA Different
And part of the problem, a small but
significant part, arose from what could
be called the philosophical direction of
GSD toward an agency providing many
excellent state services but little state
control. The philosophy is different in
degree if not in kind from the U. S. Gov-
erment Services Administration, a watch-
dog agency that has attempted to reduce
the costs and expose the economic foibles
of the vast federal bureaucracy.
Harkness' former boss, ex-Finance Di-
rector Hale Champion, strongly favored
the service philosophy of the state GSD
and was in some measure responsible for
it. As Champion saw it, control decisions
on governmental economy have to be left
up to individual agencies.
"I'd rather take some risks than have
government bound up with red tape,"
Champion contended. "The more you tie
the hands of the guy who deals with the
situation, the less relationship govern-
ment has to the people it serves."
Left unanswered is the question of
what department, if any, will attempt to
reduce costs of California's $4.6 billion-
a-year state government. The economy
function was originally a specific mission
of GSD, whose budget grew in three years
by $8.2 million to a total of $57.6 mil-
lion.
Millions Handled
GSD's own spending, however, is a
minor portion of the money it handles.
The department in one way or another
administers the expenditure of some $350
million annually and in 1965 conducted
property acquisitions totaling $90.8 mil-
lion alone.
Particularly sensitive is the office of
procurement, always a prime target of
suspicion for the form of preferential
bidding treatment. The controversial CHP
car specifications raised the question of
whether firms selling other products to
the state received preferential specifica-
tions.
Favoritism or not, the Little Hoover
Commission's review of bids have uncov-
ered several instances in which the GSD
appears to have made little effort to foster
competition. For instance, on last Aug.
30, the GSD purchased 468 Motorola mo-
bile radios for CHP cars at a cost of
$339,797 (less a $79,723 trade-in allow-
ance).
Only one bid was received and the com-
mission is inquiring to see what, if any-
thing, the GSD did to encourage bids
from other manufacturers.
The GSD itself has conceded that
bidding practices are not reviewed and
the department's records removal policy
makes it difficult to determine if prefer-
ential policies existed in the past.
Pride in Record
However, Harkness displayed unflag-
ging pride in the GSD record and dis-
missed many of the criticisms as un-
founded suspicions. He contended also
that growth of the GSD's own budget
provided a distorted picture because, he
said, department-induced economies show
up as savings for the agencies served by
GSD.
"We approached our problems before
they consumed us," Harkness said,
thumping the table to make his point
during the course of a lengthy interview.
As evidence that the GSD has not ig-
nored waste in government, Harkness
displayed a strongly worded memo crack-
ing down unauthorized use of state auto-
mobiles. He also hailed effectiveness of a
GSD order restricting unauthorized long-
distance telephone calls.
166
ORGANIZATION OF THE EXECUTIVE BRANCH
But on other issues such as the GSD-
nin state fair Harkuess remained essen-
tially unresponsive to criticism.
The fair has lost money every year un-
der GSD, showing a net loss of $256,641
in L966 despite tax revenues of $474,014
from horseracing. Ground was broken re-
cently for a gaudy new fair and exposi-
tion in northern Sacramento, a $33.7 mil-
lion package that Legislative Analyst A.
Alan Post says has been accepted "purely
on faith."
Views on Fair
Asked about the exposition, self-styled
"showcase of California," Harkness re-
sponded this way.
Q — The present fair loses money — is
the new fair going to lose money?
A — No. The new fair is programmed
and planned on a self-supporting basis.
Q — What would happen if it doesn't
break even? Is there any requirement or
restriction?
A — Well, from a psychological point of
view I'm not going to answer that because
we're so dedicated to it coming out I'm
not even going to think that it won't
come out. . . .
It was this type of response that led
to imposition of an uprecedented percent-
age cut in the GSD's budget in 1965.
The GSD, however, emerged virtually
unscathed in 1966. The Legislature ap-
proved the budget substantially as sub-
mitted without adopting most of Post's
suggested cuts.
Change in Air
The situation could change radically
this year. In the topsy-turvy world cf
State Capitol politics, Republican career
servant Harkness probably benefited from
a "don't rock the boat" attitude prevail-
ing among Democratic legislators in 1966.
The Democrats are not likely to be under
similar restraints in the current legisla-
tive session.
In the past many of Harkness' lead-
ing critics were Democrats, notably Ways
and Means Committee Chairman Robert
Crown of Alameda. Cracked Assembly-
man Alan Pattee (R-Salinas) during
hearings of the Assembly Government Or-
ganization Committee last year :
"Mr. Harkness, when you mention
Ways and Means you get kind of a
tremor in your voice."
Perhaps the most thorough attempt at
review of GSD came during the Govern-
ment Organization Committee hearings
headed by former Assemblyman Milton
Marks (R-San Francisco).
Among other things, the hearings dem-
onstrated the difficulty for the Legislature
in taking an overall look at the vast
GSD. Much of the hearing was con-
sumed by Harkness and his deputies go-
ing page by page through the depart-
ment's progress report.
Asked to comment on his investigations,
Marks issued a two-page statement up-
holding the principle of separate depart-
ments of finance and general services.
As a result of the separation, he said,
the functions of both departments were
receiving more attention.
Arguing Point
"It seems to me that this in itself is
one of the strongest arguing points for
the creation of a separate department
. . ." Marks said.
"This brings us to the second ques-
tion of whether the programs of the GSD
are being managed properly," Marks
added. "And I think this is what the
criticism and controversy surrounding
the department is all about."
Marks, who has since been named to
a San Francisco judgeship, said his com-
mittee's findings will be contained in a
report to the 1967 Legislature. The re-
port is certain to form the basis of new
scrutiny and perhaps some new criticism
for the oft-maligned super service de-
partment.
Based on the GSD's performance in its
first three years, it will need all the
scrutiny it can get.
L-418— 100 8-67 500
printed in California office of statb printing
Volume 15
ASSEMBLY INTERIM COMMITTEE REPORTS
1965-1967
ASSEMBLY INTERIM COMMITTEE ON
FINANCE AND INSURANCE
Number 28
BOB MORETTI, Chairman
Jack R. Fenton, Vice Chairman
Hale Ashcraft
Anthony C. Beilenson
Jack T. Casey
C. George Deukmejian
Houston I. Flournoy
John Francis Foran
Stewart Hinckley
John T. Knox
James R. Mills
W. Byron Rumford
Newton R. Russell
Philip L. Soto
Robert S. Stevens
Howard J. Thelin
John G. Veneman, Jr.
Victor V. Veysey
George A. Willson
George N. Zenovich
JANUARY 1967
Edward Levy, Consultant
Errol Miller, Assistant Consultant
Fern Appleton, Secretary
PARTI
WORKMEN'S COMPENSATION
UNEMPLOYMENT INSURANCE FOR
FARMWORKERS
Published by the
ASSEMBLY
OF THE STATE OF CALIFORNIA
JESSE M. UNRUH
Speaker
GEORGE N. ZENOVICH
Majority Floor Leader
JAMES DRISCOLL
Chief Clerk
CARLOS BEE
Speaker pro Tempore
ROBERT T. MONAGAN
Minority Floor Leader
TABLE OF CONTENTS
Page
Letter of Transmittal 5
Workmen's Compensation 7
Unemployment Insurance for Farmworkers 49
(3)
LETTER OF TRANSMITTAL
The Honorable Jesse M. Unruh
Speaker of the Assembly, and
Members of the Assembly
State Capitol
Sacramento, California
Gentlemen :
January 31, 1967
In accordance with the provisions of House Resolution No. 710
of the 1965 Regular Session, the Assembly Interim Committee on
Finance and Insurance herewith submits Part I of a record of com-
mittee activities and a report on the subject matter studied by the com-
mittee.
Respectfully submitted,
Jack R. Fenton, Vice Chairman
Hale Ashcraft
Anthony C. Beilenson
Jack T. Casey
C. George Deukmejian
Houston I. Flournoy
John Francis Foran
Stewart Hinckley
John T. Knox
James R. Mills
Bob Moretti, Chairman
W. Byron Rumf ord
Newton R. Russell
Philip L. Soto
Robert S. Stevens
Howard J. Thelin
John G. Veneman, Jr.
Victor V. Veysey
George A. Willson
George N. Zenovich
(5)
WORKMEN'S COMPENSATION
WORKMEN'S COMPENSATION
RECOMMENDATIONS
1. The committee does not favor an increase in the number of weeks
of compensation for the minor permanent partial disabilities of less
than 25 percent. Those disabilities rated at 25 percent or higher
should be compensated at an increased rate to more adequately re-
flect the wage loss suffered by the average claimant.
2. For the 1967 session, we recommend an immediate increase in the
maximum temporary disability benefit to $80 per week.
3. That an uninsured employers' fund be created to provide immedi-
ate benefits to employees of uninsured employers. The fund should
be created by an appropriation from the General Fund and admin-
istered by the State Compensation Insurance Fund.
(8)
WORKMEN'S COMPENSATION
The California workmen's compensation system has been the sub-
ject of a rather intensive study for the past four years. At the close
of the 1963 legislative session there was created, pursuant to legis-
lation adopted that year, the Workmen's Compensation Study Com-
mission composed of well-qualified representatives of the legal pro-
fession, employers, labor groups, insurance companies, the medical
profession, the Assembly and Senate, and the public, and chaired by
a public member, Conrad J. Moss (now a judge of the Superior Court
of Los Angeles County). The commission did an outstanding job of
research into the workmen's compensation system. Many of its rec-
ommendations were enacted into law with the passage of AB 2023
during the 1965 General Session. These recommendations, formally
acted upon in 1965, dealt mainly with the reorganization of the for-
mer Industrial Accident Commission into the Division of Industrial
Accidents and the Workmen's Compensation Appeals Board and the
strengthening of the administrative, consultative and quasijudicial
functions of these agencies. It is not the purpose of this report to re-
view this legislation, suffice it to say that the enactment of that leg-
islation in 1965 was a significant step forward in rationalizing the
state 's workmen 's compensation system.
However, significant areas of the workmen's compensation system
remained untouched during that session of the Legislature, and it
is upon these that your committee has focused its attention. Primarily,
these unresolved problems relate to the compensation of heart cases
under workmen's compensation including the apportionment liability
and disability, and the adequacy of benefits under the present statu-
tory limits. These represent difficult problems in the workmen's com-
pensation field to deal with, but the overall success of the objectives
of the workmen's compensation system itself require that they be
answered.
Compensation of Workmen's Compensation Claims
Based Upon Injury or Disease to the Heart
The California workmen's compensation system has been created
pursuant to Article XX, Section 21, of the State Constitution, which
provides in part that :
The Legislature is hereby expressly vested with plenary power,
unlimited by any provision of this Constitution, to create, and
enforce a complete system of Workmen's Compensation, by ap-
propriate legislation, and in that behalf to create and enforce a
liability on the part of any or all persons to compensate any or all
of their workmen for injury or disability, and their dependents
for death incurred or sustained by the said workmen in the course
of their employment, irrespective of the fault of any party.
Pursuant to these powers, the Legislature enacted Labor Code Section
3600 which provides :
Liability for the compensation provided by this division, in lieu
of any other liability whatsoever to any person except as pro-
(9)
IQ COMMITTEE REPORT ON FINANCE AND INSURANCE
vided iu Section 3706, shall, without regard to negligence, exist
against an employer for any injury sustained by his employees aris-
ing out of and in the course of the employment and for the death
of°any employee if the injury proximately causes death, in those
cases where the following conditions of compensation concur :
(a) Where, at the time of the injury, both the employer and
the employee are subject to the compensation provisions
of this division.
(b) Where, at the time of the injury, the employee is per-
forming service growing out of and incidental to his em-
ployment and is acting within the course of his employ-
ment.
(c) Where the injury is proximately caused by the employ-
ment, either with or without negligence.
(d) Where the injury is not caused by the intoxication of the
injured employee.
(e) Where the injury is not intentionally self-inflicted.
(f) Where the employee has not willfully and deliberately
caused his own death.
(g) Where the injury does not arise out of an altercation in
which the injured employee is the initial physical aggressor.
Although this section of the Labor Code, in establishing conditions
of compensation, speaks in terms of an " injury' ' to an employee, this
term has a somewhat broader meaning than solely a traumatic in-
jury. The work " injury" is defined in Labor Code Section 3208 as
follows :
'Injury" includes any injury or disease arising out of the
employment, including injuries to artificial members, dentures,
eyeglasses and medical braces of all types; provided, however,
that eyeglasses will not be replaced, repaired, or otherwise com-
pensated for, unless injury to them is incident to an injury causing
disability.
The act, therefore, compensates not only for industrial injuries but
for industrial disease, although for such a compensable condition to
exist, it must (1) arise out of and be incurred in the course of employ-
ment, and (2) be proximately caused by the employment.
It should be noted that our statute does not require that there be
an "accident" or that the injury or disease arise out of an "indus-
trial accident." The absence of such limiting language has a notice-
able effect upon the interpretation of our statutes. Similarly, the ex-
press inclusion of "disease" in our statute's definition of injury
broadens coverage as compared to jurisdictions where an industrial
accident is required as a precedent to a compensable injury.
To the average layman, a degenerative disease such as atheroscle-
rotic heart disease is not commonly thought of as industrially caused,
and m most cases it is not. However, to the extent that competent
medical testimony is presented which indicates that the normal degen-
erative process was accelerated by work-connected activity, the disease
becomes compensable under rulings of the Workmen's Compensation
Appeals Board and the appellate courts.
workmen's compensation 11
Industry spokesmen maintained at the committee's hearings on this
subject on January 27-28, 1966, that all of the 9,791 heart deaths due
to atherosclerotic heart disease and to coronary disease which oc-
curred among persons aged 25-65 in 1963 are potential workmen's
compensation claims under present legal standards and that, in ad-
dition, there are countless nonfatal but disabling heart cases which
could potentially be considered work connected under present "Work-
men's Compensation Appeals Board decisions. They maintain that the
trend toward finding more and more heart cases compensable has al-
ready started and, because of the difficulty in disproving that the heart
condition was work connected, a substantial number of these cases are
settled by compromises and release.
Mr. Edmund Leonard [California Self-Insurers' Association] :
. . . There has been a great tendency to belittle the realm of
heart cases in workmen's compensation as being extremely nor-
mal and this on the basis of the number of cases heard over
the years before the commission. I was given just this morning
the most recent run of statistics, and I will make it available to
the committee. This comes from the Division of Labor Statistics
and Research, showing before the commission in 1953 there were
291 cases involving disease of the arteries and hypertension, in-
cluding heart disease, and that ending with the fiscal year of
June, 1965, there were 1,219 cases presented to the commission.
... In 1962 there were 723 cases according to the division, and of
those 358 were compromised. Now this, I think, speaks for it-
self— the uncertainty in reference to heart matters that require
358 compromises out of 723 cases. In 1963 out of 95 cases — 467
were compromised. Now the 1965 cases, June 30, 1965, 1,219 — 547
compromised.
Now, I pointed out to you in the short summary, first, in prac-
tically every case it is conceded that the employee who suffers
disability or death has had severe progressive heart disease for
years, sometimes known to exist but its existence often unknown;
sometimes symptomatic, often nonsymptomatic or " quiescent. ' '
Secondly, the question of compensability depends upon a medi-
cal statement.
Thirdly, there is almost invariably a direct conflict of medical
opinion on the question of causal relationship.
Fourth, the decisions by the commission on compensability over
the years have only been reversed in the only rare number of
cases and those where there was absolutely no medical testimony
to support their position.
Fifth, that unusual stress and strain, emotional or physical, is
not in the least required any more to make a case compensable.
All you have to show is that the person was employed and then
have some medical statement to the effect that that employment
was a causal relationship between the employee's routine duties
and his disability or death.
Sixth, the commission assumes in heart cases that the admo-
nition of Labor Code Section 3202 that the Workmen's Compensa-
tion Act ' ' deliberately construed ' ' requires that a similar liberality
22 COMMITTEE REPORT ON FINANCE AND INSURANCE
be given an interpretation of the lay and medical opinion coming
to court so there is a great tendency towards compensability
built into the act.
The seventh, and last, is that there is absolutely no standard
by which the commission and the courts have acted over the
years. 1
In order to understand the complex case law dealing with this prob-
lem, flic committee made use of three documents prepared by the legal
staff of the State Compensation Insurance Fund. The first was pre-
pared in 1952 and submitted to the Senate Labor Committee which,
at that time, was examining the workmen 's compensation program. The
second, titled Report on Current Appellate Rulings Concerning
Workmen's Compensation Claims for Disability or Death Arising
Out of Cardiac Conditions, was submitted to this committee at its re-
quest on November 1, 1965, and covers the developing case law between
1952 and 1965. The final report, titled Supplemental Citations — Re-
port on Current Appellate Rulings Concerning Workmen's Compen-
sation Claims for Disability or Death Arising out of Cardiac Condi-
tions, was submitted at the committee hearings on January 27-28
and deals with certain cases decided between December 1965 and
January 1966. Because these reports represent an excellent and fair
discussion of the legal precedents in workmen's compensation cases
involving claims arising out of cardiac conditions, we are partially
reproducing them here.
DISABILITY OR DEATH ARISING OUT OF CARDIAC CONDITIONS
"The earlier decisions in heart cases fall into two general groups, the first of which
is exemplified by the decision in McNamara v. Ind. Ace. Com., 130 Cal. App. 284,
19 IAC 175. For a number of years the rule laid down in the McNamara case was
the standard whereby liability was determined in most heart cases. In that case
the Industrial Accident Commission denied a death benefit to a widow whose hus-
band had died from a heart condition. From physical examinations it was known that
McNamara had a preexisting heart pathology, as a result of which he had suffered
heart attacks on the two days preceding his death. On the day of death he re-
ported to work, drove a truck, and apparently had occasion to crank the truck. He
was observed seated at the wheel with the motor running and in evident distress.
Presumably he had just cranked the truck. He died within a few minutes.
"The district court of appeal affirmed the commission denial award and laid down
the rules which form the basis of the following statements by Campbell :
' 'Compensation will not be awarded where a chronic heart trouble, which
has finally reached such a stage that death may ensue at any time, results
fatally while the employee is doing the ordinary work of his employment. The
fact that an employee dies from heart trouble while doing work which calls for
no unusual physical strain raises no presumption of an industrial injury.'
(Campbell on Workmen's Compensation, page 291.)
"'There is no sufficient foundation for industrial liability, if the final cul-
mination be brought on merely by the normal exertion of the employment.
There must be some unusual strain or exertion; some sudden shock or excite-
ment incident to the employment.' (Campbell on Workmen's Compensation,
page 293.)
"At the same time, however, the courts recognized another line of cases in which
a recovery of compensation benefits was allowed. It is interesting to note how fre-
quently^ these decisions are cited almost as a unit by the courts. Most of these
1 AsS^5lLIn^er^n Committee on Finance and Insurance, Transcript of Hearing on
^ted^aVranscl:ipT)ati0n' ^ Dieg°' January 27_28' 1966« p- 26"27- (Hearing
workmen's compensation 13
cases were initially denial awards in which the commission decision was annulled
by the courts.
"One of the earliest cases of importance is that of Eastman Co. v. Ind. Ace.
Com., 186 Cal. 587, 8 IAC 184. In this case an employee apparently suffered a
heart attack, fell from a truck which he was driving, and then was run over by the
truck. The commission awarded a death benefit, which was affirmed by the California
Supreme Court. It was held that the death was due to crushing injuries sustained
when the truck ran over the deceased. In discussing the proximate cause of the
death and the possibility that the fall came about as a result of a heart attack,
the court quoted with approval the following language from Wicks v. Dowell, L.R.
(1905) 2 K.B. Div. 225:
" '. . . an accident does not cease to be such because its remote cause was
the idiopathic condition of the injured man ; we must dissociate that idiopathic
condition from the other facts and remember that he was obliged to run the
risk by the very nature of his employment, and that the dangerous fall was
brought about by the conditions of that employment.'
"The Supreme Court concluded that even though it appeared that an attack of
dizziness or unconsciousness from heart trouble was a contributory cause of the
accident, a finding of death from injuries arising from the employment would find
support under the evidence. However, the court also pointed out, considering the
cases aside from an idiopathic condition, that acceleration or aggravation of a
preexisting disease is an injury in the occupation causing such acceleration ; if the
disability, although arising from a chronic heart condition, were brought on by any
strain or excitement incident to the employment, the industrial liability would still
exist. A review of the case will show that the court did not place any reliance
upon this latter possibility (and the record seems to be devoid of any showing of
strain) but merely cited the circumstances as a possibility. Nevertheless, this case
is primarily cited because of this dictum by the court.
"In the Knock case, Knock v. Ind. Ace. Com., 200 Cal. 456, 14 IAC 177, the
employee had a preexisting heart disease. He was sent by his employer to inspect
some peat lands at an elevation of some 3,300 feet. Medical opinion held that the
altitude and strenuous walking precipitated a heart attack which caused death. The
commission issued a denial award, finding that 'said heart condition was due to a
previous diseased condition being precipitated by the employee's situation in a higher
altitude than that to which he had long been accustomed' and that 'such situation
and precipitation did not constitute an injury arising out of the employment.' The
Supreme Court pointed out the rule mentioned in the Eastman case and annulled
the commission's decision.
"In Fogarty v. Dept. of Indus. Rel, 206 Cal. 102, 15 IAC 182, the employee
was 19 years of age. Fogarty was required to repair a broken flume. Because of the
emergency of the work, the men were required to work with all possible expedition
and did so laboriously for many hours. The shift on which Fogarty worked was
engaged continuously for 38 hours. Fogarty worked in wet clothes and was sub-
jected both to the heat of the sun and the coldness of the night air. He developed
what was diagnosed as acute rheumatism, was hospitalized, treated, and ultimately
died some two years later of a heart pathology. The commission issued a denial
award which was annulled by the Supreme Court on the authority of the Eastman
and Knock cases.
"Nielsen v. Ind. Ace. Com., 125 Cal. App. 210, 18 IAC 232, was a case in which
a cabinetmaker suffered a heart attack from which he died. He had been employed
for 15 years, during which time he had no symptoms. He helped carry an altar
top. After arriving at the place where the new altar top was to be installed, it was
found necessary to remove an old top. The deceased used a hammer and chisel for
about five minutes in attempting to remove the old top. While doing this he was
stricken with a heart attack and died. While this work was part of the regular
work performed by Nielsen, it was pointed out by the court that the work in this
instance was done in a great hurry and the carrying of the altar top up the aisle of
the church was accomplished in an awkward and hurried manner. In citing the
Fogarty, Eastman, Knock, and other cases, the court pointed out that 'the rule of
these cases compels an annulment of the award in this instance because the material
evidence unmistakably discloses that, however serious the preexisting heart condition
or disease might have been, the unusual exertion and hurry and excitement of the
work immediately preceding his death either aggravated and accelerated such pre-
existing condition or directly caused the death/
14 COMMITTEE REPORT ON FINANCE AND INSURANCE
"In Mark v. Ind. Ace. Com., 29 Cal. App. 2d 495, 3 C.C.C. 164, another denial
award of the commission was annulled. In this case the deceased and another em-
ployee raised a motor weighing about 200 pounds and put it into a truck. It was
taken to a pumphouse and installed. The men then attempted to start the motor by
cranking it, taking turns doing this. The job was finally completed about 10 a.m., at
which time the other employee states that they were all in, by which he meant they
were 'very tired and exhausted.' Following this, the deceased drove a truck for about
an hour, the truck being used to hoist bales of hay into a barn loft. Deceased then
had his midday meal, following which for a short time he lifted bales of hay and
again drove the truck, but thereafter became ill. While the court felt that there
was not a direct conflict in the medical evidence before the commission, it neverthe-
less pointed out that under the Eastman and Knock decisions an unusual exertion
would be sufficient for a compensable claim and that the work of cranking the
engine in this instance was both unusual and exhausting.
"As can be seen from the above, the commission decisions in the Knock, Fogarty,
Nielsen and Mark cases were all denial awards which were ultimately annulled by
the courts. In these cases the commission adhered to a principle which was ulti-
mately stated or which had been stated in the McNamara case ; that is, the commis-
sion first endeavored to ascertain whether the decreased employee had engaged in
unusual work or exertion. While the commission ruled to the contrary, the courts
followed the dictum in the Eastman case and on a basis of aggravation, resulting
from what the court found to be unusual work or effort, annulled the awards. In
some instances the work was normal to the employment, but strenuous — perhaps
more so than usual.
"In any event, it became uncertain as to which line of decisions might be fol-
lowed in any given case — the tendency of the commission to follow a more or less
strict interpretation of the McNamara rule, or the more liberal view of the courts
as seen in the Knock, Fogarty, Nielsen, and Mark cases. At this time the Calabresi
case came before the commission.
"In the Calabresi case, Liberty Mutual Ins. Co. v. Ind. Ace. Com., 73 Cal. App.
2d 555, 11 C.C.C. 66, the employee regularly lifted and dumped sacks of peanuts.
This was a normal activity of his employment and a task he performed for several
hours each day. He had a preexisting heart pathology. While lifting one of the heavier
sacks of peanuts, he had a heart attack. This case, then, is well beyond the rule in
the McNamara case, because there was nothing unusual or exceptional in the work he
was doing. It was hard work, although normal to the employment. The parties re-
quested the commission to make a decision which could be taken to the courts with
a clear-cut issue so that doubt arising from the McNamara decision could be re-
solved. Ordinarily in a case with the facts similar to those in the Calabresi case a
denial award would issue. However, for the purpose of establishing a test case in
accordance with the wishes of the parties, a compensable award issued and was
affirmed by the district court. The resulting decisions was interesting.
"The court pointed out that decided heart cases fall into three classes :
. 7 ' T^os? in Yh^h the commissi°n denied an award and the courts affirmed the
denial. Typical of this class is the McNamara case. e
off2' CASuS in whTicnfthe commission awarded compensation and the courts
affirmed the award. In this class is the Eastmen case
"The court then said :
opinion it must follow that where *«£?„£ I Prmciple* ^ f^h in this
a. to whether the injury or death ™T ?S »h?slCmns or specialists differ
Physician or special^ Shies til i*Z industrial and a competent qualified
-.used by the employment and tL •°P-m°n the °°llapSe was Proximately
should be affimed ftht * T"0011 fW ?"?• the award ■»* and
trary view. In such a caw whether tS ?mpetfnt <*octor expresses a con-
« case whether the strain is a "usual" or an "unsual"
workmen's compensation 15
one is only one of the facts involved. If there was strain, even though a
strain was a strain usual to that type of employment, the injury or death is
compensable if there is competent substantial evidence to shoic the causal
connection between that strain and the collapse.''
"I have emphasized that part of the opinion above so you may clearly see just how
the court has set aside the old rule of the McNamara case and has gone so far as to
liberalize even the Eastman, Knock, Fogarty, Nielsen, and Mark cases. Now, all that
is required is evidence of any strain or exertion while at work, plus medical evidence
to show a causal connection between that and the employments (Emphasis added
by committee.)
On November 29, 1954, Mr. Everett A. Corten, now Chief Counsel of the In-
dustrial Accident Commission, directed our attention to a recent decision of the
court, Associated Indemnity Co. v. Ind. Ace. Com. (Johnson), 120 Cal. App.
2d 423 (1953). The decedent, Johnson, was working as a laborer, digging a pit
with a hand shovel, when he collapsed and died. The autopsy report showed
that the employee was suffering from arteriosclerosis and death was the result
of coronary occlusion. There was expert medical testimony that the exertion in
which the employee was engaged at the time of death, although normal to the
employment, could have caused the fatal occlusion. The death was held to arise
out of the employment.
The court stated : "The facts of this case in light of the applicable rules of
decision which we have stated furnish substantial support for the finding of the
commission that Johnson suffered an injury which was proximately caused by
the employment." As a rule of decision, the court cited Liberty Mutual Ins. Co.
v. Ind. Ace. Com., 73 Cal. App. 2d 555, 558-9 (166 P. 2d 908, 11 Cal. Comp.
Cases 66), in which the court stated :
"It is now too well settled in this state to require extended citation of
authority that the employee is entitled to compensation for disability proxi-
mately caused by industrial injury regardless of whether the employee's con-
dition at the time of injury was average or subnormal. Thus, an aggrava-
tion of an existing infirmity where such aggravation is proximately caused
by the employment is compensable, even though a normal man would not
have been adversely affected. This rule applies even though is is shown that
the employee would have ultimately died from such disease, if the evidence
shows and the commission finds that the injury hastened or produced his
death. . . . Industry takes the employee as it finds him. A person suffering
from a preexisting disease who is disabled by an injury proximately arising
out of the employment is entitled to compensation even though a normal
man would not have been adversely affected by the event.
". . . The burden of proof that the injury arose out of and in the
course of the employment, and was proximately caused thereby, is on the em-
ployee. ... It is obvious that whether the employment proximately precipi-
tated the collapse of a preexisting diseased heart and proximately caused it
to collapse before normal progressive developments would have resulted in
the collapse is a question of fact."
REPORT ON CURRENT APPELLATE RULINGS CONCERNING WORKMEN'S
COMPENSATION CLAIMS FOR DISABILITY OR DEATH ARISING
OUT OF CARDIAC CONDITIONS
This report will update previous materials supplied concerning
important legal precedents in workmen's compensation cases involv-
ing claims for disability oi death arising out of cardiac conditions.
1. Unusual employment-connected stress or strain is not an absolute con-
dition precedent to a finding that employment activity caused or pre-
cipitated a disabling or fatal heart condition.
It was emphasized in our report of May 26, 1952, that the old dic-
tum in early cases, which seemed to require an unusual or extraordi-
nary employment-connected stress or strain precipitating a heart
26 COMMITTEE REPORT ON FINANCE AND INSURANCE
condition, was overturned by the district court of appeal in the Cala-
bresi case, Liberty Mut. Ins. Co. v. Ind. Ace. Com., 73 Cal. App.
2d 555. This so-called ''old rule" emanating from McNamara v. Ind.
Ace. Com., 130 Cal. App. 284, and other cases, was epitomized in
Campbell's treatise on workmen's compensation: " There is not suf-
ficient foundation for industrial liability, if the final culmination
[heart attack] be brought on merely by the normal exertion of the em-
ployment. There must be some unusual strain or exertion; some sud-
den shock or excitement incident to the employment." (Campbell
on Workmen's Compensation, p. 293.) The conclusion was that as of
1952 there was no such requirement in that "Now, all that is required
is evidence of any strain or exertion while at work, plus medical
evidence to show a causal connection between that and the employ-
ment." (Letter of May 26, 1952, p. 7.) Such a rule, still valid today,
is based upon the following language in the Calabresi case, where
Presiding Justice Peters, in analyzing the actual decisions from which
the so-called rule requiring unusual stress was derived, concluded
that the decisions did not in fact justify such a rule :
4 'From an analysis of these cases and of the principles set forth
in this opinion it must follow that where examining physicians
or specialists differ as to whether the injury or death was indus-
trial, and a competent qualified physician or specialist testified
that in his opinion the collapse was proximately caused by the em-
ployment, and the commission so finds, the award must and should
be affirmed although an equally competent doctor expresses a
contrary view. In such a case whether the strain is a 'usual' or an
'unusual' one is only one of the facts involved. If there was strain,
even though the strain was a strain usual to that type of employ-
ment, the injury or death is compensable if there is competent sub-
stantial evidence to show the causal connection between the strain
and the collapse." (73 Cal. App. 2d, at p. 563, emphasis added.)
The language of the Calabresi case and its holding were adopted
by the Supreme Court in Lumbermen's Mut. Cos. Co. v. Ind. Ace.
Com. (Cacozza), 29 Cal 2d 492 (1946). The court reasoned in citing
federal precedents "that an accidental injury may occur notwith-
standing the injured is then engaged in his usual and ordinary work,
and likewise ... the injury need not be external." (29 Cal. 2d at
p. 498.)
2. It is the claimant's burden to show by scientific evidence that the dis-
abling or fatal heart condition is employment connected.
It is evident that the primary requirement for compensability of a
heart condition under the Calabresi and Cacozza cases is that there
causal connection between the employment and the condition. As in
many other cases, "In order to be entitled to an award, petitioners
[the employee's dependents] must show a causal connection between
the employment and the injury." (See Daniels v. Ind. Ace. Com., 148
Cal. App. 2d 500, 503.) Further, whether or not there is such a
causal connection between the employment and the heart condition is
a question of fact. As stated in the Calabresi case, "whether the
employment proximately precipitated the collapse of a preexisting
workmen's compensation 17
diseased heart and proximately caused it to collapse before normal pro-
gressive developments would have resulted in the collapse is a question
of fact." (73 Cal. App. 2d at p. 559.) And, "The burden of proof that
the injury arose out of and in the course of the employment, and was
proximately caused thereby is on the employee." (Ibid.; see also
Associated Indem. Corp. v. Ind. Ace. Com. (Johnson), 120 Cal App
2d 423, 426 (1953).)
In answering the question of whether or not there was a casual con-
nection between the employment and the heart condition, "Obviously,
the commission must depend on the reasoned opinions of attending
physicians and experts in the field." (Calabresi, 73 Cal. App. 2d at
p. 559.) In other words, to support an award of compensation in a
case involving the intricate medical question of whether an employee's
heart condition resulting in his disability or death was related to his
employment, there must be competent medical evidence of work causa-
tion.
In City and County of San Francisco v. Ind. Ace. Com. (Murdoch) ,
117 Cal. App. 2d 455 (1953), the employee, a maintenance worker for
the city's park commission, collapsed as he was cutting trees and
branches which had blown down in a storm. He was dead a short time
later upon arrival at the hospital. The report of one doctor stated his
death was due to an acute coronary occlusion, the result of a longstand-
ing arteriosclerosis. He also noted that this type of complication
"would occur at any moment of the day, whether this man had been
active physically, or whether he had been sitting or lying quietly."
(Id. at p. 457.) On objection of applicant's counsel this doctor's opin-
ion was not admitted into evidence, at which point there was no medi-
cal evidence of any kind before the commission. The court, in annulling
award, stated :
"To make out a prima facie case it is necessary to prove more
than the fact that decedent died while performing a task required
by his employment which he had performed on various occasions
throughout the years apparently without incident. The present
record is wholly devoid of evidence of the cause of death. It is
true that the employee died immediately after performing a task
that was the most arduous of any required by his employment.
However, it is not a matter of common knowledge that operating
a crosscut saw with a partner on the other end is labor of such a
strenuous type as to bring on a fatal heart attack. . . . Where the
subject matter is within the exclusive knowledge of experts trained
in a scientific subject, expert evidence is essential. [Citations].
... In the present case there is nothing in evidence bearing on the
cause of death. . . . The award must be annulled . . . because
there is no competent evidence in the present record from which it
may be inferred that the employee 's death arose out of his employ-
ment." (Id., at pp. 458-460, emphasis added.)
(See also Peter Kiewit Sons v. Ind. Ace. Com. (McLaughlin) , 234
A.C.A. 981 (June 1965), award annulled, where no medical evidence
related applicant's allegedly disabling back condition to his employ-
ment. )
2— L-2516
18 COMMITTEE REPORT ON FINANCE AND INSURANCE
3. Medical opinion generally varies regarding the relationship of any activ-
ity to cardiac failure, and resultant conflicts on the issue of causation
in specific cases present questions of fact for the conclusive resolution
of the commission.
However, the expert opinion, essential to a determination of the issue
of causal ion in heart cases, is often varying. As noted in the Calabresi
case, "We have frequently read in applications for writs before this
court the divergent views of medical specialists on the effect of strain
on a preexisting diseased heart. There can be no doubt but that there
is a respectable school of thought that believes that strain, at least a
nonunusual strain, does not adversely affect a preexisting diseased
heart. Other doctors, equally qualified, honestly believe that strain ad-
versely affects such preexisting condition. The existence of these diver-
gent ideas is what has led the commission to render, on occasions, what
appear to be divergent opinions." (73 Cal. App. 2d at p. 560.)
Thus the commission must have the support of medical evidence in
finding that an employee's death or disability resulting from heart
disease was caused by his employment. In reaching its decision, as in
any other case, the commission is faced with the statutory admoni-
tion that the workmen's compensation provisions of the Labor Code
"shall be liberally construed by the courts with the purpose of extend-
ing their benefits for the protection of persons injured in the course
of their employment." (Labor Code Section 3202.) In addition, in the
case of certain law enforcement officers (Labor Code Section 3212),
correctional institution security officers (Section 3212.2), highway pa-
trolmen and other police officers (Section 3212.5), and peace officers in
the Bureau of Narcotics enforcement and Bureau of Identification and
Investigation (Section 3212.7), heart trouble "which develops or mani-
fests itself during a period while such [person] is in the service ..."
of such agencies is presumed to arise out of and in the course of such
persons' employment.
The commission in heart cases, as in many other cases, is almost in-
variably faced with divergent conflicting medical opinion respecting
the employment relationship of an employee's death or disability re-
sulting from heart trouble. But the appellate courts have made it clear
that, once the commission weighs the scientific evidence and reaches its
decision in light of the above cited statutory admonitions, the decision
on the facts is not subject to review so long as there is sufficient scien-
tific evidence to support it.
/-.o^fR°°dieXample is Foster v- Ind" Acc- Com-> 136 Cal- APP- 2d 812
(1955), where a mechanic from the Division of Highways arrived at
work at 7 :30 and was found dead an hour and a half later. His death
was due to a coronary occlusion, although he had no prior symptoms
of arteriosclerosis Decedent had been on light work due to a prior
back injury. Dr Lucia, who had treated decedent on several occasions
T-F AFenS .°f yearS' concluded unequivocally "that the work in
which Mr Foster engaged and the circumstances under which it was
consummated directly contributed to his demise, as is clearly shown
by the details of his last illness." (136 Cal. App. 2d at p. 814 ) Dr
Wallace, not acquainted with decedent, but who had studied the medi-
cal records and testimony in the case, concluded, "In my opinion
forrehk 7J^ °f eVidG?Ce that his ^ob was in an^ ™W ^sponsible
xor nis death . . . assuming that he had coronary arteriosclerosis,
workmen's compensation 19
there is nothing to support the thesis that his work precipitated the
fatal attack or coronary occlusion. There are instances when unusual
and extraordinary physical activity or severe and exceedingly upset-
ting emotional upheaval may be said to precipitate occlusion of pre-
viously diseased arteries, but certainly neither situation was evident
here." (Id., at pp. 814r-815.) On this evidence the commission denied
death benefits based on its finding that decedent's death did not arise
out of and in the course of his employment. The appellate court, in
affirming the award, stated as follows :
"While petitioner's arguments are persuasive and the evidence
of Dr. Lucia would no doubt have sustained a compensable award
if the referee and the commission had accepted it, the rejection of
it and the acceptance of a contrary opinion from another expert is
not ground for reversal by an appellate court." (136 Cal. App. 2d
at p. 815.)
The court concluded that "if there is any evidence, whether direct or
by reasonable inference, which will support the finding of the commis-
sion, a reviewing court has no power to disturb it. [Citations.] The
function of the court on review of the action of the commission is to de-
termine whether the evidence, if believed, is substantial and supports
the findings." (Id., at p. 816.)
4. Although not an absolute prerequisite, the presence of unusual physical
or emotional employment-connected stress or strain remains an impor-
tant factual consideration, but some evidence of such stress or strain
does not guarantee benefits.
The absence of unusual or extraordinary physical or emotional
stress or strain under the Caldbresi case does not preclude an award of
disability or death benefits for heart trouble, but the presence of such
stress or strain is often a significant factor in commission awards.
The Supreme Court in Walters v. Ind. Ace. Com., 57 Cal. 2d 387, ap-
pears to recognize that an unusual employment-connected physical
strain is a most important consideration in heart cases, both factually
and legally. In the Walters case the commission had originally denied
disability benefits on the basis of the trial referee's disbelief of appli-
cant's story that he had suffered an attack while attempting to lift the
front end of an unusually heavy car. At the original hearing appli-
cant's treating physicians opined that such a lifting incident undoubt-
edly precipitated applicant's heart attack and his resultant heart trou-
ble, rendering him disabled. The carrier's physicians, on the other hand,
discounted the effects of any such lifting incident and were of the opin-
ion that the heart attack was spontaneous, a natural incident of appli-
cant's underlying asymptomatic heart disease, and thus not work-con-
nected. After appellate review of the commission's take-nothing order
was denied (see 26 C.C.C. 146), applicant sought to reopen the case
based on the newly available testimony of three other witnesses, con-
firming the happening of the heavy lifting incident and impeaching the
employer's conflicting version. In reversing the commission's refusal
to reopen the case, the Supreme Court noted that the original denial
was itself supported by very meager evidence, to wit, the failure of the
employer's foreman to specifically recall the lifting incident. The addi-
tional evidence, both confirming that the incident happened and im-
20 'YIMITTEE REPORT ON FINANCE AND INSURANCE
peaching the foreman's story, was held to constitute a sufficient show-
in? by applicant of good cause to reopen the matter, especially in light
of the statutory presumption favoring employee's claims for compensa-
tion. The Supreme Conrt also noted that one of the grounds for re-
opening a compensation case is a showing that the original award was
inequitable.
Also, evidence of unusual mental stress has been considered by the
Supreme Court to be significant in heart cases. The court in Argonaut
Ins. Exchange v. Ind. Ace. Com (Bellinger), 49 Cal. 2d 706 (1958),
in affirming an award of death benefits, held the commission was justi-
fied in finding that the employee's fatal heart attack was work-con-
nected in light of the medical evidence that "decedent's work, with its
exceptional mental stress and responsibility, might 'be considered the
precipitating factor in hastening his exodus.' " (Id., at p. 713.)
Many other cases where appellate review was sought but denied have
been found in the reports ("California Compensation Cases," cited
"C.C.C."). It should be noted that not all commission decisions are
reported — only those where the losing party petitions for appellate re-
view. No attempt has been made to trace all commission decisions in-
volving heart disorders — the reported decisions, nevertheless, seem to
indicate definite factual trends.
For example, a physical shock or stress seemed important in Hart-
ford Accident & Indemnity Co. v. Ind. Ace. Com. (Grief), 26, C.C.C.
188 (writ denied, 1961). There an award of disability benefits was left
undisturbed where applicant, while working as a waitress, suffered a
severe electrical shock. She had had a preexisting heart murmur but
this heart condition had never interferred with her work. The award
was based on the opinion of applicant's treating doctor that applicant
had suffered fibrillation of the heart as a direct result of the electrical
shock, and that once such fibrillation occurs there will be successive
episodes until ultimately the fibrillation is constant and disabling. An-
other doctor was of the opinion that the electrical shock had nothing
to do with the cardiac condition, and still another was of the opinion
that applicant was not, in fact, disabled. (See similar asesc involving
unusual physical stress where appellate review was denied at 29 C.C.C.
89, 22 C.C.C. 157 and 20 C.C.C. 100.)
Emotional stress has also played an important factual role. Thus,
the District Court of Appeal refused to review an award of disability
benefits in City and County of San Francisco v. Ind. Ace. Com. (Minis),
29 C.C.C. 257 (writ denied, 1964). The award was based on the treat-
ing doctor's opinion that the emotional stress suffered by applicant, a
busdriver, in an altercation between himself and a passenger was suffi-
cient to produce the heart symptoms which led to his disabling heart
attack. (See other emotional stress cases at 27 C.C.C. 128, 27 C.C.C.
288, 25 C.C.C. 20, 25 C.C.C. 91, 24 C.C.C. 12 and 21 C.C.C. 270.)
On the other hand, some evidence of unusual emotonal or physical
stress or strain in and of itself is no guarantee of an award of disabil-
ity or death benefits. Thus in Grace v. Ind. Ace. Com., 20 C.C.C. 247
(writ denied, 1955), the commission denied disability benefits where
applicant, a butler-chauffeur, alleged that his disabling heart attack
was precipitated by the unusually heavy lifting involved in slipping
pads of paper out from under his employer's living room furniture. The
workmen's compensation 21
commission reversed the referee's award if benefits on conflicting medi-
cal evidence, noting that but little effort was required to remove pads
of paper from underneath furniture. (See other such denials at 25
C.C.C. 105, 21 C.C.C. 39, 20 C.C.C. 74 and 20 C.C.C. 27.)
5. In the absence of unusual stress, dependent upon the persuasiveness of
the medical evidence of work connection, the commission has awarded
benefits for disabling or fatal heart conditions and has been upheld on
petition for appellate review, but has just as frequently denied benefits
in such cases.
In the absence of any particularly unusual stress or strain where
only ordinary exertion is manifest, the commission, in line with the
Calaoresi case, has often rendered awards of death and disability
benefits in heart cases, even where employees are stricken performing
their ordinary and regular duties. In all such cases there is invari-
ably substantial medical evidence to connect the employment with the
fatal or disabling heart disease. Thus in City and County of San Fran-
cisco v. Ind. Ace. Com. (DeJarnatt), 29 C.C.C. 229 (writ denied,
1964), disability benefits were awarded to applicant, an ambulance
steward, who, while pulling out a heavy oxygen tank to inspect it as a
part of his normal duties, suffered a severe disabling heart attack. The
independent medical examiner concluded that "such exertion even for
one or two minutes might have been sufficient to have induced some
myocardial muscle necrosis and thereby initiated his beginning infarc-
tion." Other medical evidence was directly to the contrarv. (See other
such awards at 30 C.C.C. 45, 28 C.C.C. 38, 27 C.C.C. 42, 25 C.C.C. 242,
23 C.C.C. 185 and 22 C.C.C. 130.)
On the other hand, many cases appear in the reports in which work-
men 's compensation benefits have been denied where an employee's
fatal or disabling heart attack occurs during or after the performance
of his ordinary employment duties. In Daniels v. Ind. Ace. Com., 148
Cal. App. 2d 500 (1957), the appellate court affirmed the commission's
denial of death benefits. Decedent was employed as a" troubleshooter ' '
for an irrigation district with duties including the repair of transform-
ers, meters and other electrical facilities, which occasionally involved
the climbing of poles. Decedent had had no prior signs of heart disease.
On the day of his death he suffered a heart attack while engaged in
climbing his third pole of the day. His death later at the hospital was
attributed to a coronary occlusion. An independent medical examiner
claimed that statistics verified that physical exercise has nothing to do
with death from coronary occlusion. Other medical opinion was intro-
duced to the effect that decedent's death was not work-connected.
Another doctor opined that the work strain was a factor in decedent's
lung congestion which led to a rupture of a coronary valve, resulting in
death. But a further autopsy revealed no such rupture.
Similarly, appellate review was refused in Silva v. Ind. Ace. Com.,
27 C.C.C. 107 (writ denied, 1962), where the commission denied death
benefits. There an employee, a chipper for a steel company, had had
heart symptoms from January 1959, until his death on April 11,
1960. After a pneumonia attack his symptoms persisted and his doc-
tor recommended that he do light work. Decedent died while per-
forming his regular duties which apparently involved working in
extreme temperatures, climbing stairs and handling equipment
22 COMMITTEE REPORT ON FINANCE AND INSURANCE
weighing up to 20 pounds. His treating doctor reported that deced-
ent's death was work-connected because the doctor had recommended
decedent do no heavy work and he was allowed to do such against
his instructions, and that the strain and fatigue of the work he was
doing would aggravate or accelerate the medical problem and has-
ten death. The autopsy surgeon was of the opinion that the work did
not cause or aggravate decedent's underlying heart pathology. Two
other doctors also opined that there was no work-connected activity
which would contribute to decedent's death or aggravate his under-
lying heart pathology. (See also Foster v. Ind. Ace. Com., supra, 136
Cal App. 2d 812 and other denials at 30 C.C.C. 157, 23 C.C.C.
46, 22 C.C.C. 184, 22 C.C.C. 185, 22 C.C.C. 272, 21 C.C.C. 74, 20 C.C.C.
1, 20 C.C.C. 262, 19 C.C.C. 143.)
6. Despite the statutory presumption of work connection, death and disa-
bility benefits have been denied in heart cases involving firemen and
policemen, but the medical evidence must clearly disassociate the heart
condition with the employment.
The commission has denied death or disability benefits to policemen
and firemen or their dependents where such employees have suffered
disabling or fatal heart attacks. The statutory presumption that such
heart trouble arises out of their employment was held rebutted by
medical evidence, although sometimes in conflict, clearly indicating
that the employment had nothing to do with the disability or death.
The district court of appeal has affirmed the commission in one such
case. In Havel v. Ind. Ace. Com., 154 Cal. App. 2d 737 (1957), the
commission had denied benefits to a policeman who was disabled by a
heart attack occurring at home after two prior experiences while on
duty. The medical evidence was conflicting, some connecting the police-
man's heart disability with his employment in terms of possibilities,
and other medical testimony unequivocally denying that there was any
connection between decedent's heart disability and his employment.
The district court of appeal affirmed the commission's decision on the
basis that "there was substantial evidence before the commission to
controvert the presumption in favor of the petitioner." The court
concluded that "we cannot, therefore, hold as a matter of law that the
presumption and supporting evidence necessarily compel the conclusion
that the petitioner's heart trouble was of industrial origin." (Id., at
p. 743; see other such denials at 24 C.C.C. 17, 23 C.C.C. 132, 21 C.C.C.
165, 20 C.C.C. 105, 20 C.C.C. 202.)
It should be noted, however, that the commission has no authority to
ilcny compensation in a death or disability case involving a fireman,
policeman or other person entitled to the statutory presumption at-
tributing heart trouble to employment under Labor Code Sections
3212, 3212.2, 3212.5 and 3212.7, where there is no medical evidence
specifically disassociating the heart trouble from the employment. In
Horn v. Ind. Ace. Com., 128 Cal. App. 2d 837 (1954), the commission
had denied disability benefits to a fireman who had had repeated heart
symptoms during his long period of employment as a fireman from 1924
to 1953. There was no medical opinion at all on the issue of how the
heart disease arose, i.e., whether or not it was employment-connected.
Further, no physician specifically disassociated applicant's heart trouble
from his employment. The district court of appeal annulled the com-
workmen's compensation 23
mission's take-nothing order because the statutory presumption of
causation had not been controverted by any evidence.
7. In rare cases awards have been made based on medical evidence relating
an employee's heart condition to his employment, although almost no
employment stress was apparent, except that encountered in any normal
activity.
Although the presence or absence of stress is often factually im-
portant to a determination or work-connection, there are rare instances
where awards have been made based on medical opinion attributing
an employee's heart failure to his employment, even though there is
virtually no manifestation of any exertion, usual or unusual, beyond
that encountered in all normal activities. Thus, in City of Los Angeles
v. Ind. Ace. Com. (Stone), 29 C.C.C. 154 (writ denied, 1964)^ the
applicant, an electrical inspector, had been suffering from arterio-
sclerosis from 1958 which had rendered him partially disabled for long
periods. Applicant had worked on November 14 and 15 but apparently
nothing unusual had happened. The nature of his work was unex-
plained. He left work on November 15 because of chest pains and re-
turned February 20, 1961. Dr. M. D. Kritzer was of the opinion that
his heart problem "was at least made more severe and aggravated
by virtue of the fact that this gentleman did work on November
14th and 15th while probably having a posterior myocardial infarc-
tion." On this and other medical evidence the commission issued an
apportioned award of total disability. This decision was let undis-
turbed by the appellate court.
In the Stone case the doctor's basis for the connection between the
employment and the employee's heart condition was that the employee
happened to be engaged in an employment activity even though such
activity was not necessarily stressful in any sense of the word. Similar
medical opinions, which emphasize that any activity would have pre-
cipitated an attack, have sustained awards, where the activity pre-
cipitating the attack happens to be work-connected. (See other such
awards at 28 C.C.C. 9, 26 C.C.C. 185 and 24 C.C.C. 259.)
In what appears to be a somewhat similar situation, the appellate
court has affirmed a commission award. In Associated Indent. Corp.
v. Ind. Ace. Com. (Johnson), 120 Cal. App. 2d 423 (1953), decedent,
employed on a weekend job, had been digging in a pit. After a 25-
minute respite, during which the dirt was shoveled out of the truck,
decedent got back into the pit, picked up his shovel, collapsed and
died, from what was determined to be a coronary occlusion. Although
decedent had no prior symptoms, he was found to have had advanced
arteriosclerotic disease. One doctor said that the exertion of shoveling
would have been but a minor factor in precipitating decedent's attack.
Another doctor felt that his exertion played some part in his death,
but that the same effects "could have been caused by any normal
activity, such as eating meals or walking a block." (120 Cal. App. 2d at
p. 425.) The court in upholding the award, concluded :
"Although he was afflicted with general arteriosclerosis which,
at the point where the final occlusion occurred, was far advanced,
so that death would have occurred in time from the normal prog-
ress of the disease, yet the exertion which the performance of his
work called for increased the hazard of final occlusion which oc-
24 COMMITTEE REPORT ON FINANCE AND INSURANCE
curred and which caused his death. The exertion was sufficient,
according to the expert testimony, to have brought about, by
means of the increased contraction and expansion of the artery
and the accelerated blood flow, a dislodging of particles from the
diseased lining, causing a block. This the autopsy surgeon found
had occurred, and caused the fatal occlusion. The experts testified
that this exertion could have had the effect that the autopsy dis-
closed. That is sufficient support for the finding of the commission
as to proximate cause." (120 Cal. App. 2d at p. 426.)
8. The presence or absence of symptoms prior to the allegedly industrially
related heart condition is an important, but not conclusive, factual con-
sideration.
From a review of the reported cases, it is readily apparent that in
virtually every case involving disability or death on account of heart
trouble there is some degree of underlying preexisting heart dis-
ease. The manifestations of the preexisting disease seem to be of fac-
tual importance in the determination of work causation. Thus where
the evidence clearly shows that the employee had no prior symptoms
of heart disease, his fatal or disabling attack is often related to his
employment. (See awards in such cases at 22 C.C.C. 157, 20 C.C.C.
100, 27 C.C.C. 128, 24 C.C.C. 12, 28 C.C.C. 38, 25 C.C.C. 242, 23
C.C.C. 185, 22 C.C.C. 130, 26 C.C.C. 185.) And, compensation has
been awarded where, although preexisting symptoms were present,
the heart trouble never had interfered with the employee's work (see
awards at 21 C.C.C. 270, 29 C.C.C. 229). On the other hand, compen-
sation is often denied where it is established that the employee's
heart condition was symptomatic prior to his alleged industrial in-
jury. (See denials at 23 C.C.C. 46, 22 C.C.C. 184, 22 C.C.C. 185, 22
C.C.C. 272, 20 C.C.C. 1, 20 CCS. 262.) But, again, there is no abso-
lute factual rule relating to the employee's prior condition, since com-
pensation has been awarded even where the employee's underlying
heart condition was symptomatic and to an extent disabling (see
awards at 27 C.C.C. 42, 21 C.C.C. 165), and denied where apparently
there were no prior symptoms. (See Daniels v. Ind. Ace. Com., supra,
148 Cal. App. 2d 500.)
9. Apportionment in Heart Cases.
The fact that almost invariably an employee's heart trouble stems
in part from a preexisting heart condition gives rise to problems of
apportioning liability. An employer is, of course, fully responsible for
the industrially caused aggravation or lighting up of a preexisting
condition (Labor Code Section 4663), but not liable for the natural and
normal progress of a preexisting condition (see Tanenbaum v. Ind. Ace.
Com., 4 Cal. 2d 615 (1935)).
(a) Death eases: So long as work contributed to the death, there may be no
apportionment to preexisting condition, but there may be an apportion-
ment of full benefits as between carriers or employers responsible during
(he period of work activity found to have caused an employee's fatal
heart condition.
The Supreme Court has held that Section 4663 applies only to disa-
bthhf benefits. Thus, in death cases, so long as the employee's death
was at least partially attributable to industrial factors, full death bene-
workmen's compensation 25
fits must be awarded, and there is never an apportionment of liability
to the underlying disease, which in fact may also have contributed to
the cause of death. (See Pacific Gas & Electric Co. v. Ind. Ace. Com.
(Drew), 56 Cal. 2d 219.) However, the commission has allowed an
apportionment of full death benefits as between two or more carriers
or employers. That is, the commission has held two or more carriers
or employers proportionately responsible for full death benefits
awarded to the employee's dependents, where it finds that the em-
ployee's heart trouble, resulting in his death, was caused by employ-
ment activity during which there were two or more carriers or employ-
ers. In two such cases the appellate courts have refused to review the
commission action. (See 29 C.C.C. 12; National Surety Corp. v. Ind.
Ace. Com. (Duffy), 2d Civ. No. 28,753, writ denied, 11/30/64, 30
C.C.C )
(b) Disability cases: Preexisting symptomatology is an important, but not
conclusive, factual consideration.
Regarding the apportionment of disability benefits between the in-
dustrially caused aggravation of, and the natural progress of, the un-
derlying disease, again the nature of the specific effect of the heart
disease upon the employee prior to his disabling heart attack is of
factual importance. If the preexisting disease was asymptomatic, non-
apportioned disability benefits will often be awarded. (See 22 C.C.C.
157, 20 C.C.C. 100, 25 C.C.C. 20, 28 C.C.C. 38, 25 C.C.C. 242, 23
C.C.C. 185, 22 C.C.C. 130.) The same tendency is observed even where
there are symptoms, if the symptoms were nondisabling in that prior
to the disabling attack the preexisting disease never interfered with
the applicant's employment. (See 30 C.C.C. 90, 29 C.C.C. 229, 22
C.C.C. 185, 26 C.C.C. 188.)
But once again there are no factual absolutes. The fact that the
employee had no symptoms, disabling or otherwise, prior to his dis-
abling heart attack does not preclude the commission from finding
that the employee's disability is attributable in part to the aggrava-
tion of a preexisting asymptomatic heart condition and in part to the
natural and normal progress of that condition, and issuing an appro-
priately apportioned award. This is the precise holding of Bowler v.
Ind. Ace. Com., 135 Cal. App. 2d 534 (1955). The court held that the
question of the extent to which an applicant's disability is caused by
the aggravation of the preexisting condition and the extent to which it
is caused by the natural progress of that condition is a question of fact
for the commission to resolve on the evidence. The court upheld an
apportioned award, even though applicant had no symptoms of heart
disease prior to his disabling heart attack suffered while engaged in
heavy physical labor. The medical evidence indicated that the resultant
disability was due in part to his preexisting heart disease.
An example of a factual pattern where such an apportionment be-
comes necessary is where the medical evidence indicates that an initial
heart attack is employment-connected, but a subsequent disabling or
fatal heart attack is the result entirely or partially of the natural
progress of the employee's underlying heart disease. (See 22 C.C.C.
272, 19 C.C.C. 143, 29 C.C.C. 239.) '
2g COMMITTEE REPORT ON FINANCE AND INSURANCE
(c) Where the medical evidence without conflict calls for an apportionment,
the commission must do so.
Although usually a question of fact, an apportionment is required
as a matter of law where the medical evidence without conflict estab-
lishes that an employee's disability is due at least in part to the natural
progress of an underlying heart disease. The appellate court in City of
Glendale v. Ind. Ace. Com. (Enochs), 153 Cal. App. 2d 213 (1957),
has ruled that in such a situation the commission is without authority
to issue a nonapportioned award. In such case all the medical opinion
was agreed that a portion of the applicant's disability was caused by
the natural progress of his disease, and not by his employment, but one
doctor "expressed the view that an apportionment could not be made
because of its speculative nature. ' ' The court concluded that no matter
how difficult the task, the commission should have made an apportion-
ment : " To require the employer to assume the entire financial burden
of the applicant's disability simply because it is difficult to make an
apportionment between the occupational and nonoccupational causes
would not only be contrary to the mandate of the Legislature but also
unfair and inequitable to the employer." (153 Cal. App. 2d at pp. 216-
217.)
(d) In the case of law enforcement officers and others entitled to the statutory
presumption of causation under Sections 3212, 3212.5 and 3212.7, the
commission may not apportion compensation for heart trouble to preexist-
ing disease, once causation is found.
Respecting those public officers having the benefit of the statutory
presumption of causation under Labor Code Sections 3212, 3212.5 and
3212.7, the commission may not apportion any part of the disability
compensation to an applicant's preexisting disease. The Legislature in
1959 added the following phrase to each of the cited statutes: "Such
. . . heart trouble ... so developing or manifesting itself in such
cases shall in no case be attributed to any disease existing prior to such
development or manifestation. ' '
Recently in Ferris v. Ind. Ace. Corn., 237 A.C.A. 509 (District Court
of Appeal, 4 Civil No. 7753, 10/7/65, the court held that the effect of
the quoted 1959 addition to the cited statutes was to preclude any ap-
portionment of liability to preexisting disease once the commission has
found in line with the presumption of said sections that the disability
was caused in part by employment. (See also State Compensation In-
surance Fund v. Ind. Ace. Com. (Quick), 56 Cal. 2d 681, 686.)
SUPPLEMENTAL CITATIONS— REPORT ON CURRENT APPELLATE
RULINGS CONCERNING WORKMEN'S COMPENSATION
CLAIMS FOR DISABILITY OR DEATH ARISING
OUT OF CARDIAC CONDITIONS
This supplement is for the purpose of citing certain heart cases
which have been decided since the submission of the report. The sec-
tions in which they are deemed to fit will be quoted in full. If a par-
ticular section is not quoted, no further cases in that category have
been decided.
workmen's compensation 27
1. Unusual employment-connected stress or strain is not an absolute condi-
tion precedent to a finding that employment activity caused or precipi-
tated a disabling or fatal heart condition. (Pp. 1-3, Report.)
In City of Oakland v. Ind. Ace. Com. (Haley), 30 C.C.C. 393 (writ
denied, December 6, 1965 ; hearing denied by Supreme Court, January
6, 1966), the petitioning city urged that decedent had not been ex-
posed to any unusual stress in his employment as a police clerk on
the; date of his fatal heart attack. The commission 's answer ob-
served that under the Calabresi case (73 Cal. App. 2d 555) it was un-
necessary to show unusual stress, but that in any event as a matter
of fact decedent 's last day was unusually stressful. An award of death
benefits to decedent's wife was left undisturbed by the appellate
courts.
2. It is the claimant's burden to show by scientific evidence that the dis-
ability or fatal heart condition is employment connected. (Pp. 3-5.)
An award of workmen 's compensation benefits will be annulled where
there is no medical evidence to relate an applicant's disability
(caused by a cerebral vascular accident) to her employment. Allied
Ins. Co. v. Ind. Ace. Com. (Williams), 30 C.C.C. 227 (award annulled
and case remanded on concession by commission of lack of such medi-
cal evidence in the record).
3. Medical opinion generally varies regarding the relationship of any ac-
tivity to cardiac failure and resultant conflicts on the issue of causation
in specific cases present questions of fact for the conclusive resolution
of the commission. (Pp. 5-10.)
In Pacific Intermountain Express v. Ind. Ace. Com. (Pilkington),
30 C.C.C. 266 (writ denied, September 23, 1965; hearing denied by
Supreme Court, October 20, 1965), three doctors, all "board certified"
as heart specialists, testified on behalf of the employer that decedent's
fatal heart attack was not related to his employment. Two other doc-
tors, specialists in internal medicine and cardiology but not "board
certified," testified on behalf of applicant that " Pilkington 's duties
before his death were beyond his endurance and that his continued
work caused his attack." (30 C.C.C. 267.) An award of death bene-
fits was left undisturbed by the appellate courts. See also Drum-
mond v. Ind. Ace. Com., infra, 30 C.C.C. 292 (writ denied).
4. Although not an absolute prerequisite, the presence of unusual physical
or emotional employment-connected stress or strain remains an impor-
tant factual consideration, but some evidence of such stress or strain
does not guarantee benefits. (Pp. 10-13.)
Employment-connected emotional stress was a significant factor in
the medical reports supportive of the commission's awards in El Do-
rado Ins. Exch. v. Ind. Ace. Com. (Simon), 30 C.C.C. 302 (writ de-
nied), and City of Oakland, v. Ind. Ace. Com. (Haley), supra, 30
C.C.C. 393 (writ denied, December 6, 1965; hearing denied by Su-
preme Court, January 6, 1966).
5. (No further cases.)
COMMITTEE REPORT ON FINANCE AND INSURANCE
6. Despite the statutory presumption of work connection, death and disa-
bility benefits have been denied in heart cases involving firemen and
policemen but the medical evidence must clearly dissociate the heart
condition with the employment. (Pp. 16-17.)
In Drummond v. Ind. Ace. Com., supra, 30 C.C.C. 292 (writ denied),
applicant, a lady deputy sheriff, had heart trouble which her treating
doctor asserted was related to the stress of her employment. Defend-
ant's medical expert, and an independent medical examiner, opined
that there was no relation between her employment and her heart
trouble. The commission's denial of benefits was upheld despite peti-
tioner's contention that the presumption of Labor Code § 3212.5 had
not been dispelled by ' ' unequivocal evidence. ' '
7. In rare cases awards have been made based on medical evidence relating
an employee's heart condition to his employment, although almost no
employment stress was apparent, except that encountered in any normal
activity. (Pp. 17-19.)
See Pacific Inier mountain Express v. Ind. Ace. Com. (Pilking-
ton), supra, 30 C.C.C. 266, to the effect that the employee's duties
were beyond his endurance. In that case another element appeared,
however, in that decedent's employment as a truckdriver so isolated
him at the time of his heart attack as to make medical treatment and
recovery impossible.
8. The presence or absence of symptoms prior to the allegedly industrially
related heart condition is an important, but not conclusive, factual con-
sideration. (Pp. 20-21.)
In cases where applicant's preexisting heart condition was asympto-
matic (City of Oakland v. Ind. Ace. Com. (Horn), 30 C.C.C. 269
(writ denied)), and nonlabor disabling (El Dorado Ins. Exch. v.
Ind. Ace. Com. (Simon), 30 C.C.C. 302 (writ denied)), the commis-
sion's findings of employment connection to the disabling heart attacks
were sustained.
9. Apportionment in Heart Cases.
(b) Disability cases: Preexisting symptomatology is an important, but not
conclusive, factual consideration. (Pp. 22-23.)
The appellate courts refused to review commission findings that em-
ployment caused applicant's entire disability without apportion-
ment to underlying condition, (1) where there were no prior symptoms
(City of Oakland v. Ind. Ace. Com. (Horn), supra, 30 C.C.C. 269),
and (2) where the prior condition Avas nonlabor disabling (El Dorado
Ins. Exch. v. Ind. Ace. Com. (Simon), supra, 30 C.C.C. 302).
Respectfully submitted,
Everett A. Corten
Chief Counsel
Sheldon C. St. Clair
Associate Counsel
workmen's compensation 29
At the heart of our quasi-judicial system for determining compen-
sability for work-connected injuries is the availability of expert medical
testimony to establish not only the existence of an injury or disease
but expert medical testimony to determine the cause of the degenera-
tive disease. As pointed out in the above legal summary, there must
be competent medical evidence to establish whether the work-connected
activity either caused, accelerated, or adversely affected a preexisting
symptomatic or asymptomatic disease before there can be an award.
In recognition of this problem, the California Heart Association ap-
pointed an ad hoc Committee on Workmen's Compensation which
conducted a two-year study of workmen's compensation as it relates
to the employment and rehabilitation of individuals with heart dis-
ease. The report of this committee, as presented to the Assembly
Finance and Insurance Committee by Harold T. Griffeath, M.D.,
Chairman, California Heart Association Public Relations Committee,
pointed out that there are many types of heart disease, the most com-
mon being congenital (present at birth), rheumatic (caused by
rheumatic fever), arteriosclerotic or coronary heart disease (sec-
ondary to atherosclerosis), and hypertensive ('secondary to high
blood pressure), and with each type of heart disease, impairment can
vary from none whatsoever to extremely severe. The committee states
that with respect to the nature of heart disease :
It is evident that questions relating to diseases of the heart
and circulatory system are complex and do not lend themselves
to formulae or simple solutions.2
The Heart Association Committee report also stated:
The legal problems relating to heart disease are made doubly
difficult by the fact that the two major causes of heart disability
and death, coronary atherosclerosis and high blood pressure, are
diseases about which medical information is far from complete.
We feel that it is extremely important to emphasize the inade-
quacy of present knowledge to answer many of the questions raised
by Workmen's Compensation Law.3
The committee concluded that atherosclerosis was a major cause of
disease of the heart and circulation and posed the chief legal problem.
It pointed out that 50 percent of all men over 45 have present an
important degree of atherosclerosis of the coronary arteries. In sup-
port of this contention, Dr. Griffeath reported on a study conducted
by the U.S. Army Institute of Pathology :
I referred to the fact that occlusion of vessels of surprising
degree will be seen in apparently healthy young people. On the
left-hand column which you can't see well are the ages of these
people, and they range from 18 to 40. There are only two aged
40, all the rest are 18 to 22. The average age of this group is 21.8.
These were all hearts taken from healthy soldiers, American
2 California Heart Association, Heart Disease and Workmen's Compensation, 1964,
p. 4.
3 Ibid.
3() COMMITTEE REPORT ON FINANCE AND INSURANCE
soldiers, killed in action in Korea. On the right-hand column are
listed luminal narrowing. That means how much of the artery
was still open. The first two— 100% occlusion in these apparently
healthy young soldiers— and then 98, 98, 98, 98, .98, 95, 90, right on
down to 50% occlusion. These were cases of apparently healthy
young boys killed in Korea, frozen, and their hearts were later
examined by the Army Institute of Pathology. The striking finding
of that study which involves 300 hearts was that in 80 percent of
those hearts at an average age of 21.8, there was sufficient athero-
sclerosis that it could be seen with the naked eye in these hearts
without even needing a microscope. In 80 percent of the boys at
an average age just under 22 years, there was sufficiently advanced
arteriosclerosis to see with the naked eye. This is shown to illustrate
the fact that this disease begins very early in life and is well estab-
lished early in life. This information makes it clear that the disease
is well on its way long before employment comes into the picture.4
The Heart Association report went on to say :
The development and progression of this condition usually pro-
ceeds gradually over a period of many years before the occur-
rence of symptoms. What appears to be a sudden onset of a seri-
ous illness in a previously healthy individual is in reality an
outward expression of a progressive disease process which has
been silent for years. The factors which initiate atherosclerosis
are poorly understood. The factors which influence the progres-
sion of this disease are poorly understood. The factors which
determine when the quiescent disease will abruptly manifest itself
by sudden death or a nonfatal heart attack are poorly understood.
Current knowledge indicates that atherosclerosis is the result
of interplay among several factors, including genetic (heredi-
tary), hormonal, and metabolic. ("Metabolic" in this sense re-
fers to the quantity and type of certain fat and protein compo-
nents of the blood as well as clotting components of the blood.)
Environmental factors may modify the process. An example is
heavy cigarette smoking which has an unfavorable influence. The
modifying effect of certain diets, high blood pressure, diabetes and
of physical and emotional stress are under study. Time is an ex-
tremely important factor. It has been said that if a man lives long
enough he will certainly die of atherosclerosis. The relative impor-
tance of these factors varies among individuals and in the same
individual at different times. Undoubtedly there are factors as yet
to be discovered.
Although facts are relatively scant in this field, opinions are
plentiful and one can find support for almost any hypothesis. Based
on what is known about atherosclerosis, it is the conclusion of al-
most all experts in the field and the belief of the California Heart
Association that atherosclerosis is not primarily due to work but to
otner causes. Complications of atherosclerosis of the coronary or
* Transcript, pp. 8-9.
WORKMEN S COMPENSATION 31
other arteries are usually unrelated to work but may be precipi-
tated by work activity after the disease process is advanced.5
"With respect to workmen's compensation awards for heart cases as a
deterrent to a person with a heart condition being able to find em-
ployment, the ad hoc committee has this to say :
It is the opinion of all members of our committee and the con-
cern of the California Heart Association that "Workmen's Com-
pensation Law in California is causing unemployment for people
with heart disease who are perfectly capable of working with com-
plete safety for themselves, their employers and fellow workers.
Industrial spokesmen have stated before our committee that as a
consequence of present law and interpretation, employers are un-
willing to hire individuals who might expose them to liability for
a preexisting impairment. It is apparent that this reluctance by em-
ployers is increasing.
It follows that as medical science becomes increasingly able to
discern heart disease in apparently healthy individuals, we will be
creating a formidable new class of unemployables. Our committee
is aware that there is a tendency at present for larger employers
to screen out individuals who are "potential" cardiacs. These are
persons who are not diseased but whose age, family history, slightly
elevated blood pressure or blood cholesterol level places them in a
group with a greater-than-average chance of ultimately develop-
ing cardiovascular disease.
It is alarming indeed to picture one million or more Californians
with an imagined disability, unable to support themselves or their
families. The committee feels that this prospect is more than just
a gloomy prospect. It is a likely consequence of present law as it
becomes expressed in relation to the reasonable self-interest of
employers. The deterrent to employment is largely a financial one
involving increased insurance costs, since most employers are fa-
miliar with the data from the United States Labor Department
and elsewhere indicating that impaired workers have proved gen-
erally equal to and in some respects better than other workers if
properly placed.
The California Heart Association is concerned about the yearly
increase in the number of claims based upon heart disease coming
before the Industrial Accident Commission. It is our committee's
conviction that the rate of increase will accelerate rapidly. The
number of heart claims in relation to the total number of workers
with heart disease is still small. If the criteria which have led to
awards in heart cases before the Industrial Accident Commission
were applied in all possible similar cases, the number of heart at-
tacks and other cardiovascular problems which could be judged
industrial would, we think, be tremendous. A natural consequence
of this predicted rapid increase in cardiac claims will be an in-
creased reluctance of employers to hire individuals with heart
disease.6
5 California Heart Association, ibid., pp. 4-5.
6 Ibid., pp. 6-7.
32 COMMITTEE REPORT ON FINANCE AND INSURANCE
Finally, the Heart Association made the following observation on the
adequacy' of medical testimony as it relates to permanent disability
evaluation :
It is the view of many physicians within the Heart Association
that awards in workmen's compensation cases involving heart dis-
ease are based more on folklore than on scientific facts. Though
there is certainly a need for clear guidelines regarding the condi-
tions under which disability from heart disease may reasonably be
considered as arising from employment, the gaps in present knowl-
edge in this field create difficulty in setting down strict medical
criteria for assessing work aggravation. Any such medical criteria
would run the risk of being arbitrary and lacking in scientific
backing. Although research is needed and is under way to eluci-
date some of the problems posed by compensation cases, we cannot
reasonably expect research data to give us the answer in a specific
case with all its individual variables. There can be no substitute
for a careful analysis of all the factors in the individual case by a
highly competent and well informed physician.
In the evaluation of disability, newer methods of physiological
testing for the determination of disability should be encouraged.
Methods of evaluating cardiac and pulmonary functioning during
exercise have been developed. When properly applied and inter-
preted, such techniques add objective and quantitative measure-
ments to the assessment of disability. Such techniques are espe-
cially helpful in cases where disability from emotional problems
or lung disease is mistakenly attributed to the heart.
Testing is of greatest help in those cardiac problems which are
anatomically relatively stable. On the other hand, coronary artery
disease, because of the rapidity with which improvement or worsen-
ing of the coronary circulation can occur with accompanying vari-
ations in the degree of disability, can be evaluated with more
limited certainty. No matter how refined the physiological testing,
such procedures must be a supplement to the all-important clinical
evaluation by a physician with special training and experience in
the field of cardiovascular disease.
The Heart Association is concerned about the competence of
medical testimony. It is believed that higher standards should be
applied to medical witnesses. The possession of a medical degree
does not insure that a physician is competent to give meaningful
opinions regarding technical cardiovascular questions. There is a
need to study means of elevating the qualifications of medical wit-
nesses or ways of assigning relative credence to opposing testimony.
Even more important may be a study of ways to supply the Indus-
trial Accident Commission with highly competent, impartial medi-
cal advisers. The present system discourages impartial testimony
since counsel for each party tends to select medical witnesses of
predictable persuasion.7
Appearing on behalf of the City of Los Angeles and the League of
California Cities, Mrs. Christina New, Deputy City Attorney for the
7 Ibid., pp. 8-9.
workmen's compensation 33
ity of Los Angeles, discussed both the problems of rebutting testi-
nony before the Workmen 's Compensation Appeals Board on questions
j)f industrial causation of heart conditions and the scope of review of
ippeals board findings. Mrs. New maintained:
For heart attack or heart disease to be compensable, the work
does not have to be the sole cause or even the primary cause of the
heart condition. If the work is but a contributing cause, it is a
compensable injury under the facts and law as liberally construed
by the Industrial Accident Commission.
The rule . . ., namely, if any doctor testified, including the fam-
ily physician, that the heart condition was the result of the em-
ployment that this should be considered industrial is, in fact, gen-
tlemen, the very rule that is being applied by the Industrial Acci-
dent Commission at the present time.
Dr. Griffeath pointed out that there is no substantial agreement
as to the causes of arteriosclerotic heart disease and that it would
be possible to find a doctor to support any medical theory or opin-
ion as to causation. This, gentlemen, is true. This is one of the prob-
lems that we are up against. The applicant merely has to go out
and find a doctor that will write a report for him saying that his
heart condition is industrially caused. It doesn't matter how many
other reports from other doctors are in the evidence. It doesn't
matter if there are reports by independent medical examiners.
The referee can and almost invariably will, because of Labor Code
Section 3202, construe and find in favor of the applicant that this
is an industrial heart condition. Now, this is the situation we are
faced with once the referee has so held. This is the finding of facts.
It is a finding of medical facts but it is a finding of facts that is
conclusive on appeal. Labor Code Section 3953 says that, and I
will quote right from the section: "The findings and conclusions
of the commission on questions of fact are conclusive and final and
are not subject to review." So if we don't win a case that we feel
is definitely a nonindustrial condition at the commission level . . .
there is no hope.
Also, if we are fortunate enough to have a writ of review
granted, if there is any evidence in the record whatsoever, the dis-
trict court of appeals and the Supreme Court will not disturb the
finding of the commission. Not substantial evidence, gentlemen,
but any evidence. And I will point this fact up by reading from
the most recent Advanced California Report dated January 7, 1966,
from the case of Riders Material Company v. Industrial Accident
Commission. The decision was written by the Honorable Justice
Mosk and I quote: "Under the rules of construction by which we
are bound, findings of the commission must be liberally interpreted
in favor of sustaining an award, and even if the findings are inade-
quate for uncertainty, they will be upheld if they can be made cer-
tain by reference to the record. Moreover, conflicts in the evidence
must be resolved in favor of the findings of the commission, and if
there is any evidence in support, findings will not be disturbed on
appeal." Any evidence. Now, this can be the evidence of a doctor
that the applicant's counsel has gone out and carefully questioned
3— L-2516
34 COMMITTEE REPORT ON FINANCE AND INSURANCE
regarding his theory— does chronic stress and strain aggravate pre-
jsting degenerative underlying arteriosclerotic heart condition —
and the doctor, especially if he is a treating physician, the family
doctor, says, well— I think in this case, yes it did, and he will write
a report to that effect; the referee will find it is industrially
caused and that is the end of it.
It goes so we petition, if we have it granted, the court will say
there is evidence here. We could have five other doctors and an in-
dependent medical examiner saying — well, we disagree, we feel
that this is a nonindustrial condition.8
The charge is often made that the family physician, when called
to testify for an applicant on the question of industrial causation or
irravation of a heart condition, is not an impartial expert medical
witness. This proposition was supported by Dr. Griffeath :
It is very common for the family physician to testify, and he is
in a position where he often is not an ideal impartial witness. I
know that I find it very difficult to testify in a case where I am the
attending physician. You will see individuals who are quite rigid
about their attitudes in all cases except their own patients. Doctors
are human like everybody else ; they are influenced by loyalty and
emotions. We do certainly have a situation where as mentioned the
system does seek out people of known persuasion, and if you had
a group of perhaps superhuman, ideal, impartial, medical wit-
nesses, they probably would never be asked to testify because they
would be too unpredictable.9
If an employer is faced with a choice of hiring an employee with a
known cardiac condition or one with no such condition, he would, all
other things being equal, hire the person without the cardiac condition.
The employer does not, of course, wish to expose himself to a potential
workmen's compensation claim Avhich might result in a substantial per-
manent disability award or the payment of a death benefit. Although
the permanent disability may be apportioned where it is a symptomatic
prior disabling disease, the death benefit is not apportionable. One
member of the committee questioned Dr. Griffeath on the reluctance of
employers to hire known cardiac risks :
Assemblyman Russell : Do you have any statistics as to the num-
ber of men or women who are unemployable because of . . . any
kind of heart condition?
Dr. Griffeath : I think this is very difficult information to obtain
because most people will not report the individuals they turn
down. It is difficult to get at times information on hiring practices
and why certain individuals are excluded. We do know, though,
that many companies have exclusion of cardiac policies in their
hiring just as insurance companies rate up or exclude cardiacs
and we know that this is a real problem. We even know that some
companies are now screening people as to their risk of developing
heart disease and are tending to exclude those individuals who are
a high risk even though they are well at the moment.10
8 Transcript, pp. 60-62.
9 Transcript, p. 22.
10 Transcript, pp. 31-32.
workmen's compensation 35
While industry spokesmen argue that heart cases account for a
substantial amount of the expenditures for workmen's compensation
in this state, others point out that the number of such heart cases before
the Workmen's Compensation Appeals Board are relatively small:
Clint Fair, California Labor Federation, AFL-CIO : In 1953,
they represented 1.7% of all cases decided by the Industrial Acci-
dent Commission] now they have increased to 2.8% in 1964 [and
in 1965] they are down to 2.7%. The problem is not that great a
problem nor is it endangering our system of workmen's compen-
sation when but 2.7% of the cases are in the area in which we have
the greatest number of deaths in our society.11
Given the difficulty that the medical profession itself has had in
determining whether a particular patient's heart condition was caused
or aggravated by his employment and the lack of any generally ac-
cepted medical standard on such causation, can the Legislature set
acceptable legal standards different than those now used. One witness
thought not :
Charles Scully: With respect to the assumption that there
should be a different standard for heart cases, rather than for
other types of compensable injury, I submit that the witness that
you heard this morning in my opinion obviously establishes that
you cannot establish a rule of certitude. You cannot come up with
statutory criteria which in a medical-legal aspect can fairly eval-
uate liability or nonliability. As a matter of fact, I believe the only
conclusion that you can draw from the testimony of Dr. Griffeath
this morning is that it is an individual medical-legal determination
to be made in each case based upon the existing factors applying
to that particular individual in his particular job classification
at the time the condition came about.12
Alternative suggestions have been made with respect to compensat-
ing persons with preexisting injuries or illnesses when his condition
would make an employer reluctant to hire him. One such suggestion
was made at the committee hearing by Mr. Thomas Harris of the
Teamsters Legislative Council :
We have developed this suggestion, and it was only a suggestion
as the attorneys present will immediately recognize, is open to a
challenge of constitutionality on the basis of a case that was de-
cided in the Supreme Court some 20 years ago, but courts change,
and maybe it would be worth the challenge. Our proposal essen-
tially [is] this: that any man with one of the statutory defined
disabilities whether it be heart or epilepsy or certain other types
of injury, leg or back and so forth that the Legislature might de-
fine, he could get from the Industrial Accident Division on a
proper medical basis a certification that he suffered from this kind
of injury. He could then go to an employer and say, yes, I have
a back injury and had a back injury five years ago, and I am
pretty good at this sort of business, here 's my card that shows that
I am registered with the Administrative Director as having such
11 Transcript, p. 37.
12 Transcript, p. 43.
11
many
list
tticuli
fori
phy
fav
pli;
36 COMMITTEE REPORT ON FINANCE AND INSURANCE
and such an injury. That man would in no way waive his rights
1. cnefits in any way whatsoever. But as in automobile insurant
you have an assigned risk fund that takes care of this, that .
signed risk insurance, that takes care of some of us more ir
mpetent drivers, so you would have this fund that would ps
actly the full benefits as though he were on a. par with anybocf
36. The man would not in any way waive his benefits; on t?
her hand, the employer's own account would not be charge
for those benefits. It could be met, obviously, out of General Func
it might be met in various other ways but the suggestion we mat
and that is not the crux of the matter as to how the fund wi
made. Our suggestion was tha.t there be an additional tax on ever;
body who was paying for workmen's compensation.
We believe that the question that has appeared ... here tods
... is serious. Not that it is affecting hundreds of thousands <
workers, but it is affecting many, many hundreds — probably thoi
sands of workers — who want to work, are able to work, physical]
able to work, but which under the present state of the law i
sane employer, especially small employers, is very eager to hire.
To what extent would the mandatory use of independent medic;
examiners or heart specialists help solve the problem of the refer*
gaining superior impartial medical testimony on which to base hi
decision? Since it has been argued that referees will often disregaxne
the opinion of heart specialists in favor of that of a family physicia lere
in reaching a decision on the compensability of a particular heart cas i» '
it is necessary to consider this problem. i le
In 1956 a study 14 was conducted under the auspices of the Cardk
and Industry Committee of the California Heart Association to, amon
other things, test to the degree of unaniminity of medical opinio
with respect to the relationship between alleged ''injury" and heai
disease and to determine if the Industrial Accident Commission^
decisions in heart cases were consistent with expert medical opinio
rendered outside the claims process. The study consisted of an examine
tion of 395 heart cases taken from the files of the Industrial Accider
Commission. These cases were submitted to the panel of outside qual
fied physicians. Over one-half of these cases involved industrial workei
and an additional one-fifth were policemen and firemen entitled to tr
presumption of compensability granted such safety members by varioi'
sections of the Labor Code. A separate tabulation was kept of thei
safety members.
The panel of examining physicians concluded that 79 out of the 3J*
cases submitted for review lacked sufficient information upon whic
to base an opinion. Out of the remaining 319 cases, there was unanimoi
agreement among the reviewers in only 47 cases (15%). Subsequent;
101 of these cases were sent to the same reviewers just as if the
were abstracts not previously distributed. In this case, only 70 percei
of the abstracts were judged the same way by the reviewer the secon
time. On this point the study concluded that the medical judgment i
1:1 Transcript, pp. 47-48.
" Beard, Rodney R., M.D., et al., "Heart Disease Claims Under the California Worl
men's Compensation Act," Circulation, Vol. XIII, No. 3, March 1966, pp. 448-45
K
ii
[fai
retii
lere
re;
ill
workmen's compensation 37
ured by reproducibility on case abstracts material is far from
able. However, often when an expert medical witness is called to
;ify upon such heart cases, he relies on the same information and
many cases does not make a personal examination of the claimant.
s is the case in all cases involving claims for death benefits. This
ticular study concluded with these words:
There is some discrepancy between the judgments of the Cali-
fornia Industrial Accident Commission and a group of expert
physicians reviewing the cases in abstract form, but it compares
favorably with the substantial discrepancy among the physicians
themselves, and the discrepancy between one judgment by a physi-
cian and a second judgment made on the same case by the same
physician, some time later. Inasmuch as awards favorable to the
claimant must be supported in nearly every case by medical evi-
dence, it appears that education of physicians for the part they
play in these proceedings is needed.
It may also be pointed out that the allegation that " every
heart claim gets an award" has not been substantiated by this
study.15
fThe evidence available to this committee would indicate that al-
pugh there has been a rise in the number of cardiac cases filed with
e Workmen's Compensation Appeals Board and its predecessor,
gre has not been an inordinate increase. The increase in the work-
* force and the growing awareness among claimants and counsel of
e developing law with respect to this type injury account for much
this increase. Taking into account the lack of generally accepted
sdical standards on the degree to which work-connected activity
uses or contributes to heart disease, it is not surprising that in any
ven case before the Workmen 's Compensation Appeals Board predic-
bility of the outcome is uncertain. As in most legal matters, the trier
fact must weigh the evidence presented and, exercising sound dis-
etion and reasoning, reach a decision. We are not convinced that
ere has been an abuse of such discretion by the referees or the
>ard, particularly in light of the unanswered medical problems in-
lved in heart disease. We do not believe that the legal framework
this regard, set forth earlier in this report, is manifestly unfair
employers or employees. Although some would like to confine awards
ised on heart disease to cases arising out of extraordinary or severe
ress or strain connected with the work, it must be remembered that
Le compensation system in California was not designed to provide
nefits only for the extraordinary event, but for all ordinary occur-
nces which result in injury, illness or death.
If there is uncertainty in the appeals board decisions, it stems
iainly from the lack of medical certainty in this area. What is re-
hired is medical guidelines rather than legal absolutes. The Legis-
iture cannot impose a rule restricting heart awards to cases of ex-
''aordinary stress or strain when such a rule would not be based
pon reason or substantially conclusive medical evidence that such a
Ibid., p. 456.
COMMITTEE REPORT ON FINANCE AND INSURANCE
rule is proper It was our hope that in enacting AB 2023, and in par-
ticular Section 139 of the Labor Code during the 1965 General Ses-
sion reasonable guidelines could be developed. This new code sec-
tion requires the appointment of a medical advisory committee which
is charged in subsection (d) of that section to "assist in develop-
ing guidelines for determination of disputed questions of medical
fact n This direction to the medical advisory committee should pro-
ride the Workmen's Compensation Appeals Board with added medi-
cal information to, if necessary, revise its guidelines on heart cases
if subsequent medical findings deem this necessary.
Benefits
Permanent Disability Benefits
The Governor's Workmen's Compensation Study Commission, in its
report, found that there had been a sharp increase in benefit-payroll
ratios since 1953, and this increase was contributed to, primarily, by
awards in certain categories. Table 1 sets forth the aggregate benefit-
payroll ratios on a loss-incurred basis for carrier-insured payrolls
during those 10 years. As can be seen from these figures, the more sig-
nificant increases took place in three categories: death benefits (77.8
percent), major permanent partial disabilities (122.9 percent), and
minor permanent partial disabilities (58.5 percent). Wages in this
period of time increased by only 43.3 percent.
The reason for the sharp rise in death benefits is accounted for by the
increased number of death cases (44.9 percent), which roughly cor-
responds to the increase in covered working force during that period
(40.6 percent). In addition, statutory changes in the maximum death
benefit from $8,750 or $7,000 (according to whether there is a sur-
viving widow with at least one dependent child or not) to $20,500 or
$17,500 respectively has accounted for a 50 percent rise. These two ele-
ments taken together account for nearly all of the total 77.8 percent
rise in death benefits ratios.
However, the increased permanent disability costs cannot be attrib-
uted solely to the rise in the covered work force, increased wages or
statutory changes of benefit amounts. In comparing the respective
numerical increase in permanent disability cases resulting from an
increased work force to the actual number of cases, an important
insight can be gained.
While the temporary only cases have remained 6,421 short of the
expected number, major permanent partials have gained 2,586 cases
and minor partials 6,940 cases in excess of the expected numbers.
Hence, a substantial shift across the spectrum has taken place which is
in part responsible for the disproportionate changes in the benefit-pay-
roll ratios of the respective loss categories.
After reviewing the benefit cost figure developed for the study, the
commission concluded :
The substantial increase in the relative amounts of death bene-
fits was primarily the result of increase in benefit levels. The sharp
rise in indemnity benefits for permanent disability was not only
the product of the growth in covered workers and rise in benefit
workmen's compensation
39
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workmen's compensation
TABLE 2
41
Type of increase
Major
permanent partial
Increase in number of cases
Minor
permanent partial
Temporary only
Expected
Actual
Excess or deficiency.
922
3,508
+2,586
5,077
12,017
+6,940
20,390
13,969
-6,421
levels, but in addition the result of a demonstrable shift from in-
juries resulting only in temporary disability to injuries resulting
in a residual permanent disability. The shift occurred across the
whole disability spectrum, but had the most pronounced effects on
relative costs in the category of permanent partial disabilities of
25 percent and above.16
Two witnesses at the committee's hearings presented explanations
for this increase in permanent partial disability costs. One, Mr. Ray-
mond Young, Manager, State Compensation Insurance Fund, blamed it
on inadequate temporary disability payments presently being made
which, in his opinion, forced persons to claim a permanent disability
to make up for wages lost while unable to work and being paid this in-
adequate temporary disability.
In our society, our entire economy is based on the assumption
that we will be able to pay for the groceries, the gas and lights, and
the installment payments on the car, and our kids' teeth, and ton-
sils, and so forth, and it is in this area that workmen's compensa-
tion can really do its greatest job, in terms of the number of people
directly involved.
The need exists when the man has the need, immediately after
the injury occurred. When wage replacement payments are de-
layed or when they prove to be inadequate to meet basic economic
needs, the injured man is forced to seek some other remedy. When
he is forced in this direction, a series of ripple effects are set in
motion which create problems as great or greater than the ones you
have heard expressed here during the hearing.
Specifically, it leads to increased litigation. It leads to a tendency
to misuse the permanent disability rating system to augment or
supplement inadequate temporary benefits. It tends to delay the re-
turn to work.
. . . This [chart] indicates that there is 70.28 percent increase in
filings before the Industrial Accidents Division since 1958 com-
pared to a 20 percent increase in disabling injuries reported. In
other words, 70.28 percent gain in the number of filings for deter-
mination by the new Division of Industrial Accidents since 1958.
Another facet of the problem shows up in the apparent shift
from cases involving temporary disability only, as contrasted to
cases involving permanent disability. For example, a comparison of
the figures in 1957 compared to 1962 show that there was a 123.8
"California, Report of the Workmen's Compensation Study Commission, April 1965,
p. 46.
42 COMMITTEE REPORT ON FINANCE AND INSURANCE
percent increase in major permanent disabilities ; a 62.3 percent in-
crease in minor permanent disabilities compared to only a 25.6
percent increase in cases involving temporary.
Assemblyman Beilenson: What's the reason, do yon think, for
this increase .'
Mr. Young: 1 think there is a real need for these workmen to
augment the benefits they are receiving as temporary benefits.
Quite frequently in correspondence in our files, we see a man who
has accumulated a number of bills during the time he has been re-
ceiving temporary disability. Oftentimes, benefits are delayed, a
man doesn't get them when he needs them and when he does get
them they aren't enough, so he must seek some other remedy to
get himself out of the financial situation.
Assemblyman Beilenson : This didn 't used to be the case %
Mr. Young : I think it was less the case in time when the benefits
more nearly approximated the 62 percent.17
Pressing an opinion contrary to that of Mr. Young was Mr. Warren
Hanna representing the California Conference of Employer Associa-
tions. Mr. Hanna attributed the increased number of applications and
the increased number of permanent disability awards to three causes.
First, the increased number of awards for cardiacs and other degenera-
tive pathologies; second, refusal of the Workmen's Compensation Ap-
peals Board to apportion disabilities between those caused by the injury
and a preexisting injury or disease ; and third, the granting of awards
based wholly or in part on the subjective complaints of the applicant. In
reference to the awards based on subjective complaints which he de-
scribed as the ''subjective racket" the witness mentioned that it is al-
most unheard of for an applicant to walk away from the Appeals Board
hearing without an award of some sort, even if it is solely based on sub-
jective complaints unsupported by medical testimony. Further :
. . . this makes it possible for a claimant seeking a rating to ex-
aggerate the subjectives, that is, by saying they are so severe that
he can no longer do his work adequately or perhaps at all, and if
believed by the referee or the board, even though unsupported by
any objective finding or sign of disability, the employer can thus
be forced to pay for a substantial permanent disability or even at
times, for total and permanent disability.18
Mr. Hanna suggested the elimination of awards for subjective com-
plaints that cannot be supported by findings of manifest physical im-
pairments. He also suggested that :
. . . it would be well to eliminate all allowances for minor and
minimal disabilities which take up so much time of the board and
staff which aren't really disabling.19
This latter suggestion was supported by Mr. Edmund Leonard of the
California Self-Insurers' Association. Directing his attention to those
applicants who have permanent disability ratings of between 1-19 per-
cent, he postulated : *
17 Transcript, pp. 121-122.
18 Transcript, p. 101.
19 Transcript, p. 103.
workmen's compensation 43
. . . [they] actually had no wage loss. And under the concepts of
a wage loss replacement . . . advanced to you and which is the
basic concept of a compensation system, this whole 19 percent
should be washed out. There's no question on that. They have no
need. They have no wage loss and they shouldn't get anything.20
Reference must also be made to the study by Professor Earl F.
Cheit 21 on the question of permanent wage loss suffered by permanent
disability cases. In a study of actual cases Professor Cheit determined
that only 7.3 percent of persons with disability ratings between 1 and
19 percent actually suffered a permanent wage loss. This figure rises
to 27.1 percent for persons with a disability rating of 20-69 percent
and 66.8 percent ^hen the rating is 70-100 percent.
Of these persons with permanent wage loss in each of the three cate-
gories, the median compensation paid was as follows :
1- 19% permanent disability — $1,200
20- 69% permanent disability 3,294
70-100% permanent disability 16,801
However, for those same persons, those with permanent wage loss, the
actual median wage loss suffered was as f o\lows :
1- 19% permanent disability $27,500
20- 69% permanent disability 42,222
70-100% permanent disability 46,562
These figures would indicate that, measured by a "wage loss" stand-
ard alone, a significant number of ^persons with minor permanent par-
tial disabilities are compensated w'hen they have suffered no wage loss.
But those persons who do suffer some wage loss are compensated at a
fraction of what is the actual wa'ge loss.
However, wage loss is not Khe only criteria used to determine the
degree of permanent disability an injured employee has suffered. Labor
Code Section 4660(a) provid es that account shall be taken of the nature
of the injury, the age of the applicant, his occupation and the dimin-
ished ability of the injured employee to compete in the open labor
market.
The Workmen's Compensation Study Commission, in its report, rec-
ommended that there be no increase in benefits for disabilities for less
than 15 percent, but ^hat disabilities greater than 15 percent should be
compensated at a proportionately increasing scale so that disabilities
of 50 percent wouJ d be compensated at H times the present rate and
the total disabilities at 2 J times the present rate.
Their report on the subject concludes :
We cone hide that it is not sufficiently probable that a worker
with a permanent disability of 15 percent or less would suffer
an actuei wage loss after the injury becomes permanent to justify
increases in benefits for this group, as compared to the more seri-
ously injured group. On the other hand, we conclude that it is
sufficiently likely that a worker with a permanent disability of
50 vercent or more (equivalent, for example, to loss of the major
th\imb, index, middle and ring fingers at the proximal joints) will
20 Trap script, p. 146. T ^
» Cheit, Earl F., Injury and Recovery in the Course of Employment, John Wiley and
'.Sons, 1961, pp. 179-185.
44 COMMITTEE REPORT ON FINANCE AND INSURANCE
sustain an actual long-term wage loss sufficient to justify an ii
crease in the indemnity rate.22
4
Temporary Disability Benefits
Temporary total disability payments are presently 61.75 percent c
the employee 's average weekly earnings, but not to exceed $70 per wee
(Labor Code Sections 4453, 4653). The maximum of $70 per week ha
been in effect since 1961 when it was raised from $65 per week. The fo1
lowing table, prepared by the Division of Labor Statistics and Researcl
illustrates the changes in temporary disability benefits from 1953
1965:
IP
it
sin
I
Year*
Average weekly wage of injured workers
Total
Men
Women
Maximum
temporary
benefit
Weekly
earnings
needed to
receive
maximum
benefit
Percent of
injured workers entitled t
receive temporary benefi (SI
Equal to
61% of
earningsb
Less than
61% of
earnings I
I
i
(i)
(2)
(3)
(4)
(5)
(6)
(7)
1948
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
1961
1962
1963
1964
1965
$64.12
63.94
66.87
72.12
76.50
79.86
80.32
83.49
87.69
90.16
94.63
98.33
102.64
105.77
111.39
114.40
119.43
122.09
$66.54
66.70
69.69
75.71
80.19
83.51
84.10
87.48
91.84
94.71
99.22
102.97
107.65
111.39
117.08
120.10
125.68
128.61
$45.27
44.48
46.67
49.23
52.00
55.63
55.73
57.40
60.58
62.60
65.52
72.29
72.58
74.68
78.38
81.85
83.56
$30
30
30
35
35
35
35
40
40
50
50
65
65
70
70
70
70
70
$48.58
48.58
48.58
56.68
56.68
56.68
56.68
64.78
64.78
80.97
80.97
105.26
105.26
113.36
113.36
113.36
113.36
113.36
22
23
19
26
22
19
19
28
24
42
37
63
57
61
56
53
49
48
78
77
81
74
78
81
81
72
76
58
63
37
43
39
44
47
51
52
■ 1948-52 as of November; 1953-65 as of September.
b This column represents the proportion of injured workers earning the same or less than the amount in column 5.
0 This column represents the proportion of injured workers earning more than the amount in column 5.
For the calendar year 1966, the percentage of injured workers en
titled to receive 61.75 percent of earnings has dropped to 45 percent
This decrease in the effective rate of compensation will continue so long
as the average weekly wage in the state increases and the temporary
disability benefit is held at $70. One casualty of the present maximum
temporary disability benefit is the state 's Unemployment Compensation
Disability Fund. Unemployment Insurance Code Section 2629 pro-
vides that a difference between the injured worker's temporary disa-
bility benefits for workmen 's compensation and the unemployment com-
pensation disability benefit the employee would have been entitled tc
f he had been injured off the job can be claimed by the employee. Since
the unemployment compensation disability maximum is $80 per week,;
all workmen's compensation applicants whose weekly earnings are
■ Study Commission Report, p. 204.
workmen's compensation 45
)Ove $113 per week may receive an additional $1-$10 per week from
ie Unemployment Compensation Disability Fund. In effect, the Unem-
oyment Compensation Disability Fund is subsidizing the workmen's
prnpensation program. Since the Unemployment Compensation Dis-
•ij |)ility Fund is entirely supported by employee contributions, while
ifc jorkmen's compensation is employer financed, the industrially injured
ie| jorker is, in effect, paying the compensation for his own injury. Each
;arc Bar this subsidy amounts to over $2.4 million.
53 1 1 The committee does not look with favor upon the continuing deterio-
ation in the temporary disability compensation rate. The totally dis-
bled workman must be assured of adequate compensation benefits to
55 jieet necessary living expenses at today 's prices. The present maximum
\U{ ^mporary disability benefit does not provide such adequacy. As a
^ esult, serious economic loss is visited upon an employee while he is
mporarily disabled, a loss which the workmen's compensation system
/as initially designed to prevent. The committee also does not favor
he continued subsidy of workmen's compensation by the State Unem-
loyment Compensation Disability Fund which may seriously deplete
Jhat fund. The committee would, therefore, favor an increase in work-
len's compensation temporary disability benefits to at least that of
he maximum Unemployment Compensation Disability benefit.
The Workmen's Compensation Study Commission, the Administra-
ive Director of the Division of Industrial Accidents and the Manager
>f the State Compensation Insurance Fund have all recommended that
he maximum temporary disability benefit be raised so that at least 75
>ercent of the work force would, if injured, be compensated at the rate
)f 61.75 percent of their average weekly wage. This would mean a maxi-
num benefit of $94 a week in a year like 1966 rather than the present
|>70 per week.
Uninsured Employers
Every employer subject to the California compensation laws (other
_;han governmental agencies) who does not have a permit to self -insure
must obtain a policy of compensation insurance.23 Failure to do so is a
misdemeanor.24 Willful failure to insure may result in the addition of a
penalty of 10 percent of the compensation otherwise payable,25 and the
award of a fee for the workman 's attorney against the employer.26 The
injured worker may proceed against the uninsured employer for com-
pensation and, at the same time, sue him for damages in the civil
T courts,27 with credit being allowed against the judgment in the amount
jjof the compensation award.28 Negligence on the part of the employer is
B presumed and the defenses of contributory negligence, assumption of
j the risk and the act of a fellow servant are abolished.29 The property of
.the uninsured employer may be attached,30 and the employer's business
jmay be abated as a nuisance.31 Workers not represented by counsel may
l)2* Labor Code, Section 3700.
24 Labor Code, Section 3710.2.
26 Labor Code, Section 4554.
26 Labor Code, Section 4555.
27 Labor Code, Section 3706.
if28 Labor Code, Section 3709.
28 Labor Code, Section 3708.
80 Labor Code, Section 3707.
81 Labor Code, Section 3712.
Hi COMMITTEE REPORT ON FINANCE AND INSURANCE
obtain tl tance of the Division of Labor Law Enforcement in col-
lecting awards against uninsured employers.32
None of these remedies, potent as they may seem, is of any avail to
a seriously injured worker if the employer is insolvent or has inade-
quate assets to meet any judgment or award. California does not have
a l'u nd for the compensation of workers of uninsured employers. The
worker is left to a remedy resembling an employer's liability act
coupled with severe sanctions, none of which is effective against a
bankrupt uninsured employer.
The Division of Labor Law Enforcement and the Department of
Industrial Relations have had the duties since 1953 of enforcing the
laws requiring insurance. One investigator in San Francisco and one in-
vestigator In Los Angeles have the primary duty to enforce compliance
with the workmen's compensation laws. This division receives from
the Department of Employment cards showing the names and addresses
of the approximately 6,500 new employers registered each month. It
also receives from the Division of Labor Statistics and Research an
average in 1963 of 540 doctors' first report of injury that failed to
name a compensation carrier. These reports are mailed to the California
Inspection Rating Bureau for screening, and those employers found to
have no record of workmen's compensation coverage are sent a notice
of their obligation to insure. In fiscal year 1963-65, 681 employers ob-
tained workmen's compensation insurance as a result of enforcement
programs and there were 49 prosecutions for failure to obtain compen-
sation insurance.
However, those business entities which maintain that the persons
working for it are not employees but independent contractors may often
not obtain insurance. The question of the employee-independent con-
tractor status of the worker may not then arise until after an accident
has taken place. If, at this time, the worker is found to have been an
employee and not an independent contractor, and the employer has not
obtained insurance and has no assets or only limited assets, the em-
ployee will be unable to satisfy a judgment or award against the em-
ployer. This works serious hardships against the injured employee
especially when he is in need of immediate medical attention. In cases
of severe injury to an employee where immediate and long-term care
are required and some form of rehabilitation is a necessity the em-
ployee s eventual physical recovery may be seriously hampered by his
inability to get such necessary medical care.
The Governor's Workmen's Compensation Study Commission and the
other organizations which appeared at this committee's hearing recom-
mended that an uninsured employer's fund be established with an
initial appropriation of $100,000 to be administered bv the State Com-
pensation Insurance Fund for the purpose of paying awards of compen-
sation against uninsured employers, and for the purpose of supplying
ZS2S! 7dTlrV?\ ?G State Fund' as trustee of the uninsured
employee s fund, should be authorized to obtain the assistance of the
Sto™ t fZ Enforcement> the Attorney General and district
attorneys to assist it in recouping from uninsured employers the
amounts it has paid. J
v Labor Code, Section 3715.
workmen's compensation 47
Ohio has such a provision in its statutes (Title 41, Ohio Revised Code,
Section 4123). Under the Ohio law, the injured employee may file his
application with the Industrial Accident Commission and file a copy
of it, together with an affidavit that the employer has failed to insure,
with the county recorder. The affidavit constitutes a lien from the time
of filing in favor of the commission upon the employer's real and per-
sonal property and it is recorded like a mortgage. The lien is lifted
only when the employer pays the award or posts a bond satisfactory
to the commissioner. The employee receives his award from the Ohio
State Compensation Insurance Fund even if the fund is unable to col-
lect from the employer. Suit is brought against the employer by a state
agent, and such suits are given precedence on the dockets. The Ohio
State Compensation Insurance Fund also sues the uninsured employer
for the premium that he should have paid if he had been insured all
along.
UNEMPLOYMENT INSURANCE
FOR FARMWORKERS
UNEMPLOYMENT INSURANCE FOR FARMWORKERS
CONCLUSIONS AND RECOMMENDATIONS *
The committee favors in principle the extension of unemployment
insurance to farmworkers and recommends that in the 1967 General
Session a method be devised which will provide such an extension with
reasonable eligibility tests and Avill further provide for the equitable
distribution of the cost of such a program without an additional burden
being placed on the nonagricultural employers.
* Assemblyman Veysey dissents and submits the following statement :
"In my judgment, the recommendation should be: Unemployment insurance is
needed and should be extended to those agricultural employees who have a
Strong and nonseasonal identification with the farm labor market. Strict eligi-
bility tests of turnings and seasonality should be applied to include protection
againal the chance of loss of earnings rather than the certainty of loss, thus
taining a sound principle of insurance.
"There should be adequate safeguards against passing the costs of the agricul-
tural coverage to other employers. Agriculture and farmworkers do not seek a
subsidy."
(50)
UNEMPLOYMENT INSURANCE FOR FARMWORKERS
The two largest employee groups which remain ineligible for unem-
ployment insurance benefits in most states are government employees
and farmworkers. The absence of coverage for these groups largely
results from the influence of the Federal Unemployment Tax Act. All
employers subject to this act must pay 3.1 percent of their taxable pay-
roll to the federal government to provide unemployment insurance
coverage and administrative costs. However, if the employer partici-
pates in an approved state unemployment insurance plan, a credit of
2.7 percent is afforded the subject employer. However, governmental
employees and farmworkers are specifically excluded from mandatory
coverage under the federal act. For this reason almost all state and
territorial unemployment insurance laws exclude these same groups,
although the choice is optional with each state. Only the District of
Columbia, Hawaii and Puerto Rico have extended mandatory coverage
to farmworkers.
There has been a significant change which has converted the hired
farmworker from his former status in which he was virtually a member
of the family living on the family farm to a position in which he is part
of a mass nonresident labor supply to be hired as needed. The nature
and pattern of his employment has become increasingly similar to that
found in nonagricultural industry.
Tables 1 to 4 illustrate some statistical details concerning the
changing character of agriculture in the United States and the State
of California.
The trend from a rural to urban society has been accompanied by
the increasing "industrialization" of the nation's agriculture. Today
farming is big business, especially this is true in California. Large-
TABLE 1
POPULATION: URBAN, RURAL, FARM-U.S. AND CALIFORNIA,
SELECTED YEARS, 1800-1960
(Based on decennial census of population)
United States
California
Total
popula-
tion
(mil-
lions)
Percent
urban
Percent
rural
Farm1
Total
popula-
tion
(mil-
lions)
Percent
urban
Percent
rural
Farm1
Year2
Num-
ber
(thou-
sands)
Percent
of
total
Num-
ber
(thou-
sands)
Percent
of
total
1800
5.3
23.2
76.0
92.0
105.7
122.8
131.7
151.3
179.3
6
15
40
46
50.3
56
57
64
70
94
85
60
54
49.7
44
43
36
30
23,048
13,474
15.2
7.5
10.6
15.7
81
86
29
24
568
351
1850
1900
1910
1920
1930.
1940...
1950
5.4
1960
2.2
1 Farm population is a part of rural population.
2 As of April 1 since 1930, January 1 in 1920, April 15 in 1910, June 1 in 1850 and 1900, August 4 in 1800.
SOURCE: Statistical Ahstrart of the United States, 1966, U.S. Department of Commerce, Bureau of the Census.
(51)
52
COMMITTEE REPORT ON FINANCE AND INSURANCE
TABLE 2
EMPLOYED PERSONS IN AGRICULTURE BY TYPE OF WORKER:
UNITED STATES, 1947-1965
(Persons 14 years of age and over)
Average annual employment in agriculture
Number (000)
Percent
Year'
Total
Self-employed
and unpaid
family workers
Wage and
salary
workers
Total
Self-employed
and unpaid
family workers
Wage and
salary
workers
1947
8,266
7,973
8,026
7,507
7,054
6,805
6,562
6,504
6,730
6,585
6,222
5,844
5,836
5,723
5,463
5,190
4,946
4,761
4,585
6,589
6,227
6,181
5,773
5,408
5,278
5,094
5,051
5,030
4,893
4,535
4,173
4,148
3,856
3,729
3,524
3,271
3,179
3,093
1.677
1,746
1,845
1,733
1,647
1,526
1,467
1,452
1,700
1,692
1,687
1,671
1,689
1,866
1,733
1,666
1,676
1,582
1,492
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
80
78
77
77
77
78
78
78
75
74
73
71
71
67
68
68
66
67
67
20
1948
22
1940
23
1Q50
23
1951
23
1952
22
1953*
22
1954
22
1955
25
1956
26
1957
27
1958
29
1959
29
I960*
33
1961
32
1962*
32
1963
34
1964
33
1965
33
1 Data for the period 1947-1956 have not been adjusted to reflect changes in the definitions of employment and unem-
ployment adopted in January 1957.
1 Not strictly comparable with prior years.
SOURCE: U.S. Department of Labor, Bureau of Labor Statistics.
TABLE 3
SELECTED DATA ON SOCIAL SECURITY COVERAGE OF FARM WORKERS-1963
November 16, 1966
Number of
employers
Number of
workers
Taxable farm wages
Average
Total
(millions)
Average per
worker
number
of workers
per employer
U^.— total'
1955
485,000
475,000
480,000
475,000
41,700
39,600
39,000
1,890,000
1,900,000
1,950,000
1,950,000
380,900
362,500
393,000
51,520
1,920
2,220
2,290
$312
412
493
$805
1,020
1,135
1,175
$820
1,135
1,255
3.9
1960
4.1
1963
4 1
1964 (preliminary)
4.2
California
1955
9 1
1960 .,
9 2
1963
10 1
1 Includes Puerto Rico and Virgin Islands.
SOURCE: Social Security Farm Statistics, 1955-1963, U.S. Department of Health, Education and Welfare, Social
Security Administration, June 1966.
UNEMPLOYMENT INSURANCE FOR FARMWORKERS
TABLE 4
CALIFORNIA
(SELECTED DATA FROM 1959 AND 1964 CENSUS OF AC
November 15, 1966
Item
Number of farms
Average size of farm (acres)
Number of commercial farms (sales $2,500 or more)
Number of farms with expenditures for hired labor
Total wages paid (millions) .
Average wage bill per farm employing hired labor
Number of farms hiring regular workers (150 days or more).
Total number of regular workers hired
Average per farm hiring regular workers
Value of farm products sold — total (millions)
Livestock -
Fruits and nuts - —
Vegetables
Other field crops..
Forest and specialty horticultural products.
SOURCE: 1964 U.S. Census of Agriculture, Pre1
scale operations and extern?'
altered the character of fa'
The sharp decline in 4
is a well-known trend. T
decline has been less f
employed and the v
total employment r
lion, only one out
when total agrir
of three jobs v
farming has 7
ing relative1
Other aT
is true tr
when tT
equal)
Call*
rep
w
COMMITTEE REPORT ON FINANCE AND INSURANCE
COVERAGE IN OTHER STATES AND NATIONS
experience with unemployment insurance for farmworker is
\ly in Hawaii is there mandatory coverage that applies gen-
>st farm employment. Puerto Rico has a special provision
nly to fieldworkers in sugar cane, and even this protection
"e and in certain respects from that afforded to workers
^ industry generally. Coverage of farmworkers in other
voluntary and very few employers have elected to
\e experience Hawaii has had, it should be realized
sat state is not representative of mainland agri-
ulture economy is dominated by large pineapple
^hese highly integrated enterprises handle all
n the growing of the crop to the preparation
are some large vertically integrated corpo-
operating in this manner in certain crops
e some relevance. Clearly, however, such
•e of California's agricultural economy,
urance program for agriculture work-
mate law independent of the regular
This approach avoided conflict with
Tnemployment Tax Act.
cultural and unemployment in-
cover their workers on a self-
nly benefit costs incurred by
it of the normal unemploy-
Mx>st employers, accounting
^yment, have chosen this
mlar unemployment in-
basis pay a flat tax of
■>f the taxable payroll
' only if they hire 20
iar year. For self-
> averaged about
''or contributory
cost data are
t of taxable
ted which
r.
• stable
'cance
>ns
d
UNEMPLOYMENT INSURANCE FOR FARMWORKERS 55
Effective April 1, 1967, mandatory coverage of farmworkers will be
provided in Canada. There is no minimal size of farms specified.
Workers will be entitled to benefits on the same basis as other workers
covered under the Canadian act and no special seasonal limitations
are provided. A separate accounting for benefits paid to agricultural
workers will be maintained and the government will underwrite the
added costs of the program pending a realignment of present contribu-
tion rates of both employers and employees (unemployment insurance
in Canada is financed by contributions from employers, workers, and
the government). It is estimated that 100,000 farms will be covered and
200,000 workers will be affected.
Twenty other foreign countries have compulsory unemployment in-
surance. Eleven of these countries include some or all agricultural
workers under the protection of their programs. A compilation of unem-
ployment insurance and other social insurance benefits provided em-
ployees in these countries are presented in Table 5.
Cypress exempts farms employment fewer than five workers. A size
limitation applies in no other industry. West Germany excludes agri-
cultural employees who have yearly contracts. Ireland excludes female
farm employees. Italy excludes seasonal workers, regardless of industry.
None of the 11 countries which cover agricultural employees make any
distinction in eligibility and benefit provision between employees and
those covered in other industries. Such provisions are applied uniformly
to all workers who have coverage. Both employers and workers con-
tributed the financing of unemployment insurance in all of these 11
countries, except in Italy where workers do not contribute. Government
contributions to unemployment insurance funds are made in six of these
countries — Belgium, Cypress, Holland, Ireland, Norway and the United
Kingdom.
56 COMMITTEE REPORT ON FINANCE AND INSURANCE
AUSTRIA
Dates of basic laws and
types of programs
Coverage
Source of funds
Qualifying conditions
OLD AGE, INVALIDITY,
DEATH , . a
First laws: 1906 (salaried
employees) and 1938 (wage
earners).
Current laws: 1955 (em-
ployees) and 1957 (self-
employed).
Social insurance tyslem
(1 schilling equals 3.8 U.S. cents)
Wage earners and salaried em-
ployees, with separate sys-
tem for each; provisions
largely uniform for both.
Exclusions: Family labor, and
casual employees.
Special systems for miners,
notaries, public employees,
nonagricultural self-employed,
and agricultural self-em-
ployed.
Insured person: Wage earners,
7.5% of wages; salaried em-
ployees 7% of salary.
Employer: For wage earners,
7.5% of payroll (agriculture,
8.5%; mining, 13%); for
salaried employees, 7%.
Government: Annual grants to
wage-earner and agricultural
systems.
Maximum earnings for contri-
bution and benefit purposes:
5,200 schillings a month.
Old-age pension: Age 65 (men)
or 60 (women); and 180
months of contribution, in-
cluding 12 months in last
36 months (payable at 60 and
55, respectively, after year of
sickness or unemployment).
Reduced by current wages
above 710 schillings a month.
Reciprocity required for pay-
ments abroad beyond 2
months.
Invalidity pension: Loss of 50%
of normal earning capacity.
60 months of contribution,
including 12 months in last
36 months.
Survivor pensions: 60 months of
contribution, including 12
months in last 36 months.
SICKNESS AND
MATERNITY
First law: 1888.
Current law: 1955.
Social insurance system (cash
and medical benefits)
Employed persons; and pen-
sioners (for medical benefits
only).
Exclusions: Family labor and
casual employees.
Special systems for railway
employees, public employees,
and nonagricultural self-
employed.
Insured person: Wage earners,
up to 3.65% of wages; salaried
employees, up to 2.4%; pen-
sioners, 1-2.5% of pension
(sick funds fix exact rates).
Employer: For wage earners, up
to 3.65% of payroll; for sala-
ried employees, up to 2.4%
(sick funds fix exact rates).
Government: 50% of cash mater-
nity benefits (Pension Insur-
ance Institutions contribute
8.7% of pensions paid for
medical insurance of pen-
sioners).
Maximum earnings for contri-
bution and benefit purposes:
3,250 schillings a month.
Sickness and maternity benefits:
Currently in covered em-
ployment (funds may require
6 months of contribution in
last 12 months for optional
benefits only).
WORK INJURY
First law: 1887.
Current law: 1955.
Social insurance system
Employed and self-employed
persons.
Insured person: None, except 30
schilings a year payable by
self-employed.
Employer: For wage earners, 2%
of payroll; for salaried em-
ployees, 0.5%.
Government: None.
Maximum earnings for contri-
bution and benefit purposes:
5,200 schillings a month.
Work-injury benefits: No mini-
mum qualifying period.
Continued on next left hand page
UNEMPLOYMENT INSURANCE FOR FARMWORKERS
57
AUSTRIA
Cash benefits for insured
workers (except permanent
disability)
Old-age pension: 30% of aver-
age earnings during last 5
years, plus increments per
year of insurance of 0.6% of
earnings (first 10 years),
0.9% (11-20 years). 1.2%
(21-30 years), and 1.5%
(after 30 years). Paid for 14
months a year.
Constant-attendance supple-
ment (if helpless): 50% of
above; minimum, 300 sch. a
month.
Child's supplement: 5% of earn-
ings per child under 18 (25 if
student, no limit if invalid).
Supplemental equalization pay-
ment (if pension small):
Amount raising pension to
870 schillings a month, plus
345 sch. for wife and 100 sch.
per child.
Permanent disability and
medical benefits for insured
workers
Invalidity pension: 30% of aver-
age earnings during last 5
years, plus increments per
year of insurance of 0.6% of
earnings (first 10 years),
0.9% (11-20 years), 1.2%
(21-30 years), and 1.5%
(after 30 years). Paid for 14
months a year.
Special supplement: If pension
below 40%, increased by 10%
of earnings; if 40-49%, in-
creased to 50%.
Constant-attendance supple-
ment: 50% of above; mini-
mum, 300 sch., and maximum,
600 sch. a month.
Child's supplement: 5% of earn-
ings per child under 18 (25 if
student, no limit if invalid).
Supplemental equalization pay-
ment (if pension small):
Amount raising pension to
870 schillings a month, plus
345 sch. for wife and 100 sch.
per child.
Survivor benefits and medical
benefits for dependents
Widow's pension: 50% of basic
invalidity pension of insured;
minimum for widow over 40
or caring for child, 25% of
earnings of insured. Also pay-
able to invalid dependent
widower.
Orphans' pensions: 40% of wid-
ow's pension, or 60% if full
orphan, for each orphan under
18 (25 if student, no limit if
invalid).
Maximum survivor pensions:
100% of invalidity pension of
insured.
Supplemental equalization pay-
ment (if pension small):
Amount raising widow's pen-
sion to 870 sch. a month, plus
315 sch. per child; or raising
full orphan's pension to 475
schillings.
Funeral grant: 20 days' earn-
ings on death of insured (funds
may raise to 40 days); 1
month's pension on death of
pensioner.
Administrative organization
Ministry of Social Administra-
tion, general supervision.
Manual Workers' Pension Insur-
ance Institution and Sala-
ried Employees' Pension In-
surance Institution, adminis-
tration of pensions (separate
institutions for agriculture,
railroads, mining, and self-em-
ployed). Self-governing agen-
cies managed by elected
representatives of insured
persons and employers.
Sick funds collect contributions,
transmitting them to pension
insurance institutions.
Sickness benefit: At least 50% of
earnings (60% after 6 weeks) ;
funds may add up to 10% of
earnings for wife and 5% for
each child, subject to maxi-
mum of 75% of earnings.
Payable after 3-day waiting
period (salaried employees,
42-day waiting period), for
up to 26 weeks (funds may
pay up to 52 weeks).
Maternity benefit: 100% of earn-
ings, for 6 weeks before and
6 weeks after confinement.
Nursing benefit of 2 sch. a day
(funds may pay up to 5 sch.),
for 8-12 weeks after con-
finement (funds may pay up
to 26 weeks). Also, lump-
sum maternity grant of 40
sch. (funds may pay up to
100 sch.).
Medical benefits: Service bene-
fits, ordinarily provided by
doctors, hospitals, and drug-
gists under contract with and
paid directly by sick funds;
some funds operate own clin-
ics or hospitals.
Medical care, hospitalization,
medicines, maternity care,
dental care, appliances, and
home nursing.
Patients pay 3 schillings per
visit to doctor, 2 sch. per pre-
scription, and up to 20% of
dental care cost.
Duration: No» limit, except 26
weeks for hospitalization
(funds may provide up to 52
weeks).
Medical benefits for dependents:
Same as for insured, but with
10-20% cost-sharing for hos-
pitalization and medicines;
maximum hospitalization, 26
weeks.
Wife receives same maternity
care and nursing benefit as
insured woman, and lump-
sum maternity grant of 600
schillings (funds may raise to
1,000 schillings).
Ministry of Social Administra-
tion, general supervision.
Nine district, 10 establishment,
and 9 agricultural sick funds,
administration of contribu-
tions and benefits (special
funds for mining, railroads,
government employees, and
self-employed). Self-govern-
ing agencies managed by
elected representatives oj
insured persons and em-
ployers.
Temporary disability benefit:
(work injury): Ordinary sick-
ness benefit as above payable
after 3-day waiting period
for first 26 weeks, under sick-
ness msurance.
Permanent disability pension
(work injury): 66%% of aver-
age earnings during last year,
if totally disabled.
Child's supplement: 10% of
pension for each child under
18 (25 if student, no limit if
invalid); maximum supple-
ment, 33H% of earnings.
Constant - attendance supple-
ment: 50% of pension.
Partial disability: Percentage of
full pension corresponding to
loss of earning capacity (con-
verted to lump sum if below
25% of full pension).
Widow's pension (work injury):
40% of earnings of insured, if
age 60 or invalid: otherwise,
20% of earnings. Also pay-
able to dependent widower.
Orphans' pension (work injury):
20% of earnings for each
orphan, or 30% if full orphan.
Other eligible survivors (if above
pensions below maximum):
Parents, brothers and sisters,
and grandparents receive 20%
of earnings.
Ministry of Social Administra-
tion, general supervision.
General Accident Insurance
Institution, administration of
long-term benefits (separate
institutions for agriculture
and railways).
Sick funds collect contributions,
transmitting them to acci-
dent insurance institutions;
such funds also provide tem-
porary disability benefits and
first 45 days of medical care.
Continued on next right hand page
53 COMMITTEE REPORT ON FINANCE AND INSURANCE
AUSTRIA-Continued
Dates of basic laws and
types of programs
Coverage
Source of funds
Qualifying conditions
UNEMPLOYMENT
First law: 1920.
Current law: 1958.
Compulsory insurance system
Employed persons.
Exclusions: Family labor, casual
employees, and public em-
ployees.
Insured person: 1% of earnings
Employer: 1% of payroll.
Government: None (pays cost of
emergency assistance).
Maximum earnings for contri-
bution and benefit purposes:
2,400 schillings a month.
Unemployment benefit: 20 weeks
of contribution in last 12
months (52 weeks in last 24
months, if first claim); 12
months extended for sick-
ness, unemployment, nonin-
sured employment, etc.
Capable of earning K of wages
of similar worker, willing to
work, and registered.
Unemployment not due to vol-
untary leaving, misconduct,
work stoppage, or refusal of
suitable offer (disqualification
usually up to 4 weeks).
Benefit reduced by other in-
come over 1,200 schillings a
month.
FAMILY ALLOWANCES
First law: 1948.
Current laws: 1949 (em-
ployees) and 1954 (self-
employed).
Employment-related system
Employed and self-employed
persons, social insurance bene-
ficiaries, and assistance recip-
ients, with 1 or more children.
Insured person: 3% of income
tax payable by all income tax-
payers.
Employer: 6% of payroll.
Government: Grants by Prov-
inces.
Family allowances: Child must
be under 21 (25 if student or
full orphan ; no limit if invalid
and taxable income of child
not over 500 schillings a
month).
BELGIUM
Dates of basic laws and
types of programs
OLD AGE, INVALIDITY,
DEATH
First law: 1924.
Current laws: 1955 (wage earn-
ers), 1956 (self-employed),
and 1957 (salaried employ-
ees). Invalidity pensions
provided under sickness in-
surance.
Gainfully occupied persons;
coverage effected through 3
separate systems for wage
earners, salaried employees,
and self-employed.
Special systems for miners, rail-
road employees, seamen, and
public employees.
(Coverage for invalidity pen-
sions same as for sickness and
maternity below.)
Source of funds
Insured person: 5% of earnings
(1965, 5.25%; 1966, 5.5%).
Employer: 6% of payroll (1965,
6.75%; 1966, 7%).
Government: Annual subsidies,
according to rising scale.
Maximum earnings for contri-
bution and benefit purposes
(salaried employees only) :
9,000 francs a month.
Qualifying conditions
Old-age pension: Age 65 (men)
or 60 (women) ; payable up to
5 years earlier, with 5% re-
duction a year. For full pen-
sion, actual or credited em-
ployment in all years from
1926; or 45 years for men and
40 for women ; otherwise, pro-
portionately reduced pension.
Substantial retirement neces-
sary. Pensions not payable
abroad; those of aliens re-
duced 20% unless reciprocity.
Continued on\nexQeft hand page
UNEMPLOYMENT INSURANCE FOR FAR M WORK KRS
AUSTRIA-Continued
Cash benefits for insured
workers (except permanent
disability)
Permanent disability and
medical benefits for insured
workers
Survivor benefits and medical
benefits for dependents
Administrative organization
Medical benefits (work injury):
Comprehensive care, includ-
ing appliances and rehabili-
tation (first 45 days provided
under sickness insurance).
Maximum survivor pensions:
80% of earnings.
Funeral grant: Vi& of annual
earnings of insured; mini-
mum, 400 schillings.
Unemployment benefit: About
30-60% of earnings, inversely
according to 12 wage classes.
Maximum benefit, 156 schil-
lings a week.
Dependents supplements: 30
schillings a week for 1st de-
pendent, and 22 sch. for each
other dependent, up to maxi-
mum benefit of 80% of earn-
ings.
Payable after 7-day waiting
period, for up to 12 weeks,
20 weeks (if 52 weeks of cov-
age in last 24 months), or 30
weeks (if 156 weeks of cover-
age in last 60 months).
Unemployment assistance pay-
able to needy citizens when
insurance benefits exhausted.
Ministry of Social Administra-
tion, administration of bene-
fits and placement through
its provincial and local em-
ployment offices; employ-
ment offices managed by
tripartite committees.
Sick funds collect contributions
with those for other social
insurance programs.
Family allowance: 155 sch. a
month for 1st child, 175 sch.
for 2nd, 205 sch. for 3rd, 235
sch. for 4th, and 265 sch. for
5th and each additional child
(paid for 14 months a year).
Also, supplement of 175
schillings a month if 3 or more
children in family.
Birth grant: Lump sum of 500
schillings for each birth, plus
2 infant's grants of 600 sch.
each during first 6 months.
Ministry of Finance, adminis-
tration of program through
Family Allowances Equaliza-
tion Fund attached to Minis-
try.
Employers (or social insurance
institutions) pay allowances
directly to recipients, and
settle only surplus or deficit
of contributions due with
equalization fund.
BELGIUM
Cash benefits for insured
workers (except permanent
disability)
Old-age pension: For full pen-
sion, 60% (single person) or
75% (married person) of
average lifetime earnings; in
computing average, earnings
for each past year rpvalued
for changes in retail price
index.
Reduced pension (if full quali-
fying period not met): Per-
centage of full pension corre-
sponding to proportion of
period complefr d.
Permanent disability and
medical benefits for
insured workers
Invalidity pension: 60% of
earnings.
Maximum pension: 410 francs
a month.
Automatic adjustment of out
standing pensions to 2.h°/{
changes in retail price index
Survivor benefits and
medical benefits for
dependents
Widow's pension: 60% of old-
age pension of insured. Pay-
able to widow age 45, %
incapacitated, or caring for
child.
Automatic adjustment of out-
standing pensions to 2.5%
changes in price index.
Adaptation grant (widows not
eligible for pension): Lump
sum of 1 year's pension.
Administrative
organization
Ministry of Social Welfare,
general supervision.
National Social Security Office,
in Ministry, collection of
contributions and distribu-
tion to national agencies ad-
ministering benefits.
National Retirement and Sur-
vivors Pension Fund, admin-
istration of old-age and
survivor pensions; managed
Continued on next right hand page
60 COMMITTEE REPORT ON FINANCE AND INSURANCE
BELGIUM-Continued
Date of basic laws and
types of programs
Social imurance system
(1 franc equals 2 U.S. cents)
SICKNESS AND
MATERNITY
First law: 1894 (mutual benefit
societies).
Current law: 1963.
Coverage
Social insurance system (cash
and medical benefits)
Employed persons (must enroll
with mutual benefit society
or else with public auxiliary
fund).
Pensioners covered for medical
benefits. Coverage of stu-
dents, public utility employ-
ees, and self-employed for
medical benefits also author-
ized.
Special systems for miners, rail-
road employees, seamen, and
public employees.
Source of funds
(Invalidity pensions financed
through sickness and ma-
ternity insurance.)
Insured person: 5.0% of earn-
ings.
Employer: 5.0% of payroll.
Government: 32% of medical
benefit costs (95% for speci-
fied serious diseases); 50%
of invalidity pensions in 2nd
and 3rd year of payment,
95% thereafter.
Maximum earnings for contri-
bution and benefit purposes:
11,550 francs a month; varies
with retail price index.
Qualifying conditions
Invalidity pension: Loss of % of
earning capacity in usual
occupation. 6 months' cover-
age, including 120 days of
actual work (3 months and
60 days, if below 25), and
coverage during last quarter.
Survivor pensions: Coverage
during last 12 months, and
in Yi of period since age 20,
or 1926 if later; otherwise,
proportionately reduced pen-
Cash sickness and medical bene-
fits: 6 months of insurance,
including 120 days of actual
work (3 months and 60 days,
if below 25), and insurance
during last quarter.
Cash maternity benefits: 10
months of insurance immedi-
ately prior to confinement.
WORK INJURY
First law: 1903.
Current law: 1931.
Employed persons.
Voluntary insurance
private carrier
with
Insured person: None.
Employer: Whole cost, through
direct provision of benefits or
insurance premiums (non-
insured employers with fewer
than 500 workers must con-
tribute to special guarantee
fund).
Government: None.
Maximum earnings for benefit
purposes: 10,000 francs a
month.
Work-injury benefits: No mini-
mum qualifying period.
UNEMPLOYMENT
First law: 1920 (subsidized
voluntary insurance).
Current law: 1945.
Employed persons.
Exclusions: Railroad employees,
domestic servants, public
employees, and family labor.
Special systems for miners,
seamen, port workers, and
building workers.
Insured person: 1% of earnings.
Employer: 1% of payroll.
Government: Regular subsidy of
2% of earnings, plus amount
of any deficit.
Maximum earnings for contri-
bution purposes: 11,550
francs a month; varies with
retail price index.
Compulsory insurance system
Unemployment benefits: From 75
days of insured employment
in last 10 months to 600 days
in last 36 months, rising by
age of claimant.
Ability to earn \i of earnings
of similar worker, willingness
to accept suitable work, and
registration at exchange.
Unemployment not due to vol-
untary leaving, discharge for
misconduct, strike, or unjusti-
fied refusal of suitable offer
(disqualification for 4-52
weeks according to gravity of
fault and frequency of oc-
curence).
Continued on next left hand page
UNEMPLOYMENT INSURANCE FOR FARMWORKERS
61
BELGIUM-Continued
Cash benefits for insured
workers (except permanent
disability)
Permanent disability and
medical benefits for
insured workers
Survivor benefits and
medical benefits for
dependents
Administrative
organization
Automatic adjustment of out-
standing pensions to 2.5%
changes in retail price index.
Funeral grant: Lump sum of at
least 15 days' maximum
cash sickness benefit.
(Special allowances for orphans
paid under family allowance
program.)
by administrator representing
Ministry, assisted by em-
ployee-employer council.
National Sickness and Invalid-
ity Insurance Institute, gen-
eral administration of invalid-
ity pensions.
Sickness benefit: 60% of earnings.
Payable after 3-day waiting
period (salaried employees,
30 days, during which em-
ployer must pay full wages),
for up to 1 year; payable for
additional 2 years if prolonged
incapacity.
Maternity benefit: 60% of earn-
ings.
Payable for 6 weeks before and
6 weeks after confinement
(not payable to salaried em-
ployees during 30 days of
paid maternity leave employ-
ers required by law to provide
them).
Medical benefits: Cash refunds
of part or all of medical
expenses.
General and specialist care,
surgery, hospitalization, med-
icines, laboratory services,
maternity care, dental care,
nursing, and appliances.
Insured normally pays for serv-
ices, and is then reimbursed
by society of which a member
for up to 75% of amount
listed for such services in
official fee schedule; 100%
reimbursement for ward care
in hospital, specified serious
diseases, specialist services,
mid-wifery, appliances, and
to pensioners.
Duration: No limit.
Medical benefits for dependents:
Same as for insured.
Ministry of Social Welfare,
general supervision.
National Social Security Office,
in Ministry, collection of
contributions.
National Sickness and Invalid-
ity Insurance Institute, co-
ordination of program to-
gether with 2 Management
Committees for cash and
medical benefits.
Local agencies paying benefits:
(1) about 2,000 approved
private mutual benefit so-
cieties, federated into 5
national unions; and (2) dis-
trict offices of public auxiliary
fund, for persons not belong-
ing to mutual society.
Temporary disability benefit
(work injury): 80% of earn-
ings for first 28 days of in-
capacity; thereafter, 90%.
Payable from 1st day of dis-
ability, until recovery or
certification of permanent
disability.
Permanent disability pension
(work injury) : 100% of earn-
ings, if totally disabled.
Constant-attendance supple-
ment: Up to 50% of earnings.
Percent of full pension corre-
sponding to degree of in-
capacity, if partially disabled
(converted to lump sum in
specified circumstances).
Medical benefits (work injury):
Medical treatment, surgery,
dental treatment, hospitaliza-
tion, medicines, and appli-
ances.
Widow's pension (work injury):
30% of earnings of deceased.
Also payable to dependent
widower.
Orphans' pensions (work in-
jury): 15% of earnings per
orphan, or 20% if full orphan;
payable for not more than 3
orphans.
Other survivors (in absence of
above): Parent, 20% of earn-
ings; grandchild, brother, or
sister, 15%.
Funeral grant: Lump sum of
30 days' earnings.
Ministry of Social Welfare,
general supervision.
Employment Accident Commis-
sion, under Ministry, and
local accident boards and
inspectors, administration of
program; tripartite repre-
sentation.
Employers may insure liability
with employer mutual asso-
ciations or private insurance
companies.
Courts approve awards.
Unemployment benefit: Flat daily
amounts equal to 50-60% of
average wages of unskilled
worker. Amounts vary ac-
cording to marital status,
sex, age, and size of locality.
Maximum benefit: 124 francs a
day, or 66%% of earnings
(75% if 4 or more children).
Payable after 1-day waiting
period, with no limit on dura-
tion except in special cases.
Ministry of Employment and
Labor, genfral supervision.
National Social Security Office,
collection of contributions.
National Employment Office,
receiving and decision of
claims, supervision of paying
agencies, and operation of
employment service, through
about 30 regional offices;
managed by tripartite com-
mittee.
Local agencies paying benefits:
Public paying offices, or trade
unions for own members.
Continued on next right hand page
62 COMMITTEE REPORT ON FINANCE AND INSURANCE
BELGIUM— Continued
Dates of basic laws and
types of programs
FAMILY ALLOWANCES
First laws: 1930 (employees)
and 1937 (self-employed).
Current law: 1947.
Employment-related syskm
Coverage
All gainfully occupied persons
and social insurance bene-
ficiaries, with 1 or more
children.
Coverage effected under two
separate systems for employ-
ees and self-employed per-
sons.
Special systems for miners,
seamen, and public em-
ployees.
Source of funds
Insured person: Employee, none.
Self-employed, contributions
varying with income and
occupation.
Employer: 10.25% of payroll.
Government: Subsidies to both
employee and self-employed
programs covering any defi-
cits.
Maximum earnings for contri-
bution purposes: 11,550
francs a month; varies with
retail price index.
Qualifying conditions
Family allowances: Child must
be under age 14 (21 if student,
no limit if invalid).
Parent must have 100 days of
employment a year, or be a
social insurance beneficiary.
Eligible children may include
dependent grandchildren,
brothers, sisters, nephews,
and nieces.
CHILE
Dates of basic laws and
types of programs
Coverage
Source of funds
Qualifying conditions
OLD AGE, INVALIDITY,
DEATH
First law: 1924.
Current laws: 1952 (2 laws es-
tablishing separate programs
for wage earners and salaried
employees).
Social insurance system
(1 escudo equals about 33 U.S.
cents)
Wage earners program: Wage
earners, and urban self-em-
ployed whose annual income
not above Santiago minimum
wage.
Salaried employees program:
Salaried employees in private
employment.
Special systems for railroad em-
ployees, seamen and port
workers, public employees,
and about 30 other occupa-
tions.
Insured person: Wage earners,
6% of wages (7% in arduous
occupations) ; self-employed,
10% of earnings; salaried em-
ployees, 8% of salary.
Employer: For wage earners,
12.5% of wages (14% in
arduous occupations) ; for
salaried employees, 17.83%
of salaries.
Government: For wage earners,
5.5% of wages (full amount
not paid regularly in past).
Above contributions also finance
sickness and maternity bene-
fits.
Old-age pension: Wage earner,
age 65 and contributions in
800 weeks and 50% of weeks
since initial coverage (men);
or age 55 and contributions in
500 weeks (women); retire-
ment unnecessary.
Salaried employee, age 65 or
35 years of contribution
(men); age 55 and 20 years,
or any age if 30 years (wom-
en; retirement necessary.
Payable abroad.
Invalidity pension: Wage earner,
70% incapacity (total inva-
lidity) or 40-69% (partial in-
validity); contributions in 50
weeks, 40% of weeks in last 5
years, and 50% of weeks since
initial coverage. Salaried em-
ployee, 67% incapacity; 3
years of contribution, plus 1
year for each 5 years above
age 30.
Survivor pensions: Deceased was
pensioner, or met contribution
requirements for invalidity
pension.
SICKNESS AND MATERNITY
First law: 1924.
Current laws: 1952 (wage earn-
ers) and 1953 (medical serv-
ices for salaried employees).
Social insurance system (cash
and medical benefits)
Wage earners program: Wage
earners; urban self-employed
whose annual income not
above Santiago minimum
wage; and pensioners (medi-
cal benefits only).
Salaried employees program:
Salaried employees in private
and public employment (medi-
ca' services only).
Special systems for railroad em-
ployees, bank employees,
Insured person: See pension con-
tribution above. (Pensioners,
5% of pension.)
Employer: Same.
Government: Same. Also, direct
subsidy raising total govern-
ment share to about % of
cost.
Cash benefits (wage earners
only): Currently insured, 6
months of insurance, and 13
weeks of contribution in last
6 months.
Medical benefits: Wage earners,
currently insured (eligibility
continues during 3 months of
involuntary unemployment) ;
self-employed, contributions
throughout last 3 months.
Salaried employees, currently
insured, 6 months of insur-
Continued on next left hand page
UNEMPLOYMENT INSURANCE FOR FARMWORKERS 63
BELGIUM-Continued
Cash benefits for insured
workers (except permanent
disability)
Permanent disability and
medical benefits for
insured workers
Survivor benefits and
medical benefits for
dependents
Administrative
organization
Family allowance: 457 francs a
month for 1st child, rising to
1,000 francs for 4th and
others, plus 107 frs. if age
6-10, 198 frs. of 10-14, and
251 frs. if over 14.
'Birth grant: 7,250 francs for 1st
birth, 5,000 frs. for 2nd, and
2,690 frs. for each other birth.
Allowances adjusted automati-
cally for 2.5% changes in re-
tail price index.
Ministry of Social Welfare,
general supervision.
National Social Security Office,
collection of contributions.
National Family Allowance
Office, distribution of con-
tributions among individual
funds.
Family allowance funds paying
allowances: About 70 ap-
proved occupational and re-
gional funds, auxiliary public
fund for persons not other-
wise covered, and several
special funds.
CHILE
Cash benefits for insured
workers (except permanent
disability)
Permanent disability and
medical benefits for
insured workers
Survivor benefits and
medical benefits for
dependents
Administrative
organization
Old-age pension (wage-earners):
50% of average wages during
last 5 years, plus 1% of wages
for each 50 weeks of contribu-
tion beyond 500 weeks; maxi-
mum, 70% of wages.
Increment of 10% of contribu-
tions paid for each 150 weeks
of contribution after pension
awarded.
Child's supplement: 10% of
average pension paid in pre-
ceding year, for each child.
Maximum total pension: 100%
of wages.
Salaried employees: J-Ss of
average salary during last 5
years, times years of contri-
bution; maximum pension,
100% of salary.
If ineligible, refund of employee-
employer contributions in
installments.
Automatic adjustment of all
pensions.
Invalidity pension (wage-earn-
ers) : For total invalidity, 50%
average wages during last 5
years, plus 1% of wages for
each 50 weeks of contribution
beyond 500 weeks; maximum,
70% of wages.
Partial invalidity: 50% of pen-
sion for total invalidity.
Salaried employees: 70% of av-
erage salary during last 5
years, plus 2% of salary for
each year of contribution
beyond 20 years.
Automatic adjustment of all
pensions.
Survivor pensions (wage-earn-
ers): Widow or invalid de-
pendent widower, 50% of
pension of insured paid at age
65 or if invalid; otherwise,
payable for 1 year only. Each
orphan under 15 (18 if
student, no limit if invalid),
20% of average pension paid
in preceding year. Maximum
survivor pensions, 100% of
pension of insured.
Salaried employees: Widow or
invalid dependent widower,
40% of pension or average
salary of insured in last 5
years. Each orphan (or
parent), 15% of pension or
average salary. Maximum
survivor pensions, 100% of
pension or salary of insured.
If ineligible, refund of con-
tributions.
Funeral grant: Wage earners, 1
month's minimum wage in
district; salaried employees,
3 months' minimum salary
in Santiago.
Ministry of Labor and Social
Welfare, general supervision.
Social Insurance Service, ad-
ministration of program for
wage earners, through branch
offices; managed by tripartite
board and director-general.
Tripartite local councils super-
vise administration in indi-
vidual regions.
Private Salaried Employees'
Welfare Fund, administra-
tion of program for most
salaried employees; about 25
smaller funds cover salaried
employees in particular occu-
pations.
Sickness benefit (wage-earners):
100% of average wages during
last 6 months.
Payable after 3-day waiting
period, for normal maximum
duration of 52 weeks; may be
extended to 78 weeks in
special cases.
Salaried employees: No insur-
ance benefit (employer must
pay 100% of earnings during
1st month, 75% during 2nd,
Medical benefits: (wage earners):
Medical services ordinarily
provided directly to patients
through facilities of National
Health Service.
General and specialist care,
periodic medical examination,
hospitalization, medicines,
dental care, and maternity
care.
Duration: No limit.
Medical benefits for dependents
(wage-earners only): Same as
for insured. Wife also receives
same nursing allowance as
insured woman.
All children in country under 15:
Medical and surgical care as
out-patient, and part of cost
of hospitalization.
Ministry of Health, general
supervision.
National Health Service, ad-
ministration of benefits and
services for wage earners,
through 13 health zones;
managed by tripartite board
and director-general. Service
operates own dispensaries
and hospitals.
National Salaried Employees'
Medical Service, provision of
Continued on next right hand page
64 COMMITTEE REPORT ON FINANCE AND INSURANCE
CHILE-Continued
Dates of basic laws and
types of programs
Coverage
Source of funds
Qualifying conditions
seamen and port workers,
and other groups.
ance, and 13 weeks of contri-
bution in last 6 months.
WORK INJURY
First law: 1916.
Current law: 1931.
Voluntary insurance with public
or private carrier
Employed persons.
Exclusion: Temporary em-
ployees of small firms.
Special systems for railroad and
public employees.
Insured person: None.
Employer: Most of cost, through
direct provision of benefits or
insurance premiums.
Government: Special grants to
guarantee fund operated by
Work Accident Fund.
Work-injury benefits: No mini-
mum qualifying period.
UNEMPLOYMENT
First and current laws: 1937
(salaried employees) and
1953 (service-indemnities for
wage earners).
Compulsory benefit systems
Wage earners program: Wage
earners covered by service-
indemnity program. Includes
all wage earners except those
under special systems or con-
tracted-out at start.
Salaried employees program:
Salaried employees in private
employment.
Insured person: None (wage
earners), or 1% of salary
(salaried employees).
Employer: 2% of wages to aa
count from which service-in-
demnities paid (wage earners),
or none (salaried employees).
Government: None.
Unemployment benefit: 156 weeks
of coverage (wage earners),
or 12 months of contribution
in salaried employment (sal-
aried employees).
Able and willing to work; regis-
tration for employment; and
resources insufficient for
maintenance (salaried em-
ployees only).
Unemployment not due to
reasons within claimant's
control, or to refusal of offer
of at least 50% of previous
earnings.
FAMILY ALLOWANCES
First law: 1937.
Current law: 1953.
Employment-related system
Employed persons and social in-
surance beneficiaries, with 1
or more children or other
eligible dependent.
Separate systems for wage earn-
ers, salaried employees in
private employment, bank
employees, seamen, public
employees, and other groups.
Insured person: 2% of earnings
or pension (not applied in
practice).
Employer: 22% of payroll.
Government: None.
Family allowances: Child must
be under 18 (23 if student, no
limit if invalid) ; also payable
from 5th month of pregnancy.
Allowances also paid for wife
and aged or invalid parent.
UNEMPLOYMENT INSURANCE FOR FARMWORKERS 65
CHILE-Continued
Caah benefits for insured
workers (except permanent
disability)
Permanent disability and
medical benefits for
insured workers
Survivor benefits and
medical benefits for
dependents
Administrative
organization
50% during 3rd, and 25%
during 4th month).
'alernity benefit (wage-earners
only): 100% of wages, pay-
able for 6 weeks before and 6
weeks after confinement; may
be extended to 12 weeks after
confinement.
ursing allowance: 25% of
maternity benefit, or allow-
ance in kind, payable after
maternity benefit ends until
mother ceases nursing child.
Salaried employees: Limited
preventive and curative medi-
cal services.
limited medical services to
salaried employees, on behalf
of Private Salaried Em-
ployees' Welfare Fund and
other auxiliary funds.
'emporary disability benefit
(work injury): 75% of earn-
ings.
ayable from day injury sus-
tained, for up to 1 year.
Permanent disability pension
(work injury): 60% of earn-
ings, if totally disabled.
Constant-attendance supple-
ment: Up to 20% of pension.
Partial disability: Lump sum of
up to 2 years' earnings, ac-
cording to degree of disability.
If above specified amount,
may be paid in 12 monthly
installments.
Medical benefits (work injury):
Necessary medical and phar-
maceutical services, including
occupational retraining; pro-
vided for duration of need.
Widow's pension (work injury):
30% of earnings of insured.
Also payable to invalid
widower.
Orphans' pensions (work injury):
20% of earnings for 1 orphan
under age 18, and 40% for 2
or more; 60% of earnings for
3 or more full orphans.
Other dependent relatives (if
none of above): 10% of earn-
ings each, up to maximum of
30%; payable to parents,
grandparents, grandchildren,
or other dependents living
with deceased.
Funeral grant: Cost of burial.
Ministry of Labor and Social
Welfare, general supervision.
Work Accident Fund, adminis-
tration of program including
guarantee fund for all em-
ployers; government agency
managed by tripartite board.
Employers may insure liability
with Fund, employer mutual
association, or private com-
pany, though insurance not
compulsory.
Jnemployment benefit (wage
earners): 75% of wage loss.
Payable after 3-day waiting
period, for up to 6 months or
exhaustion of individual in-
demnity account if earlier.
lalaried employees: 75-200% of
legal minimum salary in San-
tiago. Uniform rate for all
beneficiaries, though reduced
if employee earns less than
j minimum salary in district.
Payable from 1st day of un-
employment for up to 90 days,
or 180 days in special cases.
Ministry of Labor and Social
Welfare, general supervision.
Social Insurance Service, ad-
ministration of program for
wage earners.
Private Salaried Employees'
Welfare Fund, administra-
tion of program for most
salaried employees; about 25
smaller funds cover salaried
employees in particular oc-
cupations.
7amily allowance (wage earn-
ers): 0.13 escudos per depend-
ent for each day worked.
salaried employees: About 11
escudos a month per depend-
ent.
Ministry of Labor and Social
Welfare, general supervision.
Social Insurance Service, ad-
ministration of program for
wage earners.
Private Salaried Employees'
Welfare Fund, administra-
tion of program for most
salaried employees; about
25 smaller funds cover partic-
ular occupations.
Employers usually pay allow-
ances directly to own em-
ployees, and settle only sur-
plus or deficit of contributions
due with administrative
agency.
66
CYPRUS
COMMITTEE REPORT ON FINANCE AND INSURANCE
Dates of basic laws and
types of programs
OLD AGE, INVALIDITY,
DEATH
First and current law: 1956
Social insurance system
(1 pound or 1,000 mils equals
U.8. $2.80)
Coverage
Employed persons.
Exclusions: Employees on farms
with fewer than 5 workers,
some part-time employees,
and family labor.
Voluntary coverage for self-
employed and persons leav-
ing compulsory coverage.
Source of funds
Insured person: 60 mils (men)
or 30 mils (women) a week;
married women exempt from
contribution.
Employer: 60 mils (men) or 30
mils (women) a week per
employee.
Government: 60 mils (men) or
30 mils (women) a week per
insured employee.
Above contributions also finance
cash sickness, maternity, and
unemployment benefits.
Qualifying conditions
Old-age pension: Age 65
weeks of paid contributk
and annual average of
weeks paid or credited
incapacity or unemploymj
(reduced pension if aver
of 20-49 weeks). Retirem
unnecessary. Not paya,
abroad unless reciprocj
treaty.
Invalidity pension: None p,
able.
Survivor pensions: 156 weekf
contribution paid by j
ceased, and annual aver:,
of 50 weeks paid or credi
(reduced pension if 20
weeks). Preceding conditii
waived, if death due to wi
injury. For full orphans, <
week of paid contribut
by either parent.
-:■
SICKNESS AND
MATERNITY
First and current law: 1956.
Dual social insurance (cash
benefits) and national health
(medical care) systems
Cash benefits: Employed per-
sons, except employees of
farms with fewer than 5
workers, part-time employ-
ees, and family labor.
Medical care: All residents
(within limits of facilities
available).
Insured person: See pension
contribution above.
Employer: Same.
Government: Same; also, whole
cost of medical care.
Cash sickness benefit: 26 we»,
of paid contributions, and
weeks paid or credited in 1,
year (reduced benefit if
49 weeks). Married worn,
and persons under 18 a
over 65, ineligible.
Maternity grant: 26 weeks
paid contributions by won
or husband, and 50 we<
paid or credited in last yi
(reduced grant if 20-,
weeks).
Medical care: Residence
country.
WORK INJURY
First and current law: 1942.
Voluntary insurance with pri-
vate carrier.
Wage earners, and salaried em-
ployees earning £450 a year
or less.
Exclusions: Salaried employees
earning over £450 a year,
agricultural employees un-
less using power machinery,
domestic servants, casual
employees, and family labor.
Insured person: None.
Employer: Whole cost, through
direct payment of benefits or
insurance premiums.
Government: None.
Work-injury benefits: No mi;
mum qualifying period.
UNEMPLOYMENT
First and current law: 1956.
Compulsory insurance system.
Employed persons.
Exclusions: Employees on farms
with fewer than 5 workers,
various part-time employ-
ees, and family labor.
Insured person: See
contribution above.
Employer: Same.
Government: Same.
pension
Unemployment benefit: 26 wee,
of paid contributions, and
weeks paid or credited in k
year (reduced benefit if 2;
49 weeks). Married womt
and persons under 18 a;.
over 65, ineligible.
Capable of and available f;
work, and daily reporting I
employment exchange.
Continued on next left hand pa
=5 f
UNEMPLOYMENT INSURANCE FOR FARMWORKERS 67
CYPRUS
:^!ash benefits for insured
„ orkers (except permanent
disability)
~* 1
Permanent disability and
medical benefits for
insured workers
Survivor benefits and
medical benefits for
dependents
Administrative
organization
' age pension: £1.200 a week.
! endents' supplements: 600
M ils for 1st, and 300 mils for
™ id dependent.
18 tuced pension: 600 mils-£l
'» \week, plus 300-500 mils for
* It and 150-250 mils for 2nd
ijpendent, according to aver-
se annual weeks of contri-
'ation.
ip sum: Refund of employ-
i contributions paid, if over
5 in 1957 and ineligible for
fension at 65.
•
1
i
1
I
Invalidity pension: None.
Widow's pension: £1.200 a
week, if over age 50 at hus-
band's death, over age 40
when last child exceeds age
limit, permanently incapable
of self support, or caring for
child.
Dependents' supplements: 600
mils for 1st, and 300 mils for
2nd half orphan under 14
(18 if student).
Reduced pension: 600 mils-£l
a week, plus 300-500 mils for
1st and 150-250 mils for 2nd
half orphan, according to
average annual weeks of con-
tribution.
Full orphan's benefit: 600 mils
a week, for each full orphan.
Funeral grant: £10 (reduced
grant of £5-8, according to
weeks of contribution in last
year).
Ministry of Labor and Social
Insurance, administration of
program through employ-
ment exchanges and insur-
ance officers.
tness benefit: £1.200 a week,
lus 600 mils for 1st and 300
lils for 2nd dependent.
fable after 3-day waiting
'eriod, for up to 26 weeks
jt for number of days equal
o number of weeks of paid
bntributions, if less).
i
ternity grant: £5 (reduced
rant of £2.500-4, according
b weeks of contribution in
wt year).
Medical benefits: Medical serv-
ices provided directly to
patients in government dis-
pensaries and hospitals.
Medical treatment, hospitali-
zation, maternity care, and
medicines.
Medical benefits for dependents:
Same as for family head.
Wife receives same cash mater-
nity grant as working woman.
Ministry of Labor and Social
Insurance, administration of
cash benefits through em-
ployment exchanges and
insurance officers.
Ministry of Health, provision
of medical services through
public clinics and hospitals.
nporary disability benefit
work injury): QQ%% of earn-
ngs; maximum, £15 a month.
/able after 3-day waiting
•eriod (unless incapacity ex-
eeds 4 weeks), for up to 26
/eeks.
,y be commuted into lump
urn.
Permanent disability grant (work
injury): Lump sum of 48
months' earnings (72 months,
if under 18), if totally dis-
abled.
Minimum and maximum grants:
£100 and £800.
Partial disability: Lump sum
equal to proportion of total
disability grant correspond-
ing to percentage loss of
earning capacity.
Medical benefits (work injury):
Necessary medical treatment;
provided in part at govern-
ment facilities.
Survivor grant (work injury):
Lump sum equal to 42
months' earnings of deceased
(less any benefits paid to
worker).
Minimum and maximum grants:
£100 and £600.
Court determines allocation of
grant among surviving de-
pendent relatives.
Funeral grant (if no eligible
survivor): Up to £30.
Ministry of Labor and Social
Insurance, general supervi-
sion.
Individual cases decided by
agreement between employ-
er and injured worker, sub-
ject to court review, or other-
wise by a court.
Insurance voluntary unless
specifically prescribed for
employer or class of employ-
ers. Insurance available only
with private companies.
'employment benefit: £1.200
, week, plus 600 mils for 1st
nd 300 mils for 2nd depen-
lent.
duced benefit: 600 mils-£l
i week, plus 300-500 mils
ror 1st and 150-250 mils for
2nd dependent, according to
'yeeks of contribution in last
fear.
Ministry of Labor and Social
Insurance, administration of
program through employ-
ment exchanges and insurance
officers.
Continued on next right hand page
68 COMMITTEE REPORT ON FINANCE AND INSURANCE
CYPRUS— Continued
Dates of basic laws and
types of programs
Coverage
Source of funds
1
Qualifying conditions
i
Unemployment not due
voluntary leaving, nuV
duct, direct participator
trade dispute, refusal of s
able offer, or failure to a
self of job opportunity (
qualification of up to
weeks). ,
FAMILY ALLOWANCES
■
GERMANY (WEST)
i
Dates of basic laws and
1
types of programs
Coverage
Source of funds
Qualifying conditions
OLD AGE, INVALIDITY,
Wage earners and salaried em-
Insured person: 7% of earnings
Old-age pension: Age 65 (pay;
DEATH
ployees, with separate system
(none if earnings below 10%
at age 60 if unemployed
for each; provisions uniform
of ceiling).
year, or if woman with
First law: 1889.
for both systems.
years of employent in i
Employer: 7% of payroll (14%
20 years). 180 months of c(
Current law: 1911 (insurance
Exclusion: Salaried employees
for employee whose earnings
tribution. Retirement
code), as extensively amended
earning over 15,000 marks a
below 10% of ceiling).
necessary unless pension p
in 1957.
year.
before 65. Pension not r.
Government: Annual subsidy of
alien while residing abroa
Special systems for miners,
about lA of cost of wage-
public employees, self-em-
earners' system and 1/5 that
Invalidity pension: Inability.
ployed artisans, and self-
of salaried employees' system
exercise any gainful acth
employed farmers.
(in principle, covers non-old
(general invalidity) or to e
age costs).
50% of normal wages in m
Social inturance system
occupation (occupational
Maximum earnings for contri-
validity). 60 months of c
bution purposes: 2 times na-
tribution.
tional-average earnings in
past 3 years (1964 ceiling,
Survivor pensions: Deceased I
1,120 marks a month).
60 months of contribution
was pensioner, at death.
(1 mark equals 25 U.S. cents)
SICKNESS AND MATERNITY
Employed persons. Pensioners
Insured person: 4% to 5 . 5% of
Cash sickness and medical bt<
also covered for medical bene-
earnings, according to fund.
fits: Membership in sickc
First law: 1883.
fits.
Employer: 4% to 5.5% of pay-
fund.
Current law: 1911 (insurance
Exclusion: Salaried employees
roll, according to fund.
Maternity benefits: 10 months
code).
earning over 7,920 marks a
insurance in last 2 years, 1
year.
Government: None. (Pension
eluding 6 months in last ye:
agencies pay % of employer-
All persons covered required to
employee contribution to sick-
be member of appropriate
ness funds for medical insur-
sickness fund.
ance of pensioners.)
Special system for miners.
Maximum earnings for contri-
'
bution and benefit purposes:
1
660 marks a month.
j
Social insurance system (cash and
medical benefits)
Continued on next left hand p
UNEMPLOYMENT INSURANCE FOR FARMWORKERS
69
.
CYPRUS-Continued
Cash benefits for insured
workers (except permanent
disability)
Permanent disability and
medical benefits for
insured workers
Survivor benefits and
medical benefits for
dependents
Administrative
organization
/able after 3-day waiting
rcriod, for up to 26 weeks
or for number of days equal
b number of weeks of paid
1 (ontributions, if less).
it I
k
GERMANY (WEST)
Cash benefits for insured
workers (except permanent
disability)
Permanent disability and
medical benefits for
insured workers
Survivor benefits and
medical benefits for
dependents
Administrative
organization
l-age pension: 1.5% of
A worker's assessed wages times
* /ears of insurance (latter in-
lude credited periods of in-
apacity, unemployment, and
Ichooling after 15).
i
Inker's "assessed wages" com-
muted by applying average
Percentage which his wages
vere of national-average
vages throughout coverage
*.o national-average wages in
(ast 3 years before claim
flatter national-average wage
igure for pensions awarded
h 1964, 560 marks a month).
ild's supplements: 10% of
'ast 3 year national-average
vage for each child (56 marks
i month in 1964).
Invalidity pension: 1 . 5% of
worker's assessed wages times
years of insurance, for general
invalidity (see Old-age pen-
sion for computation of as-
sessed wages and years of
insurance).
Occupational invalidty: 1% of
worker's assessed wages times
years of insurance.
Pensions computed as if worker
insured to age 55, if 36 months
of contribution in last 5 years
or if contributions in Yi of
months since entered insur-
Child's supplements: 10% of
last 3 year national-average
wage for each child (56 marks
a month in 1964).
Widow's pension: 100% of gen-
eral invalidity pension of in-
sured, payable to all widows
for 3 months. Thereafter,
60% of general invalidity
pension if widow age 45, in-
valid, or caring for child;
otherwise, 60% of occupa-
tional invalidity pension. Also
payable to dependent widow-
Orphans' pensions: 10% of gen-
eral invalidity pension of in-
sured, or 20% if full orphan,
for each orphan under 18 (25
if unmarried student, no
limit if invalid).
Maximum survivor pensions:
100% of general invalidity
pension of insured.
Funeral grant: Lump sum of 20-
40 days' earnings, or 3
months' pension if pensioner.
Federal Ministry of Labor and
Social Affairs, general super-
vision.
State Insurance Office in each
State, administration of wage-
earners' progam in State.
Federal Salaried Employees'
Insurance Office, administra-
tion of program for salaried
employees.
Sickness funds, collection of
contributions.
^kness benefit: 65% of earn-
ngs, plus 4% of earnings for
1st and 3% each for 2nd and
Jrd dependents.
yable after 1-day waiting
)eriod for up to 78 weeks in
i years (during first 6 weeks,
employer must pay wage
parner difference between
jenefit and 100% of wages,
ind also pay full salary to
salaried employee).
jiernity benefit: 75-100% of
sarnings, according to fund,
ibr 4-6 weeks before and 6
weeks after confinement.
Hiring allowance: 50% of ma-
arnity benefit, for 12-26
weeks.
iternity grant: 10-25 marks,
iccording to fund.
Medical benefits: Service benefits
provided to patients by doc-
tors, hospitals, and druggists
under contract with and paid
directly by sickness fund.
General and specialist care, nec-
essary hospitalization, pre-
scribed medicines (small fee
per prescription during first
10 days of illness), dental care,
attendance of midwife or doc-
tor at confinement, specified
appliances, and travel ex-
penses (some funds provide
additional benefits).
Duration: No limit, except 78
weeks for hospitalization in
a 3-year period.
Medical benefits for dependents:
Same as for insured, except
that some funds require larger
cost-sharing for medicines.
Wife of insured man also re-
ceives same maternity grant
as insured woman, and small
nursing allowance.
Federal Ministry of Labor and
Social Affairs, general super-
State Insurance Office in each
State, enforcement of law and
regulations in State.
Sickness funds, administration
of contributions and benefits
for members. Include about
2,000 local, establishment,
occupational, agricultural,
and miner's funds; managed
by elected representatives of
insured persons and employ-
ers, and federated into state
and national federations.
Continued on next right hand page
70 COMMITTEE REPORT ON FINANCE AND INSURANCE
GERMANY (WEST)-Continued
Dates of basic laws and
t\[H's of programs
Coverage
Source of funds
Qualifying conditions
WORK INJURY
First l»l :
Current law: 1963.
Compulsory insurance with semi-
private carrier
Employed persons, most cate-
gories of self-employed per-
sons, and students.
Insured person: None.
Employer: Contributions vary-
ing according to risk; average,
about 1.5% of payroll.
Government: None.
Work-injury benefits: No ii
mum qualifying period.
I
i
I
t
1
UNEMPLOYMENT
First law: 1927.
Current law: 1957.
Compulsory insurance system
Employees in private employ-
ment.
Exclusions: Salaried employees
earning over 15,000 marks a
year; agricultural employees
with yearly contracts; part-
time employees; and family
labor.
Special systems for building
workers and dock workers.
Insured person: 0 . 65% of earn-
ings.
Employer: 0.65% of payroll.
Government: None (pays whole
cost of unemployment assist-
ance).
Maximum earnings for contri-
bution and benefit purposes:
750 marks a month.
Unemployment benefits: 26 W|
of insured employment in;
2 years.
Capable of work, available
work, and registration ati
ployment office. i
Unemployment not due toj
untary leaving, discharg*
misconduct, strike or loci*
refusal of job offer, or re ,
of training (disqualificst
2-8 weeks).
i
;
!
I
i
FAMILY ALLOWANCES
First and current law: 1954
(allowances for 2nd chUd
provided by 1961 law).
Employment-related system
Employed and self-employed
persons, and social insurance
beneficiaries, with 2 or more
children.
Insured person: None, except
about 1% of income by self-
employed persons.
Employer: 1% of payroll.
Government: Whole cost of allow-
ances for 2nd child.
Family allowances: Child i.
be under 18 (25 if studeii
invalid).
i
Payable for 2nd child on^
family earnings not ove*
marks a month.
UNEMPLOYMENT INSURANCE FOR FARMWORKERS
71
GERMANY (WEST)-Continued
Cash benefits for insured
,/orkers (except permanent
disability)
\nporary disability benefit
work injury): Same as for
■rdinary sickness, including
upplementary payments by
mployer.
lially paid by sickness fund
or first 18 days, if worker
overed under sickness in-
urance; thereafter, borne by
.ccident insurance fund.
Permanent disability and
medical benefits for
insured workers
Permanent disability pension
(work injury): 66?^% of earn-
ings, if totally disabled; mini-
mum and maximum pension,
90 and 2,000 marks a month.
Special supplement (if cannot
work and no other pension):
10% of earnings.
Constant-attendance supple-
ment: 100-350 marks a month.
Child's supplements: 10% of
pension for each child under
18.
Partial disability: Percent of
full pension corresponding to
loss of earning capacity, if
latter 20% or more.
Medical benefits (work injury):
Comprehensive care. Usually
provided by sickness fund dur-
ing first 18 days, unless
specialized care required.
Survivor benefits and
medical benefits for
dependents
Widow's pension (work injury):
40% of earnings of insured if
age 45, invalid, or caring for
child; otherwise, 30% of earn-
ings. Also payable to depend-
ent widower.
Orphans' pensions (work injury):
20% of earnings for each
orphan under 18 (25 if stu-
dent, no limit if invalid), or
30% if full orphan.
Parents or grandparents (if
needy): 20% for 1, 30% for
couple, 60% for 4.
Maximum survivor pensions:
80% of earnings of insured.
Funeral grant: Lump sum of 1
month's earnings; minimum,
400 marks.
Administrative
organization
Federal Ministry of Labor and
Social Affairs, general super-
Federal Insurance Office, in
Ministry, direct supervision.
Industrial and agricultural acci-
dent insurance funds, insur-
ance carriers and administra-
tion of program; autonomous
associations managed by
elected employer and em-
ployee representatives. Em-
ployer must affiliate with
association for his industry
and region.
[employment benefit: 40%-
10% of earnings, varying in-
versely according to wage
lass.
pendents' supplements: 9
narks a week each for wife
,nd 1st child, 3 marks for
!nd child.
yable after 3-day waiting
>eriod (unless recipient has
lependents), for up to 13-52
veeks according to weeks of
)f insured employment; 156
veeks of employment in last
t years required for 52-week
naximum.
^employment assistance pay-
tble after exhaustion of bene-
its, subject to income test.)
mily allowance: 25 marks a
nonth for 2nd child, and 40
narks for 3rd and each addi-
tional eligible child in a
amily.
Federal Ministry of Labor and
Social Affairs, general super-
vision.
Federal Placement and Unem-
ployment Insurance Institute,
administration of benefits and
employment service through
regional and local employ-
ment offices; Institute and
offices managed by tripartite
board and committees.
Sickness funds, collection of
contributions.
Federal Placement and Unem-
ployment Insurance Institute,
administration of allowances
for 2nd child.
Union of Federations of Family
Equalization Funds, national
administration and equaliza-
tion of costs for other allow-
ances.
Family Equalization Funds, ad-
ministration of allowances
and contributions; include
about 50 funds for different
industrial branches, and for
districts in case of agricultural
funds, set up within the acci-
dent insurance funds.
72 COMMITTEE REPORT ON FINANCE AND INSURANCE
GERMANY (EAST)
Dates of basic laws and
types of programs
OLD AGE. INVALIDITY,
DEATH
First law: 1889.
Current law: 1950.
Social insurance system
(1 mark equals about 8 U.S.
cents)
Coverage
Employees, members of coop-
eratives, and students.
Special systems for railroad
and communications employ-
ees and self-employed per-
Source of funds
Insured person: 10% of earnings
(special rates for members of
cooperatives, students, and
family labor); self-employed
normally pay 14% of income.
Employer: 10% of payroll
(mining employers, 20%;
special rates for cooperatives) .
Government: Any deficit.
Maximum earnings for contri-
bution and benefit purposes:
600 marks a month.
Above contributions also finance
sickness, maternity, and
unemployment benefits.
Qualifying conditions;
Old-age pension: Age 65 (
or 60 (women); miners
50 according to lengt
employment. 15 years <i
surance (5 years if min«i
age 50 when first cove
and insurance during
period since first entry (r:
maintained by paymen
monthly fee). Retirej
unnecessary.
Invalidity pension: Loss i
of working capacity
normal earning capacit
similar worker. 5 yeaii
insurance, and insurance:
ing % of period since I
entry.
Survivor pensions: Dec*
was pensioner, or mei;
surance requirements for
age or invalidity pensio
death.
SICKNESS AND
MATERNITY
First law: 1883.
Current law: 1961.
Employees, members of co-
operatives, and students.
Pensioners also covered for
medical benefits.
Special systems for railroad and
communications employees
and self-employed persons.
Insured person: See
contribution above.
Employer: Same.
Government: Same.
pension
Sickness and medical ben
Currently insured.
Cash maternity benefit: «
months of insurance ini
2 years.
Social insurance system (cash
and medical benefits)
WORK INJURY
First law: 1884.
Current laws: 1947 and 1961.
Employees, members of co-
operatives, and students.
Separate system for self-
employed workers.
Insured person: None.
Employer: 0.3 to 3.0% of pay-
roll, according to risk of
undertaking.
Work-injury benefits: No •
imum qualifying period. )
Government: Part
medical care.
of cost of
Maximum earnings for contri-
bution and benefit purposes:
600 marks a month.
Social insurance system
Continued on next left hand
UNEMPLOYMENT INSURANCE FOR FARMWORKERS
73
GERMANY (EAST)
!ash benefits for insured
orkers (except permanent
disability)
IB Hi
ige pension: 60 marks a
H ©nth, plus 1% of average
::ar' onthly earnings per year of
"i surance (higher rates for
r«i Sners).
imj j
Dtr)1 pendent's supplements: 10
'<*)'« larks a month for spouse
wtin {e 60, invalid, or caring for
did under 3 or 2 children
ider 8; and 35 marks a
M (onth for each child under
«tf J (18 if student),
ipaes j
ya limum pension: 115 marks a
r* »onth, or 125 marks with
*i igible spouse. Maximum
ijnsion, 80% of earnings.
rial assistance for needy
>;ed not receiving pension.)
:.ife i
n i
h
Permanent disability and
medical benefits for
insured workers
Survivor benefits and
medical benefits for
dependents
Administrative
organization
Invalidity pension: 60 marks a
month, plus 1% of average
monthly earnings per year
of insurance (higher rates for
miners).
Dependent's supplement: 10
marks a month for spouse
age 60, invalid, or caring for
child under 3 or 2 children
under 8; and 35 marks a
month for each child under
15 (18 if student).
Minimum pension: 115 marks
a month, or 125 marks with
eligible spouse. Maximum
pension, 80% of earnings.
(Social assistance for needy
invalids not receiving pen-
sion.)
Widow's pension: 50% of basic
pension of insured (60% if
latter was miner), payable to
widow age 60, invalid, or
caring for child. Also payable
to invalid or aged widower.
Orphans' pensions: 25% of pen-
sion of insured for each
orphan under 15 (18 if stu-
dent), or 35% if full orphan.
Minimum pension per orphan,
40 marks a month or 70
marks if full orphan.
Maximum survivor pensions:
100% of pension of insured.
(Social assistance for needy
survivors not receiving pen-
sion.)
Funeral grant: Lump sum of 20
days' earnings; minimum,
100 marks.
Trade Union Federation, na-
tional administration of pro-
gram through its social in-
surance department and
regional executive commit-
tees.
Trade union committees in
each establishment and social
insurance departments of
district executive trade union
committees, local adminis-
tration of program.
German Insurance Institute,
administration of pensions
for self-employed.
Finance departments of muni-
cipal councils, collection of
contributions.
ness benefit: 50% of earn-
gs (employer must pay
iditional 40% of earnings
3 sick pay) . Maximum bene-
t, 10 marks a day.
able from 1st day of inca-
acity (except for 3-day
■aiting period for members
f cooperatives) for up to 26
'eeks (may be extended to
9 weeks if recovery likely
ithin period) ; maximum
uration of sick pay by em-
ployer, 6 weeks.
ternity benefit: 100% of earn-
lgs, payable for 5 weeks
•efore and 6 weeks after con-
nement. Maximum benefit,
0 marks a day.
rsing allowance: 25% of
arcings, for up to 12 weeks
fter confinement. Also, lay-
-tte grant of 50 marks.
Medical benefits: Medical serv-
ices provided to patients in
government clinics and hos-
pitals, or by doctors and hos-
pitals under contract with
and paid directly by social
insurance system.
General and specialist care,
hospitalization, laboratory
services, prescribed medi-
cines, maternity care, dental
care, appliances and trans-
port.
Medical benefits for dependents:
Same as for insured.
All pregnant women in country,
and children under age 3,
receive free medical care.
Wife of insured man also re-
ceives layette grant of 50
marks.
Trade Union Federation, na-
tional administration of pro-
gram through its social in-
surance department and
regional executive commit-
tees.
Trade union committees in
each establishment, local
administration. Benefits pro-
vided directly by employer in
nationalized and government
establishments, and by social
insurance department of local
executive trade union com-
mittees for private establish-
ments.
Medical benefits provided by
public health facilities, or
through private facilities
with which social insurance
system has contracts.
nporary disability benefit
work injury): 50% of eam-
*gs (employer must pay ad-
litional 40% of earnings as
ick pay).
ildren's supplement (if dis-
.bility 50% or more): 10% of
)enefit for each child under
5.
jrable from day following in-
jury, until recovery or certifi-
cation of permanent dis-
ability.
Permanent disability pension
(work injury): 66^% of
earnings plus 40 marks a
month, if totally disabled.
Supplement if constant attend-
ance required.
Minimum and maximum pen-
sions: 115 and 400 marks a
month (or 80% of average
earnings).
Partial disability: Percent of
full pension proportionate to
loss of working capacity, if at
least 20% disability.
Children's supplements (if dis-
ability 50% or more): 10%
of pension for each child
under 15.
Widow's pension (work injury):
40% of earnings of insured
plus supplement of 40 marks
a month, if age 60, invalid, or
caring for young child. Also
payable to invalid or aged
widower. Other widows re-
ceive 20% of earnings plus
supplement.
Orphans' pensions (work in-
jury): 20% of earnings for
each orphan, or 30% if full
orphan, plus flat-rate supple-
ment for each child.
Maximum survivor pensions:
80% of earnings of insured.
Funeral grant: Lump sum of
20 days' earnings.
Trade Union Federation, na-
tional administration of pro-
gram through its social in-
surance department and
regional executive commit-
tees.
Trade union committees in each
establishment, local admin-
istration. Benefits provided
directly by employer in na-
tionalized and government
establishments; and by social
insurance department of local
executive trade union com-
mittees for private establish-
ments.
Medical benefits provided by
public health facilities, or
through private facilities with
which social insurance system
has contracts.
Continued on next right hand page
74 COMMITTEE REPORT ON FINANCE AND INSURANCE
GERMANY (EAST)-Continoed
Dates of basic laws and
tyj>es of programs
Coverage
Source of funds
|
i
Qualifying conditions
•
UNEMPLOYMENT
First law: 1927.
Current law: 1947.
Compulsory insurance system
Employed persons.
Insured person: See pension
contribution above.
Employer: Same.
Government: Same.
Unemployment benefit: 26 wn
of insurance during last
months.
Capable of work, and regis
tion at employment offic
i
Unemployment not due to
fusal of suitable offer.
;
Other income less than ber
and not living with relate
able to support claimant, i
i
FAMILY ALLOWANCES
First and current law: 1950.
Public system for large families
Residents, with 4 or more
children.
Insured person: None.
Employer: None.
Government: Whole cost.
Family allowances: Family n1
contain 4 or more chilci
under age 14.
i
:
I
IRELAND
Dates of basic laws and
i
i
types of programs
Coverage
Source of funds
Qualifying conditions
OLD AGE, INVALIDITY,
Manual employees, and non-
Insured person: Man, 5s. lid. a
Old-age pension: Age 70, i1
DEATH
manual employees earning
week (3s. 8d. in agriculture).
initial coverage before ,
£800 a year or less.
Woman, 4s. lOd. a week
60. 156 weeks of paid c1
First laws: 1908 (old-age
(2s. lOd. if agricultural em-
tributions, and annual a*
assistance), 1911 (invalidity
Exclusions: Nonmanual workers
ployee).
age of 48 weeks paid :
insurance), and 1935 (sur-
earning over £800 a year;
credited (reduced pensior
vivor insurance).
casual employees; and family
Employer: For each male em-
24-47 weeks). Retirem
labor.
ployee, 5s. lid. a week
unnecessary. Not pays-
Current laws: 1952 (invalidity
(3s. 8d. in agriculture). For
abroad.
and survivor insurance) and
Special system for public em-
each female employee, 5s. 7d.
1960 (old-age insurance).
ployees.
a week (3s. 8d. if agricultural
Invalidity pension: Incapa»
employee) .
for work. 156 weeks of r.
Social insurance system
contributions, and 48 we
Government: Difference between
paid or credited in last y
(1 pound equals U.S. $2.80;
expenditure and contribu-
(reduced pension if 26
Is. equals 14 cents; Id.
tions (about 1/3 of cost);
weeks) .
equals about 1 cent.)
also, entire cost of assistance,
Survivor pensions: 156 week."
Above contributions also finance
contribution paid by
cash sickness and maternity
ceased or wife, and ann
benefits and unemployment
average of 39 weeks paid
benefits.
credited in last 3 or 5 ye;
For full orphan's pension,
weeks of contribution p
by 1 parent.
Continued on next left hand j
UNEMPLOYMENT INSURANCE FOR FARMWORKERS
75
GERMANY (EAST)-Continued
Cash benefits for insured
brkers (except permanent
disability)
Permanent disability and
medical benefits for
insured workers
Survivor benefits and
medical benefits for
dependents
Administrative
organization
Medical benefit (work injury):
Necessary care, including
medical treatment and surg-
ery, hospitalization, medi-
cines, appliances, and re-
training.
>'5« tmpjoyment benefit: 20% of
k irnings, plus flat amount
6r day for each dependent.
teg ising allowance: Flat month-
amount, varying according
> size of locality.
\k
umum
irnings.
benefit: 100% of
able after 7-day waiting
eriod (unless unemployment
>llows 4 weeks of incapacity
r partial unemployment),
>r up to 26 weeks.
Trade Union Federation, na-
tional administration of pro-
gram through its social in-
surance department and
regional executive commit-
Trade union committees in each
establishment and social in-
surance departments of dis-
trict executive trade union
committees, local administra-
tion of program.
lily allowance: 20 marks a
iiijfionth for 4th child, and 25
larks for 5th and each other
igible child.
h grants of 500 marks for
st birth, rising progressively
1,000 marks for 5th and
ach subsequent birth.
Ministry of Labor and Health,
national administration of
program.
IRELAND
Cash benefits for insured
rorkers (except permanent
disability)
Permanent disability and
medical benefits for
insured workers
Survivor benefits and
medical benefits for
dependents
Administrative
organization
-age pension: £2 10s. a week.
fe's supplement: £1 17s. 6d.
» week (also payable for de-
>endent invalid husband).
i-age assistance of up to
'] 15s. a week payable to
ged persons whose other
ncome below specified limits.)
Invalidity pension: £2 2s. 6d. a
week (represents ordinary
sickness benefit, whose dura-
tion unlimited if qualifying
conditions met).
Dependents' supplements:
£1 10s. a week for 1 adult
dependent, 13s. each for 1st
and 2nd child, and 8s. for
each other child.
Reduced rates for married
women and youths.
(Assistance of up to £1 15s. a
week payable to blind per-
sons whose other income
below specified limits.)
Widow's pension: £2 2s. 6d. a
week, or £2 5s. if has child
under 16.
Orphans' pensions: 13s. a week
each for 1st and 2nd child,
and 8s. for each other child
under 16. Full orphans,
£1 5s. a week per child.
(Survivor assistance payable
to widow and orphans whose
other income below specified
limits.)
Department of Social Welfare,
administration of program
with assistance of local
offices.
Continued on next right hand page
76 COMMITTEE REPORT ON FINANCE AND INSURANCE
IRELAND-Contlnued
-
!
i
Dates of basic laws and
types of programs
Coverage
Source of funds
Qualifying conditions
SICKNESS AND
Cash benefits: Manual em-
Insured person: See pension
:
Cash sickness benefit: 26 yi\
of paid contributions, so)
weeks paid or credited ir'
year (reduced benefit if
MATERNITY
ployees, and nonmanual
contribution above.
employees earning £800 a
First law: 1911.
year or less (excluding casual
Employer: Same.
employees, family labor, and
47 weeks).
Cash maternity benefit: 26 w
Current laws: 1952 (cash
public employee?).
Government: Same; also, entire
benefits) and 1953 (medical
cost of medical services
services).
Medical services: Employees
(shared equally by national
of paid contributions, an
weeks paid or credited in1
covered for cash benefits, and
and local governments).
Dual social insurance (cash
all other persons with small
year (maternity grant
benefits) and public (.medical
and moderate incomes.
medically needy whV
contribution test).
services) systems
Medical services: 1 weefe
contribution in last 3 y
Also available to any pe
whose income below £8<
year, who is medically ne1
or who is a small farmer
i
WORK INJURY
Manual employees, and non-
Insured person: None.
Work-injury benefits: No n1
manual employees earning
mum qualifying period. l
First law: 1897.
£600 a year or less.
Employer: Whole cost, through
direct provision of benefits or
:
Current law: 1934.
Exclusions: Nonmanual work-
insurance premiums.
ers earning over £600 a year;
!
Voluntary insurance with pri-
casual employees; and family
Government: None.
!
vate carrier
labor.
1
UNEMPLOYMENT
Manual employees, and non-
Insured person: See pension
Unemployment benefit: 26 w
manual employees earning
contribution above.
of paid contributions, am
First law: 1911.
£800 a year or less.
weeks paid or credited in |
Employer: Same.
year (reduced benefit if
Current law: 1952.
Exclusions: Nonmanual workers
47 weeks).
earning over £800 a year;
Government: Same; also entire
;
female employees in agricul-
cost of unemployment assist-
Capable of and available1
ture and domestic service;
ance.
work, and registration
casual employees; family
employment exchange.
labor; and public employees.
Unemployment not due
Compulsory insurance
Special system for manual
voluntary leaving, misji
system
workers in building trades.
duct, trade dispute w!
employed, failure to at
self of opportunity to ob i
employment, or refusal
suitable offer (disqualil
tion up to 6 weeks).
FAMILY ALLOWANCES
Residents with 1 or more
Insured person: None.
Family allowance: Child mus
children.
under age 16.
First and current law: 1944.
Employer: None.
Government: Whole cost.
Universal public system
UNEMPLOYMENT INSURANCE FOR FARMWORKERS
77
IRELAND-Continoed
"^ 3ash benefits for insured
orkers (except permanent
disability)
Permanent disability and
medical benefits for
insured workers
Survivor benefits and
medical benefits for
dependents
Administrative
organization
ness benefit: £2 2s. 6d. a
eek, plus £1 10s. for 1
lult dependent, 13s. each
1st and 2nd child, and
for each other child.
able after 3-day waiting
h sriod, for up to 52 weeks;
n |iration unlimited after 1 56
J it leeks of paid contributions.
ernity benefits: £2 5s. a
eek, payable for 6 weeks
I »fore and 6 weeks after
ffi' infinement.
pj i, lump-sum maternity grant
£2 (£4 for medically
iiedy).
Medical benefits: Services fur-
nished directly to patients by
local health authorities.
Hospital and convalescent-home
care, including doctors' ser-
vices and medicines for in-
patients (patient may be
charged up to 10s. a day).
Specialist and laboratory serv-
ices for out-patients (patient
may be charged 2s. 6d. for
specialist service and 7s. 6d.
for X-ray).
Obstetric and pediatric care by
doctor or midwife, including
necessary hospitalization.
Dental care and spectacles
(after 156 weeks of paid
contributions).
(General practitioner care pro-
vided to medically needy but
not to all employees.)
Medical benefits for dependents:
Same as for insured; wife of
insured man also receives
same lump-sum maternity
grant as insured woman.
Cash benefits: Department of
Social Welfare, administra-
tion of benefits through local
offices.
Medical services: Department
of Health, administration of
services through county and
city health authorities; latter
provide services in own insti-
tutions, clinics, and dispen-
saries, or elsewhere by ar-
rangement.
porary disability benefit
vork injury): 75% of earn-
; maximum benefit, £4
a week.
able after 3-day waiting
jriod, which is paid for
stroactively if incapacity
sts 2 weeks.
Permanent disability pension
(work injury): 75% of earn-
ings, if totally disabled;
maximum pension, £4 10s.
a week.
Partial disability: Pension equal
to 75% of loss of earnings.
Medical benefits (work injury):
Court may direct payment
of medical expenses by em-
ployer, subject to maximum
fees of £5.
- mployment benefit: £2 2s. 6d.
week.
endents' supplements:
I 10s. a week for 1 adult
;pendent, 13s. each for 1st
id 2nd child, and 8s. for
ch other child under 16.
able after 3-day waiting
riod, for up to 26 weeks
r each spell of unemploy-
jJient (if age 65-69 and have
t f6 weeks of paid contribu-
i pns, may draw benefit with-
ft||t time limit until age 70).
ipmployment assistance pay-
)le after means test to
sedy unemployed persons
it eligible for benefit.)
Survivor grant (work injury):
For adult survivor, lump sum
of 3 years' earnings of
insured. Minimum and maxi-
mum grants, £600 and £900.
For orphans, lump sums vary-
ing according to earnings of
deceased, number of children
under 16, and whether half
or full orphans.
Maximum survivor grants:
£1,800.
Payments to insured before
death deducted, but not be-
low minimum amounts.
Funeral grant (if no survivors):
Up to £15.
Department of Social Welfare,
enforcement of law.
Individual cases settled by
agreement between employer
and injured worker, or by
decision of Circuit Court; all
agreements registered with
Court.
Employers may insure with
private insurance company
or employers' mutual associ-
ation.
Department of Social Welfare,
administration of program
together with employment
service, through its employ-
ment exchanges and their
branches.
- ily allowance: 10s. a month
1st child. 15s. 6d. for
id, and £1 6s. 6d. for 3rd
id each other child.
Department of Social Welfare,
administration of program;
payments made through post
offices.
78 COMMITTEE REPORT ON FINANCE AND INSURANCE
ITALY
-l
Dates of basic laws and
types of programs
Coverage
Source of funds
Qualifying conditions]
OLD AGE, INVALIDITY,
Employed persons.
Insured person: 6.65% of earn-
Old-age pension: Age 60 (i
or 55 (women). J 5 yea
DEATH
ings.
Special systems for seamen,
contribution. Pension
First law: 1919.
industrial managers, liberal
Employer: 13.35% of payroll,
duced l/i if no retirer
professions, railway employ-
plus small wage-class contri-
Payable abroad.
Current law: 1952.
ees, journalists, public em-
bution equal to about 0.1%
i
ployees, self-employed artis-
of payroll.
Invalidity pension: Los
Social insurance system
ans, and self-employed
66%% (wage earners) or
farmers.
Government: Contribution equal
(salaried employees) of j
ing capacity. 5 years of!
to 6.65% of total covered
earnings, plus special grants.
tribution, including
months in last 5 years.
1
Survivor pensions: Deceased
pensioner at death, or I
years of contribution in
ing 12 months in last 5 >
;
(1 lira equals 0.16 of 1 U.S.
I
1
cent)
1
SICKNESS AND
Employed persons, and pen-
Insured person: 0.15% of earn-
Sickness and maternity ber]
Currently insured. No ]
MATERNITY
sioners.
ings.
mum qualifying period.
First and current laws: 1912
Special systems for seamen,
Employer: About 9-11% of pay-
cept for salaried emph
(maternity), 1927 (tubercu-
liberal professions, railway
roll according to occupation,
who must be insured di
losis), 1943 (sickness).
employees, journalists, public
plus contribution for medical
last 30 days to receive i
employees, self-employed
care of pensioners. (Includes
cal benefits (not entitle
Social insurance system (cash
artisans, and self-employed
2% for tuberculosis insur-
cash benefits).
and medical benefits)
farmers.
ance.)
Tuberculosis benefit: 2 yea
Government: Special grants.
contribution, including
months in last 5 years.
;
(
r
i
:
:
WORK INJURY
Employed persons.
Insured person: None.
Work-injury benefits: No ]'
First law: 1898.
Special systems for seamen and
Employer: 2 to 7.6% of payroll,
mum qualifying period.
self-employed farmers.
according to industry (aver-
1
Current law: 1935.
age contribution about 3.7%
of payroll).
[
Social insurance system
1
Government: None.
Continued on next left hand
UNEMPLOYMENT INSURANCE FOR FARMWORKERS 79
ITALY
-5
Cash benefits for insured
orkers (except permanent
disability)
Permanent disability and
medical benefits for
insured workers
Survivor benefits and
medical benefits for
dependents
Administrative
organization
I
I
':
i
■age pension: For men, an-
ual pension equal to 72
'mes 45% of first 1,500 lire
f lifetime basic contribu-
ons, plus 35% of next 1,500
re, plus 30% of rest.
i
men: 72 times 33% of first
,500 lire of contributions,
lus 26% of next 1,500 lire,
Jus 20% of rest.
•ement for deferral of pen-
on: Men, 6-40% of pension
deferred 1-5 years; women,
,-40% if deferred 1-10 years.
dmum pensions: 12,000 lire
month (15,000 lire if defer-
>*I to 65); maximum, 80%
f average earnings.
Id's supplement: 10% of
ension for each child under
3 or invalid.
l monthly pension paid
ich December.
Invalidity pension: For men,
annual pension equal to 72
times 45% of first 1,500 lire
of lifetime basic contribu-
tions, plus 35% of next 1,500
lire, plus 30% of rest.
Women: 72 times 33% of first
1,500 lire of contributions,
plus 26% of next 1,500 lire,
plus 20% of rest.
Minimum pension: 15,000 lire
a month; maximum, 80% of
average earnings.
Child's supplement: 10% of
pension for each child under
18 or invalid.
13th monthly pension paid each
December.
Widow's pension: 50% of pen-
sion paid or payable to
insured. Also payable to
invalid widower.
Orphans' pensions: 20% of pen-
sion of insured for each
orphan under 18 or invalid,
or 30% if full orphan.
Parents (inabsence of above):
15% of pension of insured
for each parent.
Maximum survivor pensions:
100% of pension of insured.
Funeral grant: Lump sum of
20,000 lire for wage earners;
varies by industry for salaried
employees.
Ministry of Labor and Social
Welfare, general supervision.
National Social Insurance Insti-
tute, administration of pro-
gram through its branch
offices; managed by tripartite
governing body.
Separate institutes or funds
administer special systems.
v
:
:
mess benefit (wage earners
oly) : 50% of earnings for 1st
0 days; 66^% thereafter.
jable after 3-day waiting
sriod, for up to 180 days
jnay be extended in special
ises).
>erculosis benefit: 300 lire a
ay while in sanatorium, and
)0 lire a day after leaving
.tter.
'.ernity benefit (wage earners
ily): 80% of earnings, pay-
Die for up to 13 weeks
efore and 8 weeks after
>nfinement.
Medical benefits: Service bene-
fits provided by doctors and
hospitals under contract with
and paid directly by Insti-
tute.
General and specialist care,
hospitalization, prescribed
medicines, 50% or more of
cost of dental care, attend-
ance of midwife or doctor at
confinement, specified appli-
ances, and spa treatment.
Duration: 180 days in a year.
Tuberculosis insurance provides
curative and convalescent
care in sanatorium, post-
sanatorium care, and re-
habilitation; no time limit.
Medical benefits for dependents:
Same as for insured.
Tuberculosis benefit for depend-
ents: 300 lire a day for 1st
6 months, and 200 lire a day
for next 6 months.
Ministry of Labor and Social
Welfare, general supervision.
National Sickness Insurance
Institute, administration of
program through regional
and district offices; managed
by tripartite governing body.
National Social Insurance Insti-
tute, administration of tuber-
culosis insurance program;
Institute operates own sana-
toria.
xporary disability benefit
vork injury): 60% of earn-
igs for first 90 days of dis-
oility; 75% thereafter.
able after waiting period of
days.
Permanent disability pension
(work injury): 100% of earn-
ings, if totally disabled.
Maximum pension, 450,000
lire a year.
Constant-attendance supple-
ment: Up to 180,000 lire a
year.
Dependents' supplements: 5%
of pension for wife and each
child under 18 or invalid.
Partial disability: Percent of
full pension proportionate to
degree of incapacity, if over
10% disability.
Medical benefits (work injury):
Medical, surgical, and hospi-
tal care; appliances; and
rehabilitation.
Widow's pension (work injury):
33^% of earnings of insured.
Also payable to aged or
invalid widower.
Orphans' pensions (work injury):
13M% of earnings for each
orphan under 18 or invalid,
or 26.7% if full orphan.
Parent (in absence of above):
13 lA% of earnings for each
parent.
Maximum survivor pensions:
66%% of earnings of insured.
Survivor grant: Lump sum of
up to 550,000 lire, according
to category of dependents
surviving.
Ministry of Labor and Social
Welfare, general supervision.
National Accident Insurance
Institute, administration of
program through provincial
offices; managed by tripartite
governing body. Institute
operates own traumatological
centers and hospitals.
Separate funds administer spec-
ial systems.
(
Continued on next right hand page
80 COMMITTEE REPORT ON FINANCE AND INSURANCE
ITALY— Continued
Dates of basic laws and
types of programs
Coverage
Source of funds
Qualifying conditions
UNEMPLOYMENT
Employees in private employ-
ment.
Insured person: None.
Unemployment benefit: 2 i
of insurance, and 52 w
First law: 1919.
Employer: 2.3% of payroll.
of contribution in last 2 y
Exclusions: Domestic servants,
Industrial employers also pay
Current law: 1939.
and occasional and seasonal
0.2% of payroll to special
Capable of work, employ
workers.
"wage supplement fund."
available for work,
Compultory insurance system
Government: None.
registered at employi,
office.
Unemployment not due
voluntary leaving, disne
for misconduct, refusa
suitable offer or refusa
prescribed training (disq
float ion for 30 days). !
FAMILY ALLOWANCES
Employees and social insurance
Insured person: None.
Family allowance: Child l|
beneficiaries, with 1 or more
be under 18 (26 if stue
First law: 1936.
children or other dependent.
Employer: 17.5% of payroll
(110 lire a day for agricul-
no limit if invalid).
Current law: 1961.
Special systems for agriculture,
tural employees).
Other eligible dependents: 1
insurance and credit, tax
invalid husband, and
Employment-related system
collectors, and journalists.
Government: Subsidy toward
or invalid parent or gr
allowances for agricultural
parent, if their other im
employees.
is below 10,000 lire a mc
NETHERLANDS
Dates of basic laws and
types of programs
Coverage
Source of funds
Qualifying conditions i
OLD AGE, INVALIDITY,
All residents.
Insured person: 8.1% of net
Old-age pension: Age 65. Cc
DEATH
income payable by all resi-
butions paid each year i
Special system for public
dents age 15-64.
15 to 64, for full pen
First law: 1913.
employees.
otherwise decrements a
Employer: 1.5% of payroll.
(no decrements for pre-
Current laws: 1956 (old age),
period, if resident citizep
1959 (survivors), and 1962
Government: Contributions for
6 years of residence aftei
(invalidity).
low-income persons, and any
58). Retirement unneces.
deficits.
Payable abroad.
Maximum earnings for contri-
Invalidity pension: Loss of
bution purposes: 10,900 guild-
of earning capacity in
ers a year.
able occupation. 150 ^
of contribution.
Social insurance system
Survivor pensions: Deceasec
insured, and survivoi
widow of specified cat*
or full orphan.
(1 guilder equals 27.6 U.S.
cents)
Continued on next left hand
, 1
UNEMPLOYMENT INSURANCE FOR FARMWORKERS 81
ITALY-Continued
Cash benefits for insured
' workers (except permanent
1 disability)
Permanent disability and
medical benefits for
insured workers
Survivor benefits and
medical benefits for
dependents
Administrative
organization
* Unemployment benefit: 300 lire a
1 day. Dependents' supple-
■! ments: 120 lire a day for
dependent spouse, each child,
°I and dependent parent.
»f Maximum duration: 180 days
in a year.
m Certain categories of workers in
k specified localities may receive
a | assistance grants if ineligible
» 1 for ordinary benefits.
1 1
Industrial wage earners also
i receive "wage supplements"
equal to 66%% of lost wages,
if employed less than 40
hours a week (paid from
wage-supplement fund) ; pay-
able indefinitely if working
24 hours a week or more, or
otherwise for 3 months.
Ministry of Labor and Social
Welfare, general supervi-
sion.
National Social Insurance Insti-
tute, administration of pro-
gram through its branch
offices. Also administers wage-
supplement fund.
Placement offices receive, in-
vestigate, and pay claims in
localities where no office of
Institute is located.
family allowance: 4,940 lire a
1 month for 1st and each other
; child.
&.dult dependents: 3,588 lire a
j month for spouse, and 1,430
1 lire for each dependent parent
1 or grandparent.
Ministry of Labor and Social
Welfare, general supervision.
National Social Insurance Insti-
tute, administration of pro-
gram through Central Family
Allowances Fund.
Individual employers pay
allowances directly to own
employees (except in agri-
culture), and settle only sur-
plus or deficit of contribu-
tions due with local branch
of Institute.
NETHERLANDS
Cash benefits for insured
Permanent disability and
Survivor benefits and
workers (except permanent
medical benefits for
medical benefits for
Administrative
disability)
insured workers
dependents
organization
\Old-age pension: Full pension,
Invalidity pension: 3,924 guild-
Widow's pension: 2,034 guilders
Ministry of Social Affairs and
1,770 guilders a year.
ers a year.
a year, or 2,910 guilders if
Public Health, general super-
1
caring for 1 or more children.
vision.
Reduced by decrement of 2%
Partial invalidity: 3,186 guilders
Payable to widow age 50 at
1 for each year of non-contri-
a year if 66^-79% invalidity,
husband's death, 50% inca-
Social Insurance Bank, ad-
I bution.
or 2,454 guilders if 55-66%
pacitated, or caring for child
ministration of pensions with
invalidity.
under 18.
assistance of employer-em-
Wife's supplement (irrespective
ployee regional Labor Coun-
of age): About 55% of pen-
Automatic half-yearly adjust-
Temporary widow's allowance
cils; Bank managed by
sion.
ment of all pensions for each
(if ineligible for pension):
tripartite board.
3% change in wage index.
2,034 guilders a year. Payable
*Tt rm
iAutomatic half-yearly adjust-
for 6 months to widow under
National revenue department,
ment of all pensions for each
27, and extended by 1 month
collection of contributions.
3% change in wage index.
for each year by which widow
is over 26, to maximum of
24 months.
Orphans' pensions: About M of
widow's pension for each full
orphan under age 10, XA if
age 10-16, and % if age 16
or over.
Automatic half-yearly adjust-
ment of all pensions for each
3% change in wage index.
Continued on next right hand page
82 COMMITTEE REPORT ON FINANCE AND INSURANCE
NETHERLANDS— Continued
_ — ,
Dates of basic laws and
types of programs
Coverage
Source of funds
i
Qualifying conditions
SICKNESS AND
MATERNITY
First law: 1913.
Current laws: 1929 (cash
benefits) and 1941 (medical
benefits) .
Social insurance system (sep-
arate but interlocking pro-
grams of cash and medical
benefits).
Employees earning not more
than 10,900 guilders a year.
Must enroll in approved
sickness fund.
Voluntary coverage for medical
benefits available to other
persons and pensioners, if
annual income below specified
levels.
Special systems for miners,
railroad employees, public
employees, seamen, and cer-
tain other groups.
Insured person: 3.4% of earn-
ings. Pensioners, 5.5 or 11
guilders a month, according
to marital status.
Employer: From about 3% to
9% of payroll, according to
risk in industry.
Government: None, except sub-
sidy for voluntary low-income
contributors.
Sickness and maternity benefi
Membership in approv
sickness fund (i.e., in cover
employment or volunta
member); no minimum co(
tribution period.
i
!
1
!
WORK INJURY
First law: 1901.
Current laws: 1921 (industry)
and 1922 (agriculture).
Compulsory insurance with
public or private carrier
Employed persons.
Separate systems for agricul-
tural employees and seamen.
Insured person: None.
Employer: Whole cost, through
insurance premiums varying
with risk; average rate, about
2% of payroll.
Government: None.
Maximum earnings for contri-
bution and benefit purposes:
10,900 guilders a year.
Work-injury benefits: No min,
mum qualifying period.
i
UNEMPLOYMENT
First law: 1916.
Current law: 1949.
Dual industry and general
compulsory insurance sys-
tems
Employees earning not more
than 10,900 guilders a year.
Exclusions: Domestic servants,
temporary employees, and
public employees.
Most employees covered under
both an industry "waiting
benefit" system and general
unemployment benefit sys-
tem; rest covered only under
latter.
Insured person: From about 1
to 5% of earnings, according
to industry (includes 0.3%
for general program, and
remainder for industry wait-
ing-benefit program).
Employer: From about 1% to
5% of payroll, according to
industry (includes 0.3% for
general program, and re-
mainder for industry waiting-
benefit program).
Government: 0.6% of total cov-
ered earnings (for general
program only). Also, cost of
social assistance.
Unemployment benefits: For in
dustry waiting benefits, 15
days of employment in in
dustry concerned during las
12 months. For general un
employment benefits, 78 day
of employment in any in
dustry during last 12 months
Capable of work; available fa
and prepared to accept world
making sufficient effort to
find work; and registration a
public labor exchange.
1
Unemployment not due ti
voluntary leaving, dismiss*
for misconduct, strike o
lockout, refusal of suitabl
offer, or refusal to undergi
prescribed training.
Continued on next left hand pag*
UNEMPLOYMENT INSURANCE FOR FARMWORKERS 83
NETHERLANDS-Continued
Cash benefits for insured
Permanent disability and
Survivor benefits and
yorkers (except permanent
medical benefits for
medical benefits for
Administrative
!
->
disability)
insured workers
dependents
organization
i
tjfcness benefit: 80% of earn-
Medical benefits: Service benefits
Medical benefits for dependents:
Ministry of Social Affairs and
.'ill
ings.
provided by doctors, hos-
Same as for insured person.
Public Health, general super-
ve
pitals, and druggists under
vision.
:;
yable after 3-day waiting
teriod for up to 52 weeks.
contract with and paid direct-
Maternity grant: Lump sum of
I
ly by sickness funds.
55 guilders payable to wife
Industrial association for each
of insured man.
industry, administration of
General and specialist care,
cash benefits within industry ;
hospitalization, laboratory
approved joint employer-em-
•dernity benefit: 100% of earn-
services, medicines, limited
ployee bodies with compul-
ngs, payable for 6 weeks
dental care, obstetric care,
sory nationwide membership
Defore and 6 weeks after
appliances, and transporta-
and bipartite governing
sonfinement.
tion.
boards. District and local
offices of associations receive
iternity grant: Lump sum of
Patient shares cost of sanator-
and pay claims.
55 guilders.
ium care, artificial limbs, and
transportation.
Maximum duration: No limit,
except 70 days for hospitali-
zation.
Approved sickness funds, ad-
ministration of medical bene-
fits: supervision by tripartite
Sickness Funds Council.
About 115 funds now oper-
ui
ating.
— — _ — .
mporary disability benefit
Permanent disability pension
Widow's pension (work injury):
Ministry of Social Affairs and
(work injury): 80% of earn-
(work injury): 70% of earn-
30% of earnings of insured.
Public Health, general super-
ings during first 6 weeks;
ings, if totally disabled.
Also payable to invalid
vision.
thereafter, 70% of earnings.
Constant-attendance supple-
widower.
Social Insurance Bank, ad-
■yable from first day of in-
ment: 30% of earnings.
Orphans' pensions (work in-
ministration of program.
capacity for up to 1 year.
jury): 15% of earnings for
Partial disability: Pension equal
each orphan under age 16,
Employers must insure with
to 70% of wage loss; may be
or 20% if full orphan.
Bank, unless authorized by
commuted to lump sum under
it to insure with special acci-
specified conditions.
Other eligible dependents (if
above pensions below maxi-
dent insurance association or
private company.
Medical benefits (work injury):
mum): Parents, grandpar-
.
Medical treatment, surgery,
ents, parents-in-law, grand
dental treatment, hospitali-
children, up to 30% of
zation, medicines, and ap-
earnings.
pliances.
Maximum survivor pensions:
60% of earnings of insured.
Funeral grant: Lump sum of
30 days' earnings.
i
nemployment benefits: Mini-
Ministry of Social Affairs and
mum rate for waiting benefits
Public Health, general super-
'and rate of general benefits:
vision.
70% of going earnings in in-
:
•sured's occupation (60% if
General Unemployment Fund,
[■youth or not living alone).
administration of general un-
ipplement for dependent:
10% of earnings.
employment benefits and
supervision of waiting bene-
fits; directed by tripartite
i
■'aiting period: Varies among
board.
1 industries, as fixed by indus-
Industrial association for each
trial association.
[aximum duration: Employees
under industry systems re-
industry, administration of
waiting benefits within in-
dustry. District and local
offices of associations receive
sBceive waiting benefits for 48
and pay claims.
F days, and then general bene-
tlfits for 78 days. Others re-
Til ceive general benefits for 126
I days.
|5ocial assistance for needy
1 unemployed exhausting bene-
fit rights.)
—^ — -~— - - ^~-^—
Continued on next right hand pag
84 COMMITTEE REPORT ON FINANCE AND INSURANCE
NETHERLANDS— Continued
Dates of basic laws and
types of programs
Coverage
Source of funds
Qualifying conditions 1
FAMILY ALLOWANCES
First laws: 1939 (employees)
and 1951 (self-employed).
Current laws: 1962.
Dual employment-related and
general systems
Employees, self-employed per-
sons of limited income, and
social insurance beneficiaries,
with 1 or more children; and
all other residents with 3 or
more children.
Insured person: Employee, none.
Self-employed and non-em-
ployed, 2% of net income.
Employer: 5.3% of payroll.
Government: Whole cost of allow-
ances for 1st and 2nd child of
self-employed persons, and
for pensioners.
Maximum earnings for contri-
bution purposes: 10,900 guild-
ers a year.
Family allowances: Child r
be under age 16 (27 if stu«'
or invalid).
Self-employed must earn
than 4,000 guilders a yea
receive allowances for
and 2nd child. Non-emplc
receive allowances only f
3rd child.
NORWAY
Dates of basic laws aud
types of programs
Coverage
Source of funds
Qualifying conditions '
OLD AGE, INVALIDITY,
DEATH
First law: 1936.
Current laws: 1957 (old age
and survivors) and 1960 (in-
validity).
Universal pension system
(1 crown equals 14 U.S. cents)
All residents.
Special systems for railroad em-
ployees, seamen, fishermen,
forestry workers, nurses, and
public employees.
Insured person: 3.25 to 18.25
crowns a week, according to
annual-income class, payable
by all residents below age 70.
No contribution if income
below 4,000 crowns a year.
Employer: Amounts equal to
contributions of employees.
Government: About 20% of cost,
shared between national and
local governments; latter also
bear cost of supplemental
pensions.
Old-age pension: Age 70. B
dence in country during
8 years (aliens must also b1
15 years of residence after
20). Retirement unnecessj-
Pensions not payable abr
except during tempo)
absence.
Invalidity pension: Loss of £
normal working capac
Residence during last 5 y
(aliens must also have
years of residence after '
20).
Survivor pensions: Widow*
widower, spouse was I
sioner at death. Orphan,
der 18, resident in coun
and supporting parent di
SICKNESS AND MATERNITY
First law: 1909.
Current law: 1956.
Social insurance system (cash
and medical benefits)
Medical benefits: All residents
(dependent spouse earning
below 1 ,000 crowns a year and
children under 18 covered by
insurance of family head).
Cash benefits: All employees
covered compulsorily; non-
employees may be covered
voluntarily.
Special systems for seamen,
fishermen, and public em-
ployees.
Insured person: From 2.20 to
10 crowns a week, according
to annual-income class. Self-
employed pay additional pre-
mium if covered voluntarily
for cash benefits. Pensioners
exempt from contributions,
unless non-pension income
above 1,000 crowns a year.
Employer: 75% of contributions
of employees.
Government: National govern-
ment, 20% of contributions
of insured persons; local
governments, 25% of same.
Cash sickness and maternity I;
fits: 14 days of in sun1
(nonemployees, 6 weeks)
Medical benefits: Currently
sored.
1
1
Continued on next left hand j
UNEMPLOYMENT INSURANCE FOR FARMWORKERS 85
NETHERLANDS-Continued
Cash benefits for insured
irorkers (except permanent
disability)
Permanent disability and
medical benefits for
insured workers
Survivor benefits and
medical benefits for
dependents
Administrative
organization
Hi i
ifyily allowance: 19.50 guilders
! month for 1st child, rising
o 32.50 guilders a month for
in th and each additional child.
J" I
Ministry of Social Affairs and
Public Health, general super-
vision.
Industrial associations, admin-
istration of allowances within
each industry; larger em-
ployers pay allowances to
own employees and settle
surplus or deficit of contri-
butions due with association.
Social Insurance Bank, admin-
istration of allowances for
non-employees and pension-
ers, with assistance of re-
gional Labor Councils.
NORWAY
Cash benefits for insured
workers (except permanent
disability)
Permanent disability and
medical benefits for
insured workers
Survivor benefits and
medical benefits for
dependents
Administrative
organization
\jl-age pension: 315 crowns a
month.
jpplement for wife age 60:
'% of pension.
Id's supplement: 75 crowns
a month for each child under
18.
(pplementary pensions granted
by some local governments,
in some cases after income
test.
Invalidity pension: 315 crowns a
month.
Supplement for invalid or aged
wife: 50% of pension.
Child's supplement: 75 crowns
a month for each child under
age 18.
Constant-attendance supple-
ment: 60 crowns a month.
Supplementary pensions granted
by some local governments.
Widow's pension (if pensioner
dies): 315 crowns a month,
payable to widow age 60 or
invalid. Also payable to
widower age 60 and invalid.
Orphans' pensions: 75 crowns a
month for each orphan under
age 18, or 150 crowns for each
full orphan.
Supplementary pensions granted
by some local governments, in
some cases after income test.
Funeral grant: Lump sum of
300 crowns.
Ministry of Social Affairs, gen-
eral supervision.
National Insurance Institution,
national administration of
program, supervision of local
funds, and equalization of
costs by distribution of
government contribution.
Local insurance funds, adminis-
tration of program locally.
Generally 1 fund in each
municipality; funds managed
by elected boards.
pkness benefit: 3-19 crowns a
day, according to annual-
income class, plus 2 crowns a
day for dependent spouse and
each child under 18.
,iyable after 3-day waiting
period for up to 104 weeks
(unlimited for tuberculosis,
cancer, arthritis, and polio-
myelitis, if under treatment).
laternity benefit: 3-19 crowns a
day, according to annual-
income class, plus 2 crowns a
day for dependent husband
and each child under 18.
ayable for 6 weeks before and
, 6 weeks after confinement.
Medical benefits: Cash refunds
of part or all of medical ex-
penses, or less commonly serv-
ice benefits furnished by pro-
viders under contract with
funds.
66-75% of cost of doctors' fees,
dental care, and transport;
free care in public hospital,
maternity clinic, and sana-
torium; and listed vital medi-
cines and laboratory services.
Duration: No limit while in re-
ceipt of remedial treatment.
Medical benefits for dependents:
Same as for insured.
Wife of insured employee also
receives maternity grant of
200 crowns, unless treatment
provided in maternity clinic.
Ministry of Social Affairs, gen-
eral supervision.
National Insurance Institution,
national administration of
program, supervision of local
funds, equalization of costs
by distribution of govern-
ment contribution, and ap-
proval of contracts with
doctors.
Local insurance funds, adminis-
tration of contributions and
benefits locally.
Continued on next right hand page
86 COMMITTEE REPORT ON FINANCE AND INSURANCE
NORWAY— Continued
Dates of basic laws and
— - ' — rriB
types of programs
Coverage
Source of funds
Qualifying conditions |
WORK INJURY
Employees, fishermen, and stu-
Insured person: None (fisher-
Work-injury benefits: No vm ,
dents.
men, 1% of income).
mum qualifying period. 1 ,
First law: 1895.
Self-employed may insure vol-
Employer: 0.60 to 9 crowns a
Current law: 1958.
untarily.
week per employee, accord-
ing to risk of occupation.
Government: Cost of benefits for
students, and part of those
for fishermen.
Social insurance system
Maximum earnings for benefit
purposes: 1,667 crowns a
month.
UNEMPLOYMENT
Employees with earnings above
Insured person: 0.25 to 1.20
Unemployment benefits: 30 we
1,000 crowns a year.
crowns a week, according to
of contribution in last y*
First law: 1906 (subsidized
annual-income class.
or 45 weeks in last 3 years:
voluntary insurance).
Employer: 0 . 25 to 1 . 20 crowns
Able and willing to work, i
Current law: 1959.
Exclusions: Fishermen, family
a week per employee, accord-
registration at public empl
labor in agriculture and do-
ing to income class.
ment office.
mestic service, temporary
employees, and public em-
Government: National govern-
Unemployment not due to i
ployees.
ment, 60% of deficit of loca ]
untary leaving, discharge
funds; local governments,
misconduct, labor dispute
Compulsory insurance system
25% of contributions of in-
which participated, or reft f
Special system for seamen.
sured persons and employers.
of suitable offer or retrain .1
(disqualification for at led
4 weeks).
FAMILY ALLOWANCES
Residents with 2 or more
Insurtd person: None.
Family allowances: Family m
children.
normally contain 2 or mi
First and current law: 1946.
Employer: None.
children under age 16.
Government: Whole cost.
If both parents aliens, child
1 parent must have 6 mon'
of residence in country.
Universal public system
UNEMPLOYMENT INSURANCE FOR FARMWORKERS 87
NORWAY-Continued
Cash benefits for insured
workers (except permanent
disability)
'emporary disability benefit
(work injury): Ordinary sick-
ness benefit as above also
payable in case of work in-
jury, for up to 52 weeks.
Permanent disability and
medical benefits for
insured workers
Permanent disability pension
(work injury): 60% of aver-
age earnings, if totally dis-
abled.
Constant-attendance supple-
ment: Up to 200 crowns a
month.
Child's supplement: 75 crowns
a month for each child under
18 (21 if student, no limit if
invalid).
Partial disability: Percent of
full pension proportionate to
degree of disability (lump
sum of 3 years' pension for
15-29% disability).
Medical benefits (work injury):
Comprehensive care, includ-
ing appliances; no sharing in
cost by patient.
Survivor benefits and
medical benefits for
dependents
Widow's pension (work injury):
40% of earnings of insured, if
age 40 or caring for child;
otherwise, 2 years' pension
only. Also payable to invalid
widower.
Orphans' pensions (work injury):
75 crowns a month for each
orphan under 18 (21 if stu-
dent, no limit if invalid). If
full orphans, 1st receives 40%
of earnings of insured.
Other eligible survivors: De-
pendent parents, grandpar-
ents, brother, sisters.
Funeral grant: Lump sum of
300 crowns.
Administrative
organization
Ministry of Social Affairs, gen-
eral supervision.
National Insurance Institution,
national administration of
program and supervision of
local funds.
Local insurance funds, adminis-
tration of contributions and
benefits locally.
"Jnemployment benefit: 3-19
crowns a day, according to
annual-income class.
dependents' supplements: 2
crowns a day for dependent
spouse and each child under
18 (any age if invalid).
'payable after 7-day waiting
'' period for up to 20 weeks in
a year (30 weeks if over age
50).
'^Various travel, removal, voca-
tional training, and work-
relief allowances also pro-
vided.
Ministry of Local Government
and Labor, general super-
Directorate of Labor, in Minis-
try, national administration
of program together with
employment service.
Local insurance funds, adminis-
tration of program locally
under supervision of regional
and local labor boards; latter
administer employment offices
and decide claims.
Jfamily allowance: 400 crowns a
year for 2nd child under age
16, 500 crowns for 3rd, 600
crowns for 4th, etc. (rate rises
100 crowns for each additional
child under age 16).
Allowance payable for 1st child
also if orphan, invalid, or
parents divorced.
Ministry of Social Affairs, gen-
eral supervision.
National Insurance Institution,
national administration of
program and supervision of
local funds.
Local insurance funds, adminis-
tration of allowances locally.
88 COMMITTEE REPORT ON FINANCE AND INSURANCE
UNITED KINGDOM
Dates of basic laws and
types of programs
OLD AGE. INVALIDITY,
DEATH
First laws: 1908 (old-age
pensions), 1911 (invalidity
insurance), and 1925 (old-
age and survivors insurance).
Current laws: 1946 (national
insurance) and 1948 (na-
tional assistance).
Social insurance system
(£1 equals U.S. $2.80; Is.
equals 14 cents; Id. equals
about 1 cent)
Coverage
SICKNESS AND
MATERNITY
First law: 1911
Current laws: 1946 (national
insurance and national health
service laws).
Dual social insurance (cash
benefits) and national health
service {medical care) sys-
tems
All residents (coverage optional
for married women, and for
self-employed and nonem-
ployed persons whose income
below £208 a year).
Graduated provisions cover
only employees whose wages
are above £9 a week (con-
tracting out from graduated
provisions permitted if pri-
vate plan provides equiva-
lent benefits).
Cash sickness and maternity
benefits: Employed and self-
employed persons (coverage
optional for married women,
and for self-employed persons
whose income below £208
a year).
Maternity grants: All mothers.
Medical care: All residents.
Source of funds
Insured person: Employee,
8s. 3Hd. (men) or 7s. 2Hd.
(women) a week, plus 4%%
of weekly wages between £9-
18 (contracted-out man,
10s. 8J^d.; women, 8s. 8Md.).
Self-employed, 13s. 4d. (men)
or lis. (women). Nonem-
ployed, 10s. 2d. (men) or
78. 10d. (women).
Employer: 8s. 3lAd. (men) or
7s. 2Md. (women) a week,
plus 4J4% of weekly wages
between £9-18 (contracted-
out men, 10s. 8Md.; women,
8s. 8Hd.).
Government: Amount equal to
}4 of above flat contribu-
tions {Yz for self- and non-
employed) ; lump-sum sub-
sidy; and full cost of national
assistance.
Above flat and government
contributions also finance
cash sickness, maternity, and
unemployment benefits.
Insured person: For cash bene-
fits, see flat pension contri-
butions above. For national
health service, 2s. 8Hd. a
week (male employee),
2s. OJ^d. (female employee),
2s. lOd. (other men), or
2s. 2d. (other women).
Employer: For cash benefits,
see flat pension contribu-
tions above. For national
health service, 7Hd. per
employee a week.
Government: For cash benefits,
see pension contributions and
subsidy above. For national
health service, about 80%
of total cost.
Qualifying conditions
Old-age pension: Age 65 (mei
or 60 (women). 156 weeks «
paid contributions, and ai
nual average of 50 weeks paiiji
or credited (reduced pensio
if 13-49 weeks). RetiremeD- i
necessary until age 70 (meui i
or 65 (women); pension ni
duced by earnings over £5 5:
a week. Payable abroach
except later increases.
i
Invalidity pension: Incapacity
for work. 156 weeks of pal
contributions as employee o
self-employed, and 50 weekAi
paid or credited in last ye&i
Survivor pensions: 156 weeks c :
paid contributions, and an
nual average of 50 weeks pai«
or credited (reduced pensio*
if 13-49 weeks). For ful
orphans, 1 parent insured
(no minimum contribution
period).
Cash sickness benefit: 26 weeks
of paid contributions as em
ployee or self-employed, am
50 weeks paid or credited ii
last year (reduced benefit i
26-49 weeks).
Cash maternity benefit: 26 week
of paid contributions in las
year as employee or self
employed, and 50 weeks pak
or credited (reduced benefi-
if 26-49 weeks).
Maternity grants: 26 weeks o
paid contributions by womai
or husband, and 26 week;
paid or credited in last year.
Medical care: Residence ii
country (no other condi
tions).
Continued on next left hand pag>
UNEMPLOYMENT INSURANCE FOR FARMWORKERS
89
UNITED KINGDOM
Dash benefits for insured
arkers (except permanent
disability)
Permanent disability and
medical benefits for
insured workers
Survivor benefits and
medical benefits for
dependents
Administrative
organization
k old-age pension: £3 7s. 6d.
*b week.
SA *endents* supplements:
'ti 2 Is. 6d. for noninsured
i« ife over 60; £1 for 1st
(* bild; and 12s. for each other
1 oild.
i |
n rement for deferred retire-
lent: Is. a week for each 12
reeks of contribution after
^•pensionable age (Is. 6d. if
noninsured wife over 60).
J
\duated old-age pension (if
|ot contracted-out): 6d. a
reek for every £7 10s. (man)
tr £9 (woman) of graduated
imployee contributions paid
luring lifetime (payable in
iddition to flat pension).
ational assistance payable to
sliged persons whose resources
r>elow needs.)
Invalidity pension: £3 7s. 6d.
a week (represents ordinary
sickness benefit, whose dura-
tion unlimited if qualifying
conditions met — there is no
invalidity benefit as such).
Dependents' supplements:
£2 Is. 6d. for 1 adult depend-
ent; £1 for 1st child; and 12s.
for each other child.
Reduced rates for married
women and youths.
(National assistance payable
to invalids whose recources
below needs; special rates for
tuberculous and blind.)
Temporary widow's benefit (1st
13 weeks for all widows):
£4 15s. a week plus £1 10s.
for 1st child and £1 2s. for
each other child.
Widowed mother's benefit (if
child in care): £4 17s. 6d. a
week, plus £1 2s. for 2nd and
each other child.
Widow's pension (if age 50 at
husband's death or when
last child ineligible): £3 7s. 6d.
a week.
Full orphans (guardian's bene-
fit): £1 17s. 6d. a week per
child.
Funeral grant: £25.
Graduated widow's pension (if
not contracted-out): 50% of
graduated pension earned by
husband before death, pay-
able at age 60.
(National assistance payable to
survivors whose resources
below needs.)
Ministry of Pensions and Na-
tional Insurance, administra-
tion of flat contributions and
flat and graduated pensions
through its regional and local
offices.
Inland Revenue Department,
collection of graduated con-
tributions.
Registrar of Non-Participating
Employments, certification
of contracted-out plans (plans
must provide equivalent pen-
sions, preserve pension rights
if employment ends, and be
financially sound).
National Assistance Board,
administration of assistance
through its regional and area
offices.
tkness benefit: £3 7s. 6d. a
ftreek, plus £2 Is. 6d. for 1
■adult dependent, £1 for 1st
lisbild, and 12s. for each other
Erik
i yable after 3-day waiting
^period (no waiting period if
4l42 days lost within 13 weeks),
t for up to 52 weeks; duration
■unlimited after 156 weeks of
■contribution.
i iternity benefits: £3 7s. 6d. a
week, plus £2 Is. 6d. for 1
■adult dependent, £1 for 1st
fvchild, and 12s. for each other
I child; payable for 11 weeks
I before and 7 weeks after
confinement.
so, lump-sum maternity grant
of £16, plus an additional £6
f if confinement in home or at
lown expense.
Medical benefits: Medical serv-
ices provided by doctors and
druggists under contract
with and paid directly by
national health service, and
by public hospitals.
General practitioner care, spe-
cialist services, hospitaliza-
tion, maternity care, dental
care, medicines, appliances,
and home nursing.
Patients pay Is. for each
prescription item, £1 for each
dental treatment (except
children and expectant or
new mothers), 10s. for each
spectacle lens, and about
50% of cost of dentures.
Duration: No limit.
Medical benefits for dependents:
Same as for family head.
Wife also receives same lump-
sum maternity grants as
working woman.
Ministry of Pensions and
National Insurance, adminis-
tration of contributions and
cash benefits through its
regional and local offices.
Ministry of Health, general
administration of medical
services through national
health service.
Medical services administered
locally by Executive Council
for each local health author-
ity area (general medical,
dental, and pharmaceutical
services); about 15 Regional
Hospital Boards; and local
health authorities (home
nursing, midwifery, etc.)
Continued on next right hand page
90 COMMITTEE REPORT ON FINANCE AND INSURANCE
UNITED KINGDOM-Continued
Dates of basic laws and
types of programs
WORK INJURY
First law: 1897.
Current law: 1946.
Social insurance system
Coverage
All employees.
Special system of supplemen-
tary benefits for miners.
Source of funds
Insured person: 8d. a week
(men) or 5d. (women).
Employer: 9d. a week (men) or
6d. (women).
Government: Contribution equal
to 1/5 of total contributions
paid by employees and
employers.
Qualifying conditions
Work-injury benefits: No
mum qualifying period.
UNEMPLOYMENT
First law: 1911.
Current laws: 1946 (national
insurance) and 1948 (na-
tional assistance).
Compulsory insurance system
All employees (coverage option-
al for married women).
Insured person: See flat pension
contributions above.
Employer: Same.
Government: See pension con-
tributions and subsidy above;
also, full cost of national
assistance.
Unemployment benefit: 26 wee,
of paid contributions as ei
ployee, and 50 weeks paid
credited in last year (reduc
benefit if 26-49 weeks).
k
Capable of and available f
work, and registration
employment exchange.
Unemployment not _ due
voluntary leaving, industri
misconduct, direct particip
tion in trade dispute, refus
of suitable job offer, or faihr
to follow up job or traink
opportunity (disqualificatic
up to 6 weeks).
F AMILY ALLOWANCES
First and current law: 1945.
Universal public system
Residents, with 2 or more
children.
Insured person: None.
Employer: None.
Government: Whole cost.
Family allowances: Child mui
be under age 15 (16 if invalit
19 if student).
26 weeks of residence in last 1
months (aliens must have, i
addition, 156 weeks of res;
dence in last 4 years).
UNEMPLOYMENT INSURANCE FOR FARMWORKERS
91
UNITED KINGDOM-Continued
Cash benefits for insured
workers (except permanent
disability)
Permanent disability and
medical benefits for
insured workers
Survivor benefits and
medical benefits for
dependents
Administrative
organization
nporary disability
work injury): £5
benefit
15s. a
reek.
pendents' supplements:
22 Is. 6d. for 1 adult depend-
nt; £1 for 1st child; and
for each other child.
duced rates for married
vomen and youths.
yable after 3-day waiting
period (no waiting period if
12 days of incapacity), for up
,o 26 weeks.
Permanent disability pension
(work injury): £5 15s. a week
for 100% disablement.
Unemployability supplement of
£3 7s. 6d. a week, and de-
pendents' supplements, pay-
able if total incapacity per-
manent.
Constant-attendance sup-
plement: Up to £2 10s. (in
exceptional cases, £5).
Partial disablement: From 23s.
a week for 20% to £5 3s. 6d.
for 90% disablement (lump
sum of up to £380 for 1-
19%). Special hardship sup-
plement of up to £2 6s. if
change in occupation neces-
sary.
Medical benefits (work injury):
Provided under national
health service.
Widow's pension (work injury):
£4 15s. a week for 13 weeks.
Thereafter, £3 15s. if caring
for child, invalid, age 50 at
husband's death, or age 40
when children reach age
limit.
Widower's pension (work in-
jury): £3 15s. a week, if
invalid and dependent.
Orphans' pensions (work in-
jury): £1 10s. a week for 1st
child, £1 2s. for each other
child (£1 and 12s., if not in
widow's care).
Other eligible survivors: Parents
(first priority) and other rela-
tives previously dependent
on insured.
Ministry of Pensions and
National Insurance, adminis-
tration of cash benefits
through its regional and local
offices.
Ministry of Health, adminis-
tration of medical benefits
through national health serv-
ice.
.employment benefit: £3 7s. 6d.
a week. Dependents' supple-
ments: £2 Is. 6d. for 1 adult
dependent; £1 for 1st child;
and 12s. for each other child,
educed rates for married
I women and youths,
lyable after 3-day waiting
period (unless 12 days lost
within 13 weeks), for up to
180 days for one spell. After
5 years of insurance, extend-
ed 3 days for each 5 weeks of
contribution in last 10 years,
minus 1/10 of benefit days
in last 4 years; overall maxi-
mum duration, 492 days.
National assistance payable to
unemployed whose resources
below needs.)
] [amity allowance: 8s. a week
•for 2nd child, and 10s. for
3rd and each other child.
Ministry of Pensions and
National Insurance, adminis-
tration of contributions and
records.
Ministry of Labor, administra-
tion of benefits through its
regional offices and employ-
ment exchanges; includes
receipt, decision, and pay-
ment of claims.
National Assistance Board,
administration of assistance
through its regional and area
offices.
Ministry of Pensions and
National Insurance, adminis-
tration of program through
its regional and local offices.
92
COMMITTEE REPORT ON FINANCE AND INSURANCE
FINANCIAL IMPLICATIONS OF UNEMPLOYMENT INSURANCE
FOR AGRICULTURAL WORKERS
Of serious concern to most groups interested in farm labor coverage
under unemployment insurance is the cost of such coverage to agricul-
tural employers not now paying unemployment insurance taxes and
to presently covered employers who could be required to pay any deficit
generated by agricultural coverage. Although most estimates will vary
depending upon eligibility criteria established for coverage, a substan-
tial deficit will result if any large number of agricultural employees
are covered. Table 6 illustrates the cost of coverage if eligibility and
benefit standards were the same as those presently applied for non-
agricultural employees. This estimate is based upon a requirement of
$720 of base period earnings with total benefits limited to 50 percent
of base period wages. Although there are currently over 800,000 indi-
viduals with noncovered agricultural earnings in any one year, only
265,000 of these receive over $720 of farmworker wages in a calendar
year. Table 6 indicates that benefit payments would equal $63 million
per year in a year like 1966. With farm employer contributions of 3.5
percent of taxable wages yielding only $25.2 million, a deficit of $37.8
million would result. This would necessitate an average increase of 0.2
percent of taxable wages paid by all other employers.
TABLE 6
ESTIMATED COST OF EXTENDING UNEMPLOYMENT INSURANCE
COVERAGE TO FARM WORKERS
Estimated full effect in a year like calendar year 1966
Item
Current coverage
Farm workers
Total coverage
including farm workers
Amount of taxable wages ($4,100 base)
Amount of employer contributions, earned total
Cost of benefit payments
As a percentage of taxable wages ._
Average employment
119,175.0 million
$550.0 million
$400.0 million
2.1 percent
4,695,000
$720.0 million
$25.2 million
$63.0 million
8.75 percent
265,000
$19,895.0 million
$575.2 million
$463.0 million
2.3 percent
4,960,000
SOURCE: Department of Employment Report 440C No. 2.
There is at present a significant subsidization of the currently covered
seasonal industries by the stable or high-wage industries in this state.
Table 7 indicates the present benefits paid and taxes paid per employee
in various seasonal industries. Benefit to tax ratios in these industries
are as high as 5 to 1.
The committee is not willing to add a significantly large group of
deficit accounts to unemployment insurance coverage at this time with-
out accomplishing concomitant savings or outside financing to prevent
an additional burden on those employers currently subsidizing seasonal
industries. For that reason proposals have been made to institute a
UNEMPLOYMENT INSURANCE FOR FARMWORKERS
93
TABLE 7
(1965 experience)
Industry
Benefits per
covered job
Benefits
Taxes
$386
$182
515
105
894
166
380
170
598
195
216
129
198
108
262
137
130
91
Construction other than building — general construction.
Contract sorting, etc., of noncitrus fruits and vegetables
Fisheries .-
Building construction — general contractors
Canning and processing fruits and vegetables
Sugar refining .
Apparel .
Lumber and wood— .
Hotels
SOURCE: Department of Employment Research and Report 352 No. 21, July 29, 1966.
weeks-of-work test to determine eligibility in lieu of the present flat
monetary wage test now used. Tables 8 and 9 present coverage and cost
estimates using a weeks-of-work test. Both estimates use a $20 per week
earning requirement. Table 8 uses the present base period (approxi-
mately the first four out of the last five calendar quarters prior to filing
of an application), while Table 9 uses a base period equal to the 52
weeks immediately preceding the filing of the claim. A number of other
proposals concerning financing of unemployment insurance for agri-
cultural labor have been presented to the committee. At this time the
committee feels that all proposals including the ones presented here
require further study of their soundness and fiscal impact on employers
and employees generally before one is recommended. The committee
will attempt to develop during the 1967 Regular Session a bill to extend
coverage on equitable terms to farmworkers without placing an addi-
tional financial burden on industrial employers.
94
COMMITTEE REPORT ON FINANCE AND INSURANCE
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Volume 15
ASSEMBLY INTERIM COMMITTEE REPORTS
1965-1967
ASSEMBLY INTERIM COMMITTEE ON
FINANCE AND INSURANCE
Number 29
BOB MORETTI, Chairman
Jack R. Fenton, Vice Chairman
Hale Ashcraft
Anthony C. Beilenson
Jack T. Casey
C. George Deukmejian
Houston I. Flournoy
John Francis Foran
Stewart Hinckley
John T. Knox
James R. Mills
JANUARY 1967
W. Byron Rumford
Newton R. Russell
Philip L Soto
Robert S. Stevens
Howard J. Thelin
John G. Veneman, Jr.
Victor V. Veysey
George A. Willson
George N. Zenovich
Edward Levy, Consultant
Errol Miller, Assistant Consultant
Fern Appleton, Secretary
GROUP INSURANCE
TRADING STAMP ACT
PART II
INSURANCE INSOLVENCY FUND
BROADENED LENDING AUTHORITY
FOR SAVINGS AND LOAN
ASSOCIATIONS
HEALTH INSURANCE AND
ANTIDUPLICATION PROVISIONS
Published by the
ASSEMBLY
OF THE STATE OF CALIFORNIA
JESSE M. UNRUH
Speaker
GEORGE N. ZENOVICH
Majority Floor Leader
JAMES DRISCOLL
Chief Clerk
CARLOS BEE
Speaker pro Tempore
ROBERT T. MONAGAN
Minority Floor Leader
TABLE OF CONTENTS
Page
Letter of Transmittal 5
Group Insurance 7
Trading Stamp Act 21
Broadened Lending Authority for Savings and Loan Associations 41
Insurance Insolvency Fund 57
Health Insurance and Antiduplication Provisions 69
(3 )
2— L-2517
LETTER OF TRANSMITTAL
January 31, 1967
The Honorable Jesse M. Unruh
Speaker of the Assembly, and Members of the Assembly
State Capitol, Sacramento, California
Gentlemen :
In accordance with the provisions of House Resolution No. 710 of the
1965 Regular Session, the Assembly Interim Committee on Finance
and Insurance herewith submits Part II of a record of committee ac-
tivities and a report on the subject matter studied by the committee.
Respectfully submitted,
Jack R. Fenton, Vice Chairman
Hale Ashcraf t
Anthony C. Beilenson
Jack T. Casey
C. George Deukmejian
Houston I. Flournoy
John Francis Foran
Stewart Hinckley
John T. Knox
James R. Mills
Bob Moretti
Chairman
W. Byron Rumf ord
Newton R. Russell
Philip L. Soto
Robert S. Stevens
Howard J. Thelin
John G. Veneman, Jr.
Victor V. Veysey
George A. Willson
George N. Zenovich
(5)
GROUP INSURANCE
GROUP INSURANCE
RECOMMENDATIONS
1. That Insurance Code Section 10205 be amended to prohibit the
delivery in this state of certificates of insurance providing group
mortgage life insurance coverage unless the amount of such insur-
ance conforms to that specified in Insurance Code Section 10203.5
(a)(3)(A).
2. That the Legislature in the 1967 General Session give consideration
to raising the $10,000 limit on group mortgage life insurance con-
tained in Insurance Code Section 10203.5(a) (3) (A).
3. That the premium guarantee contained in Insurance Code Section
11656.6 be limited to the amount that dividends are due the associa-
tion or its members from the insurer and only if the insurer notifies
the association within 60 days of any past due premium due the
insurer from any insured member of the association.
(8)
GROUP INSURANCE
Group Credit Life Insurance
During the 1965 General Session, the committee was asked to under-
take a study of the effectiveness of the existing statutory limitations
governing the amount of group credit life insurance which could be
written pursuant to Sections 10203.5 and 10205 of the Insurance Code.
Limitations of these sections were called into question before the
committee largely as a result of a certain master group creditor life
insurance policy issued by the Metropolitan Life Insurance Company,
a New York corporation, in the State of New York. However, the impli-
cations raised by this issue go beyond the problems posed by the issu-
ance of this one policy. They involve the degree to which a state's
group insurance laws may be ignored while an insurer is providing
group life insurance coverage to residents in that state under a master
insurance policy issued elsewhere.
Insurance Code Sections 10203.5 and 10205 provide as follows :
Section 10203.5. (a) Life insurance conforming to all the fol-
lowing conditions is another form of group life insurance :
(1) Covering one of the following groups :
(A) All members are or become borrowers from one financial
institution, including subsidiary or affiliated persons, under an
agreement to repay the sum borrowed.
(B) All members are or become purchasers of merchandise or
other property (exclusive of securities, investment certificates and
bank deposits) under an agreement to pay the balance of the pur-
chase price.
(2) The group numbers not less than 100 new entrants yearly.
(3) The amount insured on any one borrower or purchaser does
not exceed :
(A) The amount of the loan commitment in the case of an agri-
cultural or horticultural loan commitment (as defined in Section
10203.55) repayable in one sum or in irregular installments within
a period not in excess of 18 months from the initial date of the loan
commitment, or ten thousand dollars ($10,000), whichever is less,
and
(B) In all other cases the balance of the indebtedness to the
institution or vendor, or ten thousand dollars ($10,000), which-
ever is less, on any one life.
(4) The repayment or payment of purchase price is to be made,
under the agreement of loan or purchase; in substantially equal
installments over a period not exceeding 32 years ; or in payments
or installments in accordance with the usual terms of the creditor
in the case of a revolving loan or revolving charge account ; or in
one sum or irregular installments within a period not in excess
of 18 months from the initial date of the commitment on an agri-
cultural or horticultural loan.
(9)
]() COMMITTEE REPORT ON FINANCE AND INSURANCE
(5) The policy is issued upon application of and made payable
to the institution, vendor, or a creditor to whom such vendor may
transfer title to the indebtedness, as beneficiary, and the premiums
are paid by or through the institution, vendor, or such creditor.
(b) A policy of insurance conforming to the provisions of this
Section is not subject to the provisions of Section 10209 or 10213.
Section 10205. A policy of group life insurance shall not be
issued or delivered in this State nor, except as otherwise provided
in Section 10205.5, shall an insurer provide or agree to provide
group life coverage until a copy of the form of the policy is filed
with the commissioner and approved by him. Except as provided
in Section 10211, such policy shall not be so issued or delivered un-
less it contains in substance the provisions set forth in Sections
10206 to 10210 hereof.
To more exactly define the issues, it will be necessary to examine
the facts surrounding this one particular case.
Under California law, life insurance companies may issue and de-
liver a policy of group credit life insurance covering real estate mort-
gage indebtedness, provided the amount of the insurance shall not ex-
ceed the amount of unpaid indebtedness or $10,000, whichever is less.
(California Insurance Code, Section 10203.5.) New York limits the
amount of such insurance to the amount of indebtedness, or $30,000,
whichever is less (New York Insurance Law, Section 204(C).) A group
credit life insurance policy was issued and delivered in New York
City by Metropolitan Life Insurance Company to Bankers Trust Com-
pany as agent for multiple creditors including the insurance company
and several mortgage loan correspondents of the insurance company.
As required by New York law, the policy and certificate forms were
submitted to the New York Insurance Department and, after review,
they were approved.
The Western Mortgage Corporation, a California corporation, is one
of the mortgage loan correspondents of the insurance company. The
insurance certificates are delivered by the mortgage loan correspondent
to its mortgage borrowers who have requested the coverage. Most of the
mortgage loans made by the mortgage loan correspondent are assigned
to the insurance company as security for the money borrowed from it
by the mortgage loan correspondent. Over 6,000 certificates of insurance
have been delivered to California borrowers.
The policy provides that upon receipt of proof of the death of any
insured debtor of a creditor, the insurance company promises to pay
the creditor the amount of insurance in force on the debtor at the date
of his death to be applied by the creditor toward the discharge or the
debtor's indebtedness to the creditor. The amount of the insurance is
equal to the indebtedness, or $30,000, whichever is less.
Group credit mortgage life insurance is a decreasing term insurance
and provides protection to a mortgage borrower's family by paying off
the mortgage up to the policy limits upon the death of the mortgagor.
It is not permanent insurance and it has no cash surrender value or
loan value.
The California Attorney General ruled in 44 Ops. Atty. Gen. 55
that the actions taken by the Metropolitan in providing group credit
GROUP INSURANCE 11
mortgage insurance to California residents in excess of the $10,000
limitation imposed by California law did not violate California, law
since the policy here in question was issued and delivered in New York
and only the certificates of insurance were delivered in California.
Since Insurance Code Section 10205 only prohibits the issuance or
delivery of a policy in California in excess of $10,000 and the certifi-
cates delivered here were not part of the policy or necessary thereto,
their delivery in this state was not in violation of this statute ; therefore,
it would appear that any insurer admitted in California may, in a
group insurance contract, issued in another jurisdiction, provide cov-
erage in excess of the California limitations to residents of California.
For that matter, such a group policy could ignore California's regu-
latory scheme in any number of ways in addition to the limitations on
the amount of insurance coverage in the credit life insurance field.
At the hearing of this committee held on November 12, 1965, a repre-
sentative of the California Association of Life Underwriters argued
that there were sound public policy reasons for the limitations placed
upon the writing of group mortgage insurance.
Mr. Burns: . . . There are three primary reasons for statu-
tory controls on the amounts of group credit life insurance : the
protection of life insurance companies from unwise group life in-
surance underwriting ventures; the protection of the life insur-
ance buying public from unwise purchases of certain forms or cer-
tain amounts of group life insurance; and protection of the life
insurance agency system against unfair competition from "mass
marketing. ' '
In precluding the writing of group mortgage insurance, the Cal-
ifornia Legislature has taken into account the fact that this form
of insurance does not carry with it some of the typical guarantees
of individual policy coverage under the insured's ownership and
control. For example :
The guaranteed right to continue coverage by timely payment
of premiums. Under group credit insurance, coverage ceases if
the debtor-creditor relationship is terminated — such as when a
creditor sells the mortgagor's note to another creditor — and the
law requires no guaranteed conversion privilege, as is the case
with employee group coverage. Moreover, there are no nonforfei-
ture rights to the insured person as are required by law under
individual permanent forms of insurance. Loss of coverage can oc-
cur by missing one mortgage payment.
There is no guaranteed premium rate. The mortgagor who takes
the coverage in good faith may, by action of others exercising de-
liberate antiselection against the program, be forced to pay an in-
creased premium rate for which he was not responsible.
And, thirdly, the group policyholder (the creditor) may termi-
nate the coverage without the consent of the insured persons, at a
time when they may not be able to get insurance because of poor
health.
Arrangements for the discharge of this kind of indebtedness
in the event of death are a primary consideration of the individ-
ual's overall estate plan. Because of the long period of time usu-
ally involved, factors such as the insured's age, the ages of other
3— L-2517
12 COMMITTEE REPORT ON FINANCE AND INSURANCE
members of his family, and desirable provisions for the support
of the widow and surviving children all require that the discharge
of mortgage indebtedness be individually programmed as part of
a personal estate plan. These factors are uniquely dependent upon
the individual homeowner's particular situation and do not lend
themselves to stereotyped treatment under a group insurance plan.
In addition, in a great many instances there is a substitution of
mortgages — and perhaps several such substitutions — in the period
of an individual's lifetime. As you know so well, California's pop-
ulation is mobile. Group mortgage insurance does not take into
consideration this increasing mobility of Californians as a result
of employment transfer, family growth, income improvement, job
promotions, etc. Certainly this factor indicates a need for specially
tailored, flexible life insurance to meet changing circumstances
adequately. The mortgagor, relying on group mortgage insurance
in lieu of individual life insurance, may have little or no conversion
privileges upon the transfer of the mortgage. He therefore loses
part or all of this insurance and may be uninsurable at a time when
he is faced with the need for an even greater amount of insur-
ance. A further danger in this kind of insurance is seen in the fact
that the group policy may be terminated by the insurance com-
pany without the consent of the mortgagor himself.
As pointed out by Mr. Burns, the problem is that :
... a blueprint has now been developed by which an insurer
may circumvent California Insurance Code Section 10203.5 by
claiming California group borrowers are now national groups by
virtue of the source of the lender's money supply. By this remark-
able logic, we are all part of one big national group, since there
is just one, hopefully, source of money, the federal government.
Representatives of the Metropolitan Life Insurance Company ar-
gued that the $10,000 limitation on group mortgage life insurance con-
tained in California law was unreasonably small and unrealistic tak-
ing into consideration today's price levels and the size of the average
new mortgage loans in California today. They pointed out that In-
surance Code Section 10203.5 was last amended in 1945 to raise the
limitation to $10,000 from the then-existing figure of $2,500 and to ex-
pand the period of amortization of the permitted loans under this sec-
tion from 10 years to 20 years (amended in 1947 to extend this period
to 32 years).
There was no evidence submitted to the committee which would lead
to the conclusion that purchasers of this type of decreasing term credit
insurance do not realize that it is not permanent insurance. Sales
literature submitted to the committee and carrying the letterhead of
the "Western Mortgage Corporation clearly states that this insurance
applies only to the payment of the mortgage if it is less than $30,000.
However, no specific reference is made to the fact that this is decreasing
term insurance. It also appears likely that a purchaser of this type of
insurance is not aware that it may be canceled at any time or that
the premium may be raised (unlike permanent life insurance) or
that the insurance coverage under the group policy may be terminated
GROUP INSURANCE 13
if the mortgage is sold to another lender or to an agency such as the
Federal National Mortgage Association (FNMA). Although the rep-
resentative of the insurance company here involved testified that the
mortgagor did have a conversion right if the mortgage were sold with-
out recourse to another lender, the price on such a policy might be sub-
stantially higher than it would have been at an earlier date due to the
age of the borrower-mortgagor. It should also be pointed out that le-
gally no such conversion right is required in a credit life policy such
as this.
An additional important point raised at the committee hearing was
whether this insurance agreement could even qualify under Section
10203.5 if the amount of insurance offered was less than $10,000. Insur-
ance Code Section 10203.5(a) (1) (A) requires that the members of the
group "... are or become borrowers from one financial institution,
including subsidiary or affiliated persons, under an agreement to repay
the sum borrowed." The position of the insurance company appar-
ently is that all persons borrowing money from its mortgage loan cor-
respondents meet this requirement since the mortgage loan correspond-
ents receive their money from the insurance company. This position
seems open to question. The financial institution in this transaction
could be considered to be the mortgage loan correspondent itself and
not the insurance company, its source of money. The mortgage loan cor-
respondent may not even be an affiliated person in the meaning of the
statute even if the insurer is a financial institution.
If this is the case, the legal group eligible for mortgage insurance
would only be the 6,000 borrowers from the California mortgage loan
correspondent and not all the borrowers nationwide from the 78 mort-
gage loan correspondents located in 35 states with which the insurance
company does business.
However, under the Attorney General's interpretation of our group
insurance laws, it is irrelevant whether all the borrowers from all the
mortgage loan correspondents are a "bona fide" group since our statute
will not apply when the policy is issued and delivered in another state.
The insurance carrier here involved argues that if California were
to amend its statutes to require that all group certificates delivered
here conform to California law the group mechanism itself would be
seriously hampered and the state would be attempting to assert its
laws over contracts entered into elsewhere. As to the first point, we must
point out that the group being insured in California — presently over
6,000 insureds — is large enough to constitute a bona fide insurable
group within itself and it would not be impracticable for the master
policy to state different coverage limits for certificates issued in differ-
ent states.
In passing upon the problems raised by this one policy it must be
remembered that there is no national insurance law governing inter-
state sales of group or individual policies. Congress in enacting the
McCarren Act in 1944 specifically exempted the insurance industry
from regulation under the Interstate Commerce Clause of the federal
Constitution. This was the wish at that time not only of Congress
but of the insurance industry as well. It seems strange now to find a
leading member of that industry arguing that a state should now
exercise no control over the insurance offered to its citizens, thus ac-
14 COMMITTEE REPORT ON FINANCE AND INSURANCE
oepting the rights and privileges of the license to do insurance business
in the°state and at the same time bypassing the conditions and limita-
tions imposed by the group insurance laws of that state.
Five states (New Jersey, Ohio, Texas, Wisconsin and Maryland)
have already recognized the problem under discussion and are exer-
cising either through statute or administrative ruling extraterritorial
control over group insurance offered in these states. There has been no
evidence submitted demonstrating an adverse effect on the availability
of sound group life insurance coverage in those states.
Since the question raised before the committee was primarily con-
cerned with assuring that the $10,000 group credit life limitation in
our statute was observed under policies issued in another state, we
shall confine our recommendation for specific legislation to this ques-
tion. In recommending that Section 10205 of our Insurance Code be
amended to require that certificates of insurance providing group
mortgage life coverage not exceed that amount specified in Section
10203.5 (a)(3)(A) ($10,000 at present), we do not pass at this time
on whether the present statutory limit of the amount of such insurance
should be raised. We do, however, recommend that the Legislature in
its 1967 General Session give consideration to the merits of raising
this limitation to more adequately reflect the size of the average
mortgage in today's market.
Group Workmen's Compensation Insurance
An additional problem area in the field of group insurance brought
to the committee's attention during its November 12, 1965, hearing
concerns group workmen's compensation insurance. Such insurance is
provided for in Sections 11656.5-11656.7 of the Insurance Code. These
sections provide as follows :
11656.6. An insurer may issue a workmen's compensation
policy insuring an organization or association of employers as a
group if such organization or association complies with the follow-
ing conditions :
(a) Files with the commissioner or a licensed workmen's com-
pensation rating organization designated by him :
(1) A copy of its articles of incorporation and by-laws or its
agreement of association and rules and regulations governing
the conduct of its business, all certified by the custodian of the
originals thereof ;
(2) A statement setting forth its reasons for desiring insurance
as a group ;
(3) A statement certifying that at least 75 percent of its regular
membership is engaged in a common trade or business, and an
agreement that such percentage of membership will be maintained
during such time as a group workmen's compensation policy issued
to such organization or association is in force ;
(4) An agreement that only those members who are engaged in
a common trade or business shall be named by the organization
or association in any statement to the commissioner, a licensed
workmen's compensation rating organization or insurer as eligible
for insurance as a member of the group, and an agreement that
GROUP INSURANCE 15
it will immediately notify its insurer if any member of such or-
ganization fails to remain a member in good standing in accord-
ance with the basic law, rules and regulations of such organization
or association ;
(5) A statement in writing undertaking to establish and main-
tain a safety committee which by education and otherwise will
seek to reduce the incidence and severity of accidents.
(6) An agreement in writing duly executed guaranteeing the
payment of the premiums of all its members while insured under
a group policy issued to the organization or association. A copy of
the resolution of the governing board of such organization or
association authorizing the execution of the guarantee agreement
shall be filed with the commissioner or a licensed workmen's
compensation rating organization designated by him and with any
insurer issuing a group policy.
(b) "Common trade or business" as used in this article shall
mean
(1) In agricultural enterprises, operations in which the prin-
cipal pay roll of the employer develops under any combination of
the classifications of the Manual of Rules, Classifications and
Basic Rates of Workmen's Compensation Insurance approved by
the Insurance Commissioner as applicable to farms; nurserymen;
cultivating or gardening of flowers; and classifications embracing
such other operations as may be conducted by a nonprofit coopera-
tive association composed of producer members and combinations
of nonprofit cooperative agricultural marketing associations hav-
ing a central organization composed of member associations.
(2) In the building and construction industry, operations in the
construction or repair of commercial or residential buildings or
in general engineering construction in which the principal pay
roll develops under any combination of the classifications applica-
ble to such construction or repair as they appear in the Manual
of Rules, Classifications and Basic Rates for Workmen's Compen-
sation Insurance approved by the Insurance Commissioner. Com-
mercial buildings as defined in this subsection shall mean any non-
residential buildings.
(3) For all other enterprises, operations in which the principal
pay roll develops under a single manual classification.
(c) "Principal pay roll," for the purpose of this section, means
not less than 51 percent of the total pay roll for the preceding
policy year or in the case of an employer who has no preceding
full year's pay roll, not less than 51 percent of his estimated an-
nual pay roll.
11656.7. Each member of an organization insured under a
group policy shall be treated as a single and separate entity as
respects rates, classifications and rating plans.
Two or more policies whose experience is combined for any pur-
pose whatsoever, shall be considered group insurance and subject
to the provisions of this article unless employers insured by such
policies are engaged in operations having a common pay roll or
where any rating plan or rating system and the rules applicable
to them approved by the commissioner under the provisions of
j(J COMMITTEE REPORT ON FINANCE AND INSURANCE
Article 2, Chapter 3, Part 3, Division 2, require or permit the in-
surance of more than one employer in a single policy.
At the committee hearing representatives of the Peninsula Builders'
Exchange, the California Electrical Contractors' Safety Association,
Inc., and the Building Contractors' Association of California raised
objections to subsection (a) (6) of Section 11656.6. This subsection re-
quires an association to enter into a premium guarantee agreement
with the insurer when the insurer has issued a group workmen's com-
pensation policy covering the association's members. If one member of
the association which is covered by the policy issued to the association
defaults in the payment of the workmen's compensation premium due
the insurer the association as a whole must pay the past premium. This
is the only form of group insurance in which a premium guarantee is
required by law.
In a sample of 25 major groups insured by the state fund under
this code section the guarantee paid by the associations amounted to
-4,730 out of a total premium volume of these 25 groups of $39,-
063,000. The building association representatives argued at the com-
mittee hearing that it is the insurance company through the Califor-
nia Inspection Rating Bureau that sets rates, that it is the responsibility
of the insurer to make the necessary credit checks on an individual
contractor who applies for insurance through the group as each such
contractor must be individually written even though he is a member
of the association, and it is the insurer who has the primary respon-
sibility to see that premiums due it from an association member are
promptly paid.
From the evidence presented to the committee, it would appear that
with many such associations little credit checking is done by the asso-
ciation itself of any individual member. The association has relied al-
most exclusively upon the insurer to make any necessary credit check
prior to issuance of an insurance policy. Since any member of the
association is eligible for such insurance upon approval of the insurer
and an individual contractor may have been a member of the associa-
tion for a number of years prior to applying for the insurance, it
may not be practical for the association itself to do the necessary
credit check.
With respect to the payment of the premium to the insurer, again
it would appear that the responsibility rests with the carrier since
premiums are not paid through the association by the member, but
are paid directly to the carrier and each insured is separately rated
as provided for in Insurance Code Section 11656.7.
The association is notified by the insurer when there are past due
premiums and the individual contractor is to be dropped from cover-
age. However, it is the carrier's decision as to when the individual
contractor is to be canceled under the policy and at what point his
premium has become so overdue as to warrant cancellation. During this
period of time wThen the premium is overdue or increasing in size,
the carrier may take little or no action to obtain payment, but the asso-
ciation is continuing to build its liability to the carrier by virtue of
the premium guarantee provision contained in the agreement between
the association and the carrier. In effect, the association has little or
GROUP INSURANCE 17
no control over its exposure to overdue premiums prior to the time
a member of the association is canceled by the carrier. At that time
it may force the member out of the association but remains liable to
the carrier for the overdue premium the individual member has gen-
erated.
It must be pointed out the liability of the association extends to all
members of the association, not just to the members who are insured
through the association's group insurance plan. In the case of the
Building Contractors' Association, all 1,800 members of the associa-
tion were liable for a guarantee of $30,000 which was generated by
one insured over a two-year period even though less than 300 members
of the association were insured under the group policy.
Such a premium guarantee when due an insurer is collected in two
ways from the association. First, it may be offset against any dividend
due the association on the policy. The amount of such dividend, if
any, will vary from year to year depending on the experience of the
individual members of the group. Secondly, the overdue premium may
be collected by an assessment upon each member of the association if
the association has no permanent fund established to pay such over-
due premiums.
Apparently, the collection of the premium produces no real finan-
cial problem on the members when it is offset against the dividends
due to members insured through the group. "Where the dividend is
sufficient to cover any past due premium guaranteed by the association
the association as a whole and the noninsured members of the associa-
tion do not have to contribute to make up the money due under the
guarantee.
Associations argue that the existence of the premium guarantee re-
sults in the carriers adopting a lax attitude toward individual insureds
who may be delinquent in the payment of premiums. Since the insurer
can always collect the delinquent premium from the association, they
do not adequately credit check, nor do they require adequate premium
deposits from individual members based upon a check of the individ-
ual's past payment record and do not move to collect the past due
premiums or cancel the insurance of the delinquent member fast enough
to protect the association from incurring sizable financial obligations
based upon the guarantee.
The Conro case is a case in point. Conro was a framing contractor.
During one year he was insured by the State Compensation Insurance
Fund, but was not a member of the Building Contractors' Association
of California and was, therefore, not insured through the group work-
men's compensation program. He was subsequently canceled by the
state fund for nonpayment of premium. The next year he joined the
Building Contractors ' Association and applied to the state fund for in-
surance through the group. However, the state fund was aware of Con-
ro's previously overdue premium which was still owed it. It agreed to
insure Conro through the association; it requested a $700 premium
deposit from him and worked out an arrangement with him whereby
he would pay up his back premium and the premium due for that
current year. During the first three months of 1962 he generated $6,600
of premiums, none of which were paid. He was subsequently canceled
18 COMMITTEE REPORT ON FINANCE AND INSURANCE
by the state fund, but by this time he had generated $30,000 of unpaid
premiums.
There is dispute over whether the Building Contractors ' Association
has knowledge of Conro's previous unpaid premiums and whether it
agreed to admit him to membership with this knowledge and had later
knowledge of the overdue premiums generated while he was a member
of the association. A state fund representative testified that the Build-
ing Contractors' Association had knowledge of Conro's past dealings
with the fund and acquiesced in the state fund subsequent decision
to insure him. This the Building Contractors' Association denies. Nev-
ertheless, the association is liable to the state fund for Conro's delin-
quent premium.
Recognizing the financial exposure of an association in establishing
a group workmen's compensation insurance program, the question re-
mains why they establish such programs. The answer is simply because
premiums after dividends will in most cases be less than under individ-
ual coverage. The association providing a group workmen's compensa-
tion plan must maintain a safety program aimed to reduce accident
frequency and severity. The existence of such programs has had some
effect in reducing accidents and, therefore, workmen 's compensation in-
surance costs. In addition, there are savings in the expense portion of
the premium dollar due to the group insurance mechanism. As one
witness testified this savings can be substantial.
Mr. Maxwell: . . . normally, if you handle workmen's compen-
sation insurance and you have a small contractor with premiums
of $3,000 or $4,000 the best he can possibly expect is an 8 to 10
percent dividend back on his workmen's compensation as an in-
dividual. If he is put into a group there is a possibility of re-
covering 20 to 30 to 35 percent back, which is a substantial saving.
Mr. Maxwell further testified that the association insurance that he
handles, California Carpentry Contractors' Association, has had no
credit loss in two years because they require a complete credit check
by the insurance carrier before the insurance is written and require a
20 percent premium deposit subject to monthly adjustments from each
insured. The amount of the deposit varies with the volume of premium
generated by the insured during the previous year.
It would appear to the committee that there are definite financial
advantages accruing to the small contractors when he has obtained
group insurance through an association. Such a contractor gains the
benefits of a safety program carried on by the association and his
premium rates reflect these savings in addition to expense savings
through the group insurance mechanism.
However, the insurer may tend to relax credit controls unless con-
tinually pressured by the association. Such laxity may also be shown
in a failure to require an adequate premium deposit from a contrac-
tor. Nevertheless, it is the primary responsibility of the association
itself to require that the insurer establish adequate procedures to check
credit standings and determine necessary premium deposits. In lieu of
this, it can either perform the credit checking function itself or seek
another insurer to underwrite the group if dissatisfied with the per-
formance of its present insurer.
GROUP INSURANCE 19
But the committee does view it as inequitable that the association
as a whole and all its members, whether insured under the group plan
or not, are liable for any premium due the insurer from a defaulting
member. To the extent that the dividend due the association is suffi-
cient to satisfy any premium guarantee, all the members who are in-
sured through the association suffer if their dividend is reduced. How-
ever, to the extent the dividend which might be due is insufficient to
cover the guarantee and an assessment against the entire membership
of the association is necessary, noninsureds as well as insureds are
liable. Since these noninsured members share no benefit, it seems in-
appropriate to require them to share the risk of loss.
The committee, therefore, favors amendments to Insurance Code Sec-
tion 11656.6 to limit the liability of the association to the extent that
the insurer may only recover as against any dividend due the associa-
tion or the insured members of the association, but only if the insurer
notifies the association within 60 days of any past due premium owed
the insurer by any insured member of the association.
TRADING STAMP ACT
TRADING STAMP ACT
CONCLUSIONS AND RECOMMENDATIONS
1. The Trading Stamp Act as it is now constituted is an ineffective
regulatory tool. The act does not provide an effective statutory mech-
anism for the public protection of stamp holders.
2. That a minimum capital requirement supplement the existing statu-
tory bond requirement.
3. That merchant associations that collectively guarantee redemption
of stamps issued by a member of the association be excluded from
the act if the members of the association exclusively issue and re-
deem such stamps and if the guaranteed collective redemption is
from stock on the shelves of any and all members of the association.
To effect exclusion, an association would file with the Corporation
Commissioner a statement that stamps are issued and redeemed ex-
clusively by members of the association and a copy of an agreement
between the members of the association setting forth their collective
liability to redeem from their stock in trade.
4. That licensed companies should file semi-annual reports with the
commissioner. The commissioner should prescribe the data that will
be presented in the semiannual report as well as the year-end report.
The commissioner should also prescribe a uniform basis for report-
ing outstanding stamps and the statutory bond.
5. That companies to be licensed under the act be required to maintain
financial responsibility which will be defined by the commissioner
in light of requirements set forth in the act.
(22)
TRADING STAMP ACT
Since the California Legislature enacted the Trading Stamp Act
(hereafter referred to as act) which took effect in 1960, two stamp
companies licensed under this act have become insolvent and have been
liquidated in accordance with procedures set forth in the act. In both
instances of liquidation, the redemption value on the outstanding
stamps was under 33 cents on the dollar. Not all stamps were tendered,
however, so in both instances the actual redemption value on those
that did turn up worked out to be under 50 cents on the dollar. The
fact that in these cases the redemption value was relatively low, raised
a question as to the effectiveness of the act in providing protection
for stamp holders of insolvent companies, inasmuch as the act was
passed with the intent that it would impart to stamp holders a greater
degree of protection than that which existed or would exist in lieu of
the act. These low-payout cases taken together with the fact that they
arose from involuntary liquidations should cause some concern as to
whether stamp holders are being provided with any added protection
whatsoever. Perhaps history would have been no different absent the
act, and if this is correct, then from a protection standpoint the act
is indicated to be ineffective. Nevertheless, the act probably did impart
to stamp holders some measure of protection, but as testimony at the
hearing indicated, certain people feel the added protection brought
about was, and is, minimal.
It is conceded that some, a relatively few, of our economic endeavors
will be unsuccessful with consequent adverse results. Those economic
entities infringing upon the public interest are regulated so that the
adverse effect of failure will be minimized. To this extent the regulation
is oreinted toward minimizing the effect of a given situation rather
than guaranteeing that a thorny situation will never occur. In looking
at an imaginary curve where at the lower end are placed companies
not vested with public interest and at the upper end are placed com-
panies substantially interlaced with the public interest, such as banks,
insurance companies, and savings and loan associations, the placing of
a stamp company on that curve depends upon factors which are not
easily resolved into a clear cut placement decision.
Conclusions concerning whether protection of stamp holders is
needed by virtue of some vesting of public interest in the stamp busi-
ness are frequently drawn from assumptions or data which indicate
the extent to which a consumer incurs an out-of-pocket expense for the
stamps. If the stamps are paid for, then the stamps have value to the
consumer and the public. Public interest comes into play because the
consumer has paid for his stamps and, therefore, it is in the public
interest to make sure that he can redeem, fulfill his expectation, just
as it is in the public interest to make sure that the depositor can with-
draw his money from a bank. If the stamp did not cost the consumer
money, then the stamp could be classified as a free gift and, therefore,
present a lesser case for protection for the public. This question of
(23)
04 COMMITTEE REPORT ON FINANCE AND INSURANCE
whether the consumer has paid for a stamp or received that stamp
atuitously is at this time unresolved. There exists considerable con-
troversy as to whether the merchant's, or retailer's or manufacturer's
cost of 'procuring stamps is passed on to the consumer in the form of
higher product prices, or whether this cost is absorbed in their profit
and loss account as an advertising expense. "While the question of price
shifting remains for the most part unresolved, at least not free of
controversy, there is another approach to resolving the problem as to
whether the consumer pays for the stamps.
This approach would be an opportunity cost analysis. An opportu-
nity cost analysis could hold that a consumer does pay for his stamps if
because of the inducement provided by the stamps this consumer has
foregone better value available at a nonstamp store. This better value
would be evidenced by lower price, better service or better quality.
At any rate, there is a strong case for saying that stamps cost the
consumer some money, at least cost some consumers some amount of
money. Where this is the case, these stamps can represent the con-
sumers' claim to offsetting lost value — an offset to lost opportunity
provided in the form of lower price, better service or better quality or
to offset a flat price paid for the stamps in the form of higher product
prices. If the consumer redeems his stamps, he hopefully receives at
least this offset to lost value or cost incurred. In a sense this process
of offset through a redemption of stamps is like the process of with-
drawing money from the bank. The stamp company, like the bank,
holds value owed to a consumer, except, of course, that the stamp
company pays no interest on the money held for redemption. There
are, of course, a number of other significant differences between the
operation of a bank and a stamp company. In summation, it would
appear that the consumer in paying for his stamps, perhaps un-
wittingly, finds himself, at least from an expectation standpoint, in
the same camp as a bank depositor, and as a consequence of this
expectation and value entrusted to another, it is in the public interest
to see that he receives something in return for his stamps commen-
surate with any risk he has assumed. A stamp holder, however, cannot
be said to assume that same kind of risk that the equity owner and
lender assume, primarily because the investment objectives of the
stamp holder with respect to stamps are relatively limited. The equity
owner and to a lesser extent the lender are looking for profit; their
expectation of profit correlates in a general sense with the risk they
assume. The stamp holder's implicit expectation is to get his money
back. Certainly this is the case where he has paid for his stamps, and
even where his stamps cost him nothing, an unlikely situation, the
stamp holder still cannot be summarily pushed into a buyer-beware
posture when he accepts the stamps.
If it is conceded that for reasons of public interest or equity there
is to be protection for the stamp holder, the protection then can come
from one of three directions : from management, voluntary regulation ;
from the marketplace, informal regulation; and from government,
formal regulation. State regulation is embodied in the aforesaid Trad-
ing Stamp Act found in the Business and Professions Code. Section
17773 sets forth the bonding requirements of companies licensed under
the act. This section provides in part that for each $100,000 in gross
TRADING STAMP ACT 25
income from trading stamp business in California in a company's last
fiscal year, a company's correlative bond requirement is $15,000 with
a cutoff when the bond reaches $150,000. This basic requirement is
modified, however, to the extent that a company's gross income from
trading stamp business is less than $65,000 during its last fiscal year
or where a company has not previously done business as a trading
stamp company in California. In either of these cases, the bond re-
quirement is $10,000. Thus, the bonding requirement ranges from
$10,000 to $150,000 and is either related exclusively to gross income
or to the fact that a company is doing business as a stamp company
in California for the first time.
In the event of the liquidation of a stamp company, the statutory
protection afforded stamp holders is represented by the bond. The bond
is a guaranteed residual liquid asset, but by its very nature, it bears
no relationship to the potential claims against a company. Since there
is no control over potential claims, outstanding stamps, against the
bond and furthermore as gross income for a given year is not directly
related to outstanding stamps at the end of that given year, a situation
arises where the size of a bond is no indication of protection afforded
stamp holders. For example, company A has a $40,000 bond and com-
pany B has a $20,000 bond, while company A has stamps outstanding
representing $90,000 worth of claims and company B has claims out-
standing worth $30,000. Taking these figures by themselves and in the
event of liquidation of both companies, the size of the bond is of no
consequence as far as relative protection to stamp holders is concerned.
If in this situation assets are brought into the picture, then, of course,
these would have to be taken into account along with the bond to
ascertain in which case the stamp holders would redeem at the higher
payout. In view of this analysis, protection to the stamp holder would
appear to be better afforded by having some type of liquid asset re-
serve requirement, for example, in the form of cash or marketable
high grade securities — similar to a reserve requirement of a bank. Such
a requirement would be related to outstanding stamps, and while this
requirement would not be a 100 percent reserve requirement, at least
it would bear some better relationship to stamp liabilities and at the
same time act as a constraint on the issuance of stamps, at least to a
point where a company cannot ignore the effect of incurring liabili-
ties. This type of regulation would in effect represent an assurance of
liquidity. The cash and deposits completing this requirement would be
unpledged — not, for example, representing security for a surety bond.
As previously stated, another effect of such a requirement would be
to prevent the uncontrolled buildup of stamp liabilities or, conversely,
prevent assets from being depleted to a point where the stamp holders'
interest in assets is seriously diluted. This type of requirement could
be so designed that if a company's ratio of liquid assets to stamp
liabilities fell below a certain percent that bonds could be posted to
the effect of bringing the ratio up to the minimum standard and thus
preventing a statutory insolvency. This ratio would also have to take
into account merchandise held for redemption, which merchandise
would in a sense represent a liquid asset to a stamp holder.
Another protection mechanism would be a requirement that stamp
companies licensed under the act maintain a minimum capital account,
26 COMMITTEE REPORT ON FINANCE AND INSURANCE
which would not take into account any bond posted in accordance with
the now existing bond requirement. Such a requirement would not en-
tail the prohibitive cost that a strict bond requirement would. There
could also be some required correlative relationship between capital
and outstanding stamps. A minimum capital account, however, while
providing some assurance that assets of a stamp company can shrink
by an amount equal to the capital before the outstanding liabilities be-
come impaired, at least on a book value basis, does not necessarily
assure liquidity. A company can have most of its assets tied up in
accounts receivable, stamp inventories, and fixed assets necessary to the
maintenance of a stamp business and still satisfy a capital require-
ment. Nonetheless, at some point a company's erosion of liquid assets
will be reflected in its capital account to the extent that capital has
fallen below some minimum ratio requirement. By the time the capital
ratio reflects this erosion, however, the company's ability to redeem
stamps may have been significantly vitiated. Reflecting this fact, banks
have both a reserve requirement to assure liquidity for deposits and a
minimum capital requirement to provide a base for some erosion of
asset value before the ability to redeem deposits becomes impaired. It
would appear that the stamp holder is afforded better protection by a
stamp company having both a surplus capital account and liquid assets
backing up outstanding stamps — at least backing up some percent of
outstanding stamps.
In addition to the question of adequate bonding and the related
protection afforded stamp holders, the act was scored at the hearing
for not excluding merchant associations which distribute their own
coupons and which coupons are redeemable only by the issuing mer-
chant. In this connection, there exists some confusion as to whether a
stamp company that supplies coupons to merchants and then redeems
for them is excluded from the act. Testimony was also taken on a
number of other issues, including improved financial reporting to the
Corporation Commissioner, improved procedures for the handling of
insolvent companies and control over the issuance of promotional
stamps.
BONDING AND CAPITAL REQUIREMENTS
Mr. Jerald Schutzbank, the Corporation Commissioner, testified that
the bonding requirement which exists under present statute has proved
to be of limited value as a residual reserve for stamp holders.
Mr. Schutzbank ; The committee has asked us whether the bond-
ing requirements are adequate and the answer is : taken alone to-
day, they are not. In two examples in which they have been the
only place to look for funds to pay stamp holders, they have proven
insufficient. We doubt the validity of using bonding alone as the
regulatory tool. . . . Probably a more desirable approach would
be to combine net capital requirements and bond requirements. . . .
Assemblyman John Foran raised a question as to the rationale of
the present system of relating bonds to gross receipts when it appeared
that relating the bonding requirement or a bonding requirement to-
gether with a capital requirement to the number of stamps outstanding
provided better protection to stamp holders. His question pointed out
TRADING STAMP ACT 27
the fact that the size of the bond is no indication by itself of con-
sumer protection, for under the present system, a company can incur
liabilities, in the form of outstanding stamps, with little regard, if it
so chooses, to the bond which the company has pledged.
Mr. Schutzbank : I think you are quite right, Mr. Foran. I
don 't know what the reasons were ; however, one of them might
have been ... an inconsistency among the various companies as to
how to determine the outstanding liability. This is one of the
major problems in the industry from our standpoint, at least
. . . whether you use 100 percent of the outstanding liability or
whether you make an appropriate reduction for the stamps which
you know are not going to be redeemed because there is a certain
loss through destruction or because people will not present them.
... it is necessary for there to be some uniform gauge as to
whether you use 95, 80, 70 or some other figure [representing the
percentage of the total to be considered as certain to be redeemed].
Assemblyman Jack Casey pursued this matter further by raising a
question as to problems that might be involved in reporting stamp sales
and stamp redemptions to the commissioner so that his department
could determine approximate outstanding liability on stamps and thus
be in a position to measure that liability against a bond or bond plus
the capital of a company.
Mr. Schutzbank : We don 't think it is a substantial problem. We
think it is one of the things which we should be receiving under a
proper regulatory statute.
A representative of Sperry and Hutchinson Company, Mr. Bur-
leigh Pattee, challenged certain testimony concerning inadequacy of
the statutory bond requirement. Mr. Pattee indicated that the bond re-
quirement had been increased in 1964, and that the present require-
ment was one of the highest under any licensing provision in the Cali-
fornia codes and higher than similar bond requirements applicable to
stamp companies in other states. He felt the present bond requirement
was adequate in screening out financially unstable trading stamp com-
panies, adding that bonding companies themselves screen those busi-
nesses for which a bond is issued. He pointed out that there can be no
guarantee of full liquidating value unless companies were required to
post bond for 100 percent of the value of all stamps issued and out-
standing, but that this type of requirement would impose a prohibitive
cost on companies. It was further submitted that even a 100 percent
bonding requirement, that is to say, relating the bonds to outstanding
stamps, would not guarantee 100 percent payout in the event of liqui-
dation, since liquidation expenses themselves would erode the amount
available for disbursement. Mr. Pattee 's emphasis on screening out
financially unstable companies implies that this is more or less the gen-
eral purpose of a bond requirement — to act as a screening device first
and secondarily to provide protection to stamp holders. The bond re-
quirement taken in this context would be more on the order of a licens-
ing fee or other licensing requirement rather than a mechanism for
providing a guaranteed residual asset.
4— L-2517
28 COMMITTEE REPORT ON FINANCE AND INSURANCE
As an alternative to a 100 percent bond requirement, Mr. Pattee in-
dicated that the posting of a bond providing limited protection to
stamp holders was the more reasonable approach. Assemblyman John
Foran questioned Mr. Pattee about another alternative — a capital re-
quirement. Specifically, Mr. Foran was interested in Mr. Pattee 's views
on a capital requirement as a supplement to the existing bond require-
ment or as a device to supersede such bond requirement.
Mr. Pattee: I can't speak on behalf of my company because I
haven't discussed that matter with them, but I can see nothing
wrong with such a provision at the present time as long as we have
exact standards. (Answer appeared to be with respect to a mini-
mum capital requirement and not a capital correlation with out-
standing stamps.)
Concerning standards, Mr. Pattee felt that if any changes came
about, that definite prescribed standards should be established by the
Legislature as against being established by a state agency under au-
thority granted by the Legislature. At this point Assemblyman New-
ton Russell raised a question concerning the effect of statutory require-
ments on smaller stamp companies and on competition within the trad-
ing stamp industry.
Mr. Pattee: Our company is a wealthy company, able to meet
its redemption requirements, and I don't think we would be one
of the ones under attack, if that is what you mean. But we think
it is an unhealthy situation where you make it very difficult for
the small companies in the state to operate. We think it is better
to have competition — better for the industry as a whole.
Assemblyman Russell: I am talking about the bonding and the
reserves. . . .
Mr. Pattee : Well, I made my statement that we are opposed to
increasing the bonding provisions.
Assemblyman Russell: But [whom] do you think it would fall
more heavily upon ?
Mr. Pattee : I think it would fall more heavily upon the smaller
companies, because I think that a company that is as [wealthy as
the company I represent] has no difficulty in getting bonds.
Assemblyman Russell : Then would you say that based upon this
and carried to a logical conclusion, that this type of legislation, as
you understand it, would tend to eliminate competition ?
Mr. Pattee : I think it would have a tendency to eliminate com-
petition.
Indicated in the foregoing discussion is the view that the bonding
requirement could become a burden on some companies and force them
to withdraw from competition. At the same time, these companies by
virtue of their being flushed out of the industry would not necessarily
take with them all of the unsound, mismanaged companies. Looking at
the subject of prohibitive bonding requirements from another view-
point, one might say, based on certain foregoing testimony, that the
TRADING STAMP ACT 29
price to be paid for a high degree of solvency is too high, and even
with that price paid there is no certainy of solvency.
FINANCIAL REPORTS FILED WITH THE COMMISSIONER
Section 1.7764 provides in part that each licensed company will pro-
vide the Corporation Commissioner with a short form balance sheet as
of the licensed company's most recent fiscal year. Aside from this re-
port, no other financial data are filed with the commissioner. Testimony
regarding the short form balance sheet centered on the usefulness of
the data contained in the report for use in the commissioner's supervi-
sion of licensed stamp companies. Mr. Schutzbank referred to the short
form balance sheet as being of minimal use as a regulatory tool. He
pointed out that from some of the statements he receives, it is not clear
whether the stated capital account includes the bond or whether the
bond is not taken into account in the report. He added that there is
no consistency in the way the licensed companies handle this matter.
He contrasted this regulatory tool, the short form balance sheet, with
some of the regulatory tools at his disposal in the regulation of in-
dustrial loan companies. He noted that in his capacity as commissioner
he has power to pass upon the business and personal reputation of the
individuals that would be operating a new industrial loan company.
If their reputations indicate that they are not capable of running an
industrial loan company, the license may be refused on this basis alone.
No such authority vests in the commissioner in his licensing of stamp
companies. With respect to industrial loan companies, there is also a
minimum capital requirement — specifically, a capital stock requirement
and a required paid-in-surplus or reserve equal to 50 percent of the re-
quired minimum capital stock requirement, and both requirements must
be met before a company can commence operation or open a branch
office. The capital stock requirement of an industrial loan company is
based on the number of industrial loan business offices of that company,
where those offices are located and the date the industrial loan com-
pany commenced business in California. While the foregoing require-
ments are not presented in more specific detail, they still suffice as an
indication of the fact that such requirements give rise to authority
that is broader than the commissioner's vested authority with respect
to stamp companies. As a side note, state requirements concerning bank
capital are oriented toward branches and population rather than de-
posits. Deposits are, however, used as the base measurement for re-
quired reserves, and in light of this fact, it is apparent that bank regu-
lation does take into account certain bank liabilities. Returning to the
commissioner's position on the short form balance sheet, the gist of his
discussion was that this financial statement was of minimal value to
his department. For comparative purposes Section 1930 of the Finan-
cial Code concerning the filing of financial reports by banks is here set
forth :
Every bank and every trust company shall make and file with
the superintendent whenever required by him a report in such
form as he may prescribe, verified by two of its principal officers,
showing its financial condition and such other information as the
superintendent may require at the close of business on any past
30 COMMITTEE REPORT ON FINANCE AND INSURANCE
day designated by him. If such bank or trust company regularly
keeps its books on an accrual basis the report may be prepared on
an accrual basis. The verification shall state that each of the officers
making it has a personal knowledge of the matters in the report
and that each of them believes that each statement in the report
is true.
Section 1931 of the Financial Code reads as follows :
The superintendent shall call for the report specified in Section
1930 from all banks and trust companies at least three times each
year, and for at least three times each year shall designate as the
day as of which such reports shall be made the day designated
by the Comptroller of the Currency for reports from national
banking associations.
Section 1934 of the Financial Code is also of comparative interest.
The superintendent may at any time require any bank or trust
company to make and file with him a special report furnishing
such information as he may specify when necessary to inform him
fully of the actual financial condition and affairs of the bank or
trust company.
A stamp company is, of course, not strictly analogous to a bank,
and, therefore, application of bank requirements to stamp companies
is out of order without some further analysis of the problems regula-
tion seeks to alleviate for both types of industires. One thing that may
be gathered from a look at some of the bank reporting requirements is
that these requirements recognize the limitation of a year-end balance
sheet. The balance sheet is basically a picture of a company at a given
point in time. The figures in the balance sheet necessarily reflect pe-
culiarities of a given company, such as seasonality and accounting pro-
cedures for subsidiaries or correspondents and, therefore, may not give
a worthwhile indication of the position of a company.
In his discussion of financial reports, Mr. Schutzbank testified that
other regulatory laws provided his department with relatively more
control over accounting procedures and reporting. In this statement,
the commissioner, for example, could have been referring to regula-
tions concerning credit unions. In this connection, Section 15803 of
the Financial Code, and which section follows that setting forth the
power of the commissioner to receive an annual report, provides the
commissioner with relatively broad power with respect to receiving
financial data. That section reads as follows :
Every credit union shall make other special reports to the com-
missioner as the commissioner may from time to time require.
Such reports shall be in the form and filed at such date as pre-
scribed by the commissioner and shall, if required by him, be veri-
fied in such manner as he prescribes.
( Mr. Schutzbank was questioned as to whether his department could
interpret the present statute as authorizing periodic audits. Mr. Schutz-
bank indicated that an interpretation of this nature may or may not
be justified and that such an interpretation, at any rate, would rep-
TRADING STAMP ACT 31
resent a very broad perspective of what the statute says. Even assum-
ing such a broad interpretation had substance, the commissioner noted
that his department is not budgeted to make such periodic audits. He
then indicated that if periodic audits were statutorily prescribed, then
the cost of such audits should be borne by the licensed companies.
Mr. Schutzbank : ... in addition to which we have no provision
for the charge for those audits which means that we have a sub-
stantial budget problem. One of the things which is inherent in any
traditionally regulatory statute is that the regulatory statute is
self-sustaining, and we would suggest that any regulation include
that. . . . That is not possible as we read the statute today, if we
were to find that we had the authority to do these additional au-
dits.
Mr. Herbert Wenig, Assistant Attorney General, indicated that his
office felt the Corporation Commissioner should have the authority to
receive periodic financial reports. Within this context, Mr. Burleigh
Pattee, however, testified that the licensed company he represented felt
that there was no necessity for giving the commissioner authority to
undertake periodic audits. The reason submitted for such a position
was that periodic audits would result in a substantial increase in ad-
ministrative expenses both to the state and the companies so audited.
While on the subject of audits and interim reports, Mr. Pattee added
that his organization felt the present annual short form balance sheet
sufficed as far as the commissioner's requirements were concrened. As-
semblyman Jack Casey then questioned Mr. Pattee concerning the
added burden that would be imposed on the licensed stamp companies
if they were required to submit quarterly reports to the commissioner
(reports in this context meant statements which would include mean-
ingful information on outstanding stamps).
Mr. Pattee: Well, that involves a very serious problem, Mr.
Casey, to my company for this reason : You have your sales in Cal-
ifornia; you have thousands and thousands of transients who
come here in the summer and bring their books with them and they
are redeemed here. . . . Some of the California stamps are re-
deemed in other states as well. The administrative burden of going
over the literally millions of books of this company to determine
which California stamps have been redeemed is almost insurmount-
able.
Mr. Casey: I mean just the reporting of the stamps that you
have sold in California and redeemed. In regard to your company,
there probably would ... be too much difficulty, but what you
would do is to get to these smaller companies that . . . operate
solely within the state.
Mr. Pattee : ... it wouldn 't be very meaningful where my com-
pany is concerned . . . because of the large visiting transient peo-
ple who come to California, there are greater redemptions here
than there are sales, so we have a negative figure each time.
Mr. Casey: [We would not be too much concerned with your
company] but we [would] be getting [information on] these other
companies that are solely California operating.
32 COMMITTEE REPORT ON FINANCE AND INSURANCE
Mr. Pattee : Well, I will certainly take it up with [my company]
and see if there is any reason they wouldn 't object to such a pro-
vision. . . .
COMPANIES INCLUDED AND EXCLUDED FROM THE ACT
Testimony was taken at the hearing concerning the extension of the
definition of trading stamps as contained in the act. As the act now
reads, it appears that merchant associations who issue and redeem their
own stamps are included. There is confusion, however, as to whether
a stamp company which supplies stamps to and redeems stamps for
merchants is included under existing statute. Gift Stars, Inc., is one
such company.
Apparently Gift Stars, Inc., forms contracts with various manufac-
turers and packers, most of whom are large companies and advertise
nationally. Gift Stars by virtue of the contract authorizes the other
party to use the mark ' ' Gift Stars ' ' on stamps, and these stamps may
be obtained by the other contracting party from Gift Stars or from
a printer selected by the other party. When the stamps are obtained
from Gift Star, the other party reimburses Gift Stars for the cost of
paper and cost of printing. No other payment is indicated to be made
at this time. Kegardless of the means by which the other party obtains
stamps with a Gift Stars mark, such stamps must be capable of being
identified by an Orth-Scanner, an electronic identification device, used
by Gift Stars, since it is by this device that Gift Stars is able to deter-
mine which contracting manufacturer or packer issued the stamps
which have been returned to Gift Stars. When the manufacturer or
packer is singled out, it is billed for the stamps redeemed, that is, the
redemption value plus profit of those stamps redeemed. Concerning
redemption, both Gift Stars and its parties to contract make available
to the stamp collector a catalog indicating certain gifts that may be
obtained with such stamps as well as a description of the redemption
process. The reason for central redemption, at a Gift Stars center,
rather than at the issuing manufacturers' or packers' place of business
is so that stamp holders can collect Gift Stars' stamps issued by var-
ious manufacturers and packers and present them collectively on a
particular gift noted in the catalog.
Some sections germane to the issue of exclusion are here set forth:
Section 17750. "Trading stamp" means any stamp or similar
device issued in connection with the retail sale of merchandise
or service, as a cash discount or for any other marketing purpose,
which entitles the rightful holder, on its due presentation for re-
demption, to receive merchandise, service or cash.
Section 17750.1. "Trading stamp" also means any stamp or
similar device issued as a gift or as a consideration in any trans-
action other than in connection with the retail sale of merchan-
dise or service, by a trading stamp company which also issues
such devices in connection with the retail sale of merchandise or
service, as a cash discount or for any other marketing purpose,
and which may be redeemed by the rightful holder on the same
basis as, or interchangeably with, any trading stamp issued as
described in Section 17750.
TRADING STAMP ACT 33
Section 17751. " Trading stamp" does not include any redeem-
able device used by the manufacturer or packer of an article, in
advertising or selling it, or any redeemable device issued and
redeemed by a newspaper, magazine, or other publication.
Section 17752. "Trading stamp" does not include any coupon,
caused to be prepared by the merchant using the same and dis-
tributed by him to his customers, which coupon, ticket, certificate,
card or other similar device is redeemable only by such mer-
chant for or in connection with the purchase of specific articles
of merchandise carried in his stock.
Section 17753. The Legislature finds and declares that the de-
vices described in Sections 17751 and 17752 are classes of articles
that are not employed in connection with practices which must
be regulated as provided in this chapter to protect the people of
California against improper activities of irresponsible trading
stamp companies.
In a letter opinion to the Corporation Commissioner concerning
stamp companies, the Attorney General held that Gift Stars, Inc.,
is not excluded from the act. Parts of that opinion are here set forth :
Section 17751, which excludes redeemable devices used by a
manufacturer or packer, was designed to differentiate between
concerns issuing their own trading stamps and those which use
trading stamp companies, . . . Evidently the Legislature did
not want to regulate manufacturers and packers which create and
issue redeemable devices. Gift Stars, Inc., however, is not a manu-
facturer but a separate company which furnishes and redeems
coupons for the manufacturer. Indeed, there is no clause in the
agreement between Gift Stars and the manufacturer which
makes a manufacturer liable for the redemption of stamps. Since a
manufacturer is not liable, it is arguable that the manufacturer
is merely the agent of Gift Stars. The plan is promoted and
initiated by Gift Stars, Inc., and Gift Stars, Inc., is the prin-
cipal party in the development of this plan.
The apparent purpose of the Legislature was to distinguish be-
tween concerns which issue their own stamps and those which use
stamps of a trading stamp company. This distinction was made so
that the financial responsibility of trading stamp companies could
be assured by the licensing and bonding requirements of the Trad-
ing Stamp Law.
Gift Stars, Inc., is in the same position as any trading stamp
company, and its financial responsibility should be assured. Thus,
a reasonable result, under the circumstances, is to treat Gift Stars,
Inc., in the same manner as any other company which is not
a manufacturer and which issues and redeems stamps.
In light of this opinion, the Corporation Commissioner indicated
that his department was not seeking statutory enlargement of the defi-
nition of trading stamps. Thus, it can be inferred that the commis-
sioner thought such "stamp suppliers" should be included in the
act.
34 COMMITTEE REPORT ON FINANCE AND INSURANCE
A different argument to the inclusion of "stamp suppliers" was pre-
sented by Mr. Robert Hays, who represented Gift Stars, Inc. He
pointed out that Section 17751 excludes from the act a redeemable
device used by the manufacturer or packer in advertising or selling
an article. With this in mind, he added that the "stamp supplier" acts
as an agent of the manufacturer or packer. With respect to the Attorney
General's opinion on the matter of "stamp suppliers," Mr. Hays in-
dicated that his research on this subject led him to reach an opposite
conclusion. In support of his position, Mr. Hays pointed out significant
differences between a "stamp supplier" and a nonsupplier type com-
pany regulated under the act before the Attorney General's opinion.
The thrust of his exposition was that the "stamp supplier "-merchant
relationship was an agency relationship, with the supplier, therefore,
being merely a longer arm of the merchant. Implied in this argument
is the assumption that stamp holders can ultimately look to the
merchant for redemption. In this respect, Assemblyman Anthony
Beilenson questioned Mr. Hays as to the exact nature of the relation-
ship that exists between Gift Stars and its customers.
Assemblyman Beilenson : The manufacturer is not liable for the
redemption, though, is he? Doesn't the public have to look to the
stamp supplier ?
Mr. Hays : No, sir. As I have said, these stamps, ... on their
face will read that . . . legally the manufacturer [is] liable any-
way. . . . Well, . . . the point is that it is now expressed on
these [stamps] that it is the responsibility of the manufacturer to
redeem if this is not done by [my company] .
Assemblyman Beilenson: According to the Attorney General,
there is no clause in the agreement . . . which makes the manu-
facturer liable for the redemption of stamps ; therefore, it is argu-
able that the manufacturer is not the principal of [your company] .
Mr. Hayes : ... it is inconceivable to us how a manufacturer can
cause the products to be sold bearing these representations that
upon the [presentation] of these [stamps] certain gifts will be ob-
tained and then avoid liability.
Assemblyman Beilenson : If [your company] weren't there, went
out of business or something, then each of these manufacturers
would have to supply these little gifts ?
Mr. Hays : It is our belief that this is the clear-cut responsibility
of the manufacturer, even under the ordinary principles of law,
but the company is now making that relationship [evident in]
its contracts with the manufacturer.
Comments were also made by Mr. Hays with respect to administra-
tive problems which might arise if his company were regulated by
the act.
Mr. Hays: You run into a tremendous administrative problem
here if regulation is attempted of this type of operation. We heard
a lot this morning about the problem that exists even in the
typical case, [but when my company] gives these manufacturers
the right to print these [stamps] themselves, if they don't want
TRADING STAMP ACT 35
to order them, and since [my company] has an obligation only to
redeem when these are presented, [the company] does not sell the
stamps to these merchants or to the public, but only furnishes them
to the manufacturer. [My company] is not in a position to know
how many of these stamps have been issued until such time as they
are actually presented for redemption, and for that reason, it
would be impossible for a company operating in this manner to
say, "Well, how many stamps have we got outstanding for which
we are responsible?" Only the manufacturers know that and the
manufacturers are exempt under the statute. [And] the manufac-
turer in each instance is still holding these funds until these
[stamps] are presented for redemption.
Testimony on the definition of trading stamps was heard concerning
merchant associations which print, distribute and redeem their stamps
collectively. These merchant trading stamp associations are now in-
cluded under the act. A representative of such an association felt that
these types of organizations should register with the State of Cali-
fornia, as nonprofit stamp associations as such and should, by virtue
of this fact, be excluded from the requirements of the act. The Corpora-
tion Commissioner, however, indicated that these associations should
not escape regulation simply because they operate on a nonprofit
basis. He pointed out that such associations issue stamps and are re-
sponsible for the redemption of these stamps, so that if an association's
reserves were inadequate for a given liability exposure, the problem
of redemption could still arise.
The commissioner, nonetheless, added under further questioning that
if the aggregate capital, that is to say, the combined capital of all the
merchants belonging to an association, stood behind the redemption
of a stamp or stamps issued by one member of the association, then the
potential problem of nonredemption is considerably minimized.
Thus, according to the commissioner, these associations that stand
behind stamps issued by their members present less of a problem than
do the licensed companies. This lesser problem comes about not by the
fact that these associations are nonprofit but rather arises from the
fact that these associations for the most part have sufficient capital
to assure redemption of their stamps. Assemblyman Newton Russell
questioned the commissioner concerning the exemption of such asso-
ciations from the act.
Assemblyman Russell: ... it would be all right to exclude or
minimize regulations in regard to this type, Mr. Schutzbank ?
Mr. Schutzbank : No. . . . you still have to have sufficient regula-
tions to say that those businesses in total do have enough to back
up the redemption liability.
Assemblyman John Foran questioned Mr. Schutzbank concerning the
exclusion of certain associations which do stand behind the redemption
of a stamp or stamps issued by a member of that association.
Mr. Schutzbank: I think, for example, if there were an exclu-
sion which said that whenever there was an association of mer-
chants, all of them issue stamps and all of them mutually redeemed
and all of them have a joint liability for the redemption of the
3fi COMMITTEE REPORT ON FINANCE AND INSURANCE
stamps, and if they are not redeemable by any body other than
those who issue and are not issued by any one other than those
who redeem, that I wouldn't have any great hesitation in exempt-
ing that group. The main reason for this is the joint liability.
PROCEDURES FOR HANDLING INSOLVENT COMPANIES
Testimony was heard on the statutory liquidation procedures that
were followed in two recent liquidations and which procedures entailed
considerable administrative expense — at least relative to the funds
available for claims. The commissioner was questioned as to the organi-
zation of his department to undertake liquidation of licensed stamp
companies. Mr. Schutzbank indicated that his department was not or-
ganized to handle the redemption of a large number of stamps. He
pointed out that a good part of liquidation expense is attributable
to the processing of stamps, and he further indicated that this ex-
pense of processing stamps also reflects the slow disposition of liqui-
dation cases attributable to procedures set forth in statutes. Assistant
Attorney General Herbert Wenig, presented testimony applicable to
the procedures under question.
Mr. Wenig: Now if a trading stamp company in a prior three-
month period has not redeemed stamps, a person or persons may
file a complaint with the commissioner. A notice is then served on
the company, asking the company to redeem those . . . particular
stamps represented by the complaint within 10 days. Now, pre-
sumably at this point the company could prevent further investi-
gation or involvement by merely redeeming those stamps repre-
sented by that complaint. If the trading stamp company . . . failed,
however, to redeem within 10 days, . . . the commissioner must
publish a notice of the fact in three newspapers, advising that ad-
ditional claims may be filed and this notice must be published over
a period of three months. Then after completion of publication, the
commissioner, within 30 days, must hold a hearing to determine
that the company has failed to redeem its stamps. This hearing
cannot be held until 20 days have elapsed from the date the com-
pany is notified of the hearing. Then, at the hearing the company
may pay the claims which have been presented to the commissioner.
If the company does not pay, then the commissioner within 10
days after the failure to comply with [his] demand . . . files an
action against the trading stamp company and its surety.
Now, under [this procedure] this represents an absolute mini-
mum of 130 days from the date of the filing of the first complaint,
and it is possible within the time allowed by the statute for 190
or more days to elapse before even the lawsuit is brought.
Mr. Wenig then proceeded to discuss a remedy for this lengthy statu-
tory redemption process. His proposal was aimed at preventing insol-
vency rather than at some shortening of the commissioner 's proceedings
applicable to insolvent companies.
Mr. Wenig : Because the gathering of the claims represents great
time and effort, because approving and paying claims is [a] dis-
proportionately [large expense], because many stamp holders,
TRADING STAMP ACT 37
though disappointed, do not file claims and because the bond will
pay only a small percentage of claims, the approach to protecting
stamp holders should be from an entirely different direction. It
should be toward assuring at the outset that a company possesses
adequate capital and reserves for its operation and that reserves
will be commensurate with redemption liability. Because of wide
spread public interest and because homemakers are unable to spend
time in investigating and checking various companies, the State
should have some means of assuring trading stamp customers that
they are being dealt with fairly and equitably.
Mr. Wenig added that once the commissioner went through the
aforesaid liquidation procedures, he might still have to go through
a court trial and an appeal before he could reach the assets of a non-
redeeming company. In response to a question about notifying mer-
chants to cease issuing stamps of a stamp company that has not re-
deemed, Mr. Wenig had this to say :
Mr. Wenig: Well, presumably you would have this time lag of
the 10 days and then the three-months publication notice and then
another possible 30 days before anyone could undertake to notify
a retailer that he shouldn't continue to use the stamps.
The commissioner commented briefly on the possible granting of au-
thority for him to issue cease-and-desist orders. He merely indicated
that the question of issuing such orders to prevent unsound practices
is akin to the general question of strengthening the Trading Stamp
Act. Mr. Burleigh Pattee, however, speaking for the company he repre-
sented took a position against extension of the commissioner's author-
ity so as to permit issuance of cease and desist orders to prevent un-
sound business practices.
Mr. Pattee : Such power on the part of state officers to issue
cease-and-desist orders to prevent undefined, unsound practices is
unprecedented. ... in the case of a public utility, a supervisory
commission is authorized to issue cease-and-desist orders against
a few specified and clearly defined unlawful practices. However,
private businesses are generally subject to injunctions concerning
the conduct of their business only upon application to a court.
In such circumstances, the court makes an appropriate order pur-
suant to generally accepted legal standards.
PROMOTIONAL STAMPS
The use of promotional stamps as a competitive device to attract
new business can in certain instances weaken a company's ability to
redeem stamps. Since promotional stamps represent a gift by the stamp
company, when these stamps are presented for redemption the assets
available for such redemption are taken from net capital or assets
held to redeem nonpromotional stamps issued and outstanding. If the
company issuing promotional stamps has just begun business, capital
would represent the principal source of funds for the redemption of
such stamps. If the company had been doing business for some period
of time, then the funds used to redeem such stamps might be traced
to a source other than capital. Thus, if a company does not practice
38 COMMITTEE REPORT ON FINANCE AND INSURANCE
some degree of restraint commensurate with its financial ability to re-
deem gratuitously issued stamps, the issuance of such stamps could
cause a real solvency problem.
The Corporation Commissioner indicated that promotional stamps
by themselves present no real problem for his department. "When pro-
motional stamps, however, are issued beyond that amount which the
reserves of the given company will support, then the commissioner
pointed out that a problem does arise with respect to the security af-
forded the stamp holders of that given company.
Mr. Schutzbank: We think that this is one of any number of
perfectly legitimate methods which free enterprise anticipates in
the operation of a company. On the other hand, there must be
control only in the sense that the issuance of promotional stamps
does not undermine the entire structure of the company; so if a
company which has a capital of one million dollars would care to
issue promotional stamps of one-half million dollars, so they still
have plenty of available funds and assets to meet the redemption
of those stamps when they come in, we see no objection [to this
practice]. So that the problem of the stamps is solved when you
talk in terms of sufficient capital, sufficient bonding requirements,
sufficient accounting requirements, and sufficient control over the
definition of redemption liability.
Mr. Burleigh Pattee argued that any interference with a company's
right to issue promotional stamps would be illegal as that interference
would infringe upon the right of a business to establish its own prices.
An exchange took place between Assemblyman Beilenson and Mr. Pat-
tee over the question of whether restrictions on the issuance of promo-
tional stamps thwarted free trade.
Assemblyman Beilenson: What would be illegal about that?
Mr. Pattee : This is a price fixing. Are you talking of the ques-
tion of prohibiting a man to set his own price on his stamps?
Assemblyman Beilenson : We are talking about the giving out of
free stamps.
Mr. Pattee : Free stamps, I say that, in effect, is legislation which
sets the price of the stamps.
The discussion of promotional stamps also focused on the distinction
between a gift per se and a piece of paper which represents a claim for
a gift. The latter would include a promotional stamp. Where promo-
tional stamps are issued, stamp holders must look to the company for
value. Based on this fact, it was argued that a stamp company might
overemphasize business development simply because of the fact that no
account need be made for such stamps until some time beyond the date
of issuing stamps. With the case of a gift that has value upon issu-
ance, this type of promotional device would appear to have a built in
restraint, at least more so relative to any restraint that may exist in the
issuance of promotional stamps.
TRADING STAMP ACT 39
SUBSEQUENT DEVELOPMENTS
Thrifty Green Stamps, Inc., a licensed California stamp company
with a maximum $150,000 bond, has ceased to redeem its outstanding
stamps. In June 1966, rumors apparently began circulating that this
company would be unable to redeem its stamps. These rumors led to
subsequent runs on company redemption centers, and, eventually, the
State Board of Equalization filed against the company a sales and use
tax lien of $22,894 and attached the company's bank account. The com-
pany's inability to redeem stamps reflects these factors along with an
undercapitalized financial position.
As of December 1966, the company had an estimated $431,000 of out-
standing stamps indicated to be stated on a 70 percent reserve basis.
Against this claim, there is the $150,000 bond and whatever amount
these creditors can obtain on their proration share of other assets
available for all unsecured creditors. It appears, however, that the bond
will represent the principal asset available for stamp holder claims;
thus, the indicated redemption value for these claims is 35 cents on the
dollar.
On April 30, 1966, while licensed and issuing and redeeming stamps,
this company was indicated to have liquid assets in the form of cash
and government securities of $1,233.39. Merchandise inventory, which
is assumed to be exclusively available for the redemption of outstand-
ing stamps, was stated at $325,073.33. On this same date, the company
had outstanding stamps stated on a 70 percent reserve basis of $631,-
562.81. The company had a deficit capital account (capital stock plus
surplus) of $238,324.38. For the four-month period ending April 30,
1966, the company had stamp sales of $799,738.96.
As an operating concern and on the basis of the figures presented, the
company, while licensed, was, in April 1966, indicated to be signifi-
cantly undercapitalized.
BROADENED LENDING AUTHORITY FOR
SAVINGS AND LOAN ASSOCIATIONS
BROADENED LENDING AUTHORITY FOR
SAVINGS AND LOAN ASSOCIATIONS
CONCLUSION
While there may be a good case for broadening the lending author-
ity of savings and loan associations, the committee is not prepared at
this time to make a recommendation. On this subject there is need for
more analysis and information concerning the effect upon the competi-
tive structure of the consumer loan industry and the real estate market
were savings and loan associations allowed to broaden their lending
authority.
(42)
DEVELOPMENT OF LENDING POLICY
The early American savings and loan associations (savings and loan
associations hereafter referred to as SLA) were cooperative building
societies patterned after English building societies. With the advent of
the industrial revolution, urban migration increased and, in turn,
strained the urban housing facilities then available. During this period
of history, a sophisticated mortgage loan market had not yet developed
to handle the financial requirements of low-paid workers, and tenancy,
therefore, was the principal means of urban shelter for these workers.
From this background, cooperative building societies developed as so-
cial ventures aimed at providing a mechanism through which low-paid
workers could finance homeownership.
In America, SLA over a period of time gradually changed their finan-
cial programs and form of business and eventually assumed the char-
acter of today's mutual companies and stock companies. Among the
many changes which occurred during this evolution were: (1) SLA ac-
ceptance of savers who had no intention of buying a home ; (2) continu-
ity of existence — in the early cooperative, the organization terminated
when all cooperative members had purchased homes and had paid up
their shares; and (3) incorporation under state laws.
SLA have always specialized in home mortgage loans, which special-
ization is now mandatory owing to restrictive statutes enacted at both
the federal and state levels. This policy of restricting the allocation of
SLA assets, rather than resorting to free market allocation, developed
from the following tenets and was shaped by the following historical
facts :
(1) Specialized lending is traditionally what the SLA have always
done, and, therefore, SLA should restrict themselves to familiar mar-
kets.
(2) The construction industry and homeowners' organizations lob-
bied effectively for a specialized homeowner credit system and lobbied
effectively against measures which might stem the flow of mortgage
credit.
(3) The health of the construction industry is considered vital to
the well-being of the economy, and, therefore, such industry should have
priority access to savings as compared with other industrial sectors of
the economy.
(4) Public policy has been to stimulate homeownership, since such
ownership is held to create better citizenship, family stability, and a
better environment for the future generation. In each of these in-
stances, homeownership is viewed asa" socially desirable investment. ' '
(5) A ''specialized financial institution philosophy" of the 1930 's
underlies much of the present restrictive lending legislation. Adher-
ents to this philosophy felt that (a) competition among savings insti-
tutions had to be restricted in order to save man from himself, i.e.,
institutions in direct competition would push up deposit rates and reach
out for inferior or marginal loans, both of these actions being to the
(43)
44 COMMITTEE REPORT ON FINANCE AND INSURANCE
detriment of the stability of the overall economy; and that (b) liabili-
ties should be matched with liquidity requirements, i.e., liquidity re-
quirements of SLA deposits are better fitted, as compared with bank
deposits, for long-term mortgage investment.
In order to effectuate a specialized financial institution, SLA were
given certain statutory competitive advantages over banks so that the
SLA might effectively compete for funds and then be in a position
to channel a large amount of such funds into the mortgage market.
In furtherance of this specialized financial institution policy, SLA
then, relative to banks, generally operated under and continued to do
so, less restrictive reserve requirements. Until the recent advent of bank
certificates of deposit, together with relatively higher rates paid on
these deposits and the overall increase in interest rates, the SLA were
able to compete effectively with alternative investment opportunities
for savings.
PROBLEMS ASSOCIATED WITH PRESENT LENDING POLICY
Basically, when SLA offer a depositor a higher rate of interest than
alternative investment opportunities offer, depositor savings at SLA
will tend to be relatively more stable than those savings in the alterna-
tive investments. By alternative investments is meant investments of
comparable risk, e.g., bank savings deposit and high-grade corporate
and government debt. In the instant example the liquidity require-
ments are different for SLA and the comparable alternative invest-
ments. Looking at SLA debt investments, i.e., loans and investments
which are assets to a company but at the same time are a borrowed
source of funds for the company, such investments will tend to be
less convertible into cash over a short period of time relative to aggre-
gate conversion of total bank liabilities or high-grade government and
corporate bonds. SLA do, therefore, tend to place their depositors'
funds in relatively less marketable investment opportuniites, to wit,
mortgage lending. Underlying this type of SLA lending policy is the
axiom previously stated that investments should be matched more or
less with liquidity requirements.
On July 27, 1966, a hearing concerning the subject of broadened
lending authority for state chartered SLA was held in San Francisco.
At this hearing, representatives of the Council of Savings and Loan
Financial Corporations as well as a representative of the California
Savings and Loan League spoke in favor of broadening the lending
authority of these associations.
Mr. James Rittermal of the Council of Savings and Loan Financial
Corporations testified that California statute does not control the
lending and investment policies of federal chartered SLA. Associations
of this type do operate in California. Mr. Rittermal pointed out that
broadening of the lending power of such associations by congressional
action would, therefore, have an effect on the competitive balance be-
tween the federal chartered associations and the state chartered asso-
ciations in California. In this connection, he noted that there are two
programs before Congress that seek to broaden the lending power of
the federal chartered associations. One of these programs seeks to es-
tablish federal chartered mutual savings banks. While state chartered
BROADENED LENDING AUTHORITY 45
mutual savings banks are not operative in California, they are impor-
tant in certain areas of the Northeastern United States. If Congress
were to adopt legislation allowing for the federal chartering of mutual
savings banks, such institutions would become an active factor in Cali-
fornia's financial market. This could come about because of the fact
that this proposed program would allow for conversion of federal char-
tered SLA to federal chartered mutual savings banks, and as the latter
type of institution would have broader lending power relative to that
lending power of federal chartered SLA, it is highly likely that the
federal chartered SLA would convert so as to acquire greater lending
flexibility. Greater flexibility would arise, for example, from the fact
that federal chartered mutual savings banks would be able to make
educational loans, unsecured personal loans up to $5,000 and invest
in common stock. In the event Congress established the federal char-
tering of these banks, Mr. Rittenmal felt that the Legislature should
follow this move by enacting legislation to provide for the conversion
of state chartered SLA to such mutual savings institutions.
Another program before Congress calls for the broadened investment
and lending authority of existing federal chartered SLA. It is proposed
that these SLA be allowed to make, for example, unsecured loans for
the purchase of home furnishings and mobilehomes, and to make in-
dividual consumer loans for any purpose up to $5,000. This type of
program is supported by the US Savings and Loan League and the Na-
tional League of Insured Savings Associations. These two supporting
groups differ as to the specific recommendations for broadened lending
power of the SLA, but it is sufficient, nevertheless, to say that both
groups would have federal SLA lending authority be more liberal
than that authority now possessed by California's state chartered SLA.
Apart from congressional interest in the lending power of federal
chartered mutual savings banks and SLA, the council expressed an in-
terest in liberalizing the lending power of California's state char-
tered SLA irrespective of congressional trends or action. In essence,
the council felt there was a definite need for broader lending power
rather than just a need arising out of competitive conformity with
federal chartered institutions. With respect to the basic need for
broader authority, the council presented Dr. Preston Martin, Professor
of Finance at the Graduate School of Business Administration of the
University of Southern California, who testified as to the analysis and
conclusions of a paper prepared by himself, dated July 1966, and titled,
"The Consumer's Changing Financial Needs, State and National
Trends Compared."
Related to Dr. Martin's comments is the fact that the policy of bal-
ancing liquidity requirements with investments runs into trouble if
(1) the SLA liquidity profile changes and/or (2) available investment
opportunities are inadequate. An association's liquidity profile will
change if the association competes with alternative investment oppor-
tunities at a lower interest rate or for that matter, even a narrowed
premium rate of interest. As is generally known, bank certificates of
deposit with their relatively high yield as well as the significant overall
increase in interest rates in the money market have had an impact
on the liquidity profile of SLA. This fact was alluded to by Dr. Preston
Martin.
46
COMMITTEE REPORT ON FINANCE AND INSURANCE
Dr. Martin : As the committee well knows, savings inflows to banks
and the saving and loans have fluctuated widely over the period
. . . 1958 to and including the first five months of 1966. In Cali-
fornia, savings and loans had a peak net inflow of savings of $3.2
billion in 1963 compared to the net inflow [to banks] of savings . . .
in that year of $1.75 billion. As the committee also knows, by
1 !)(;() savings and loans had fallen behind commercial banks and
other seekers for the saver's dollar: and one estimate of the first
five months of 1966 is that savings and loan associations had a
savings net loss, or outflow, of somewhere in the neighborhood
of $125 million, at the same time that commercial banks in this
state were gaining in excess of $1.0 billion in savings deposits, time
deposits and certificates of deposit added together.
A chief factor in the decline of savings and loan market share
of savings, both at the state level and the national level, has been
their inability to compete fully in the market for savings on a
rate basis.
Besides a changing liquidity profile, SLA can run into another prob-
lem which arises as an outgrowth of their present lending policy. SLA
primarily have one investment outlet, real estate lending. In this lend-
ing market, the California associations' principal loan is the conven-
tional trust deed, which unlike an FHA or VA loan is not capable
of discount in the secondary market provided by the Federal National
Mortgage Association. Thus, relative to the FHA and VA loan, the
conventional trust deed is less marketable. This being the case, 'it is
not ideally suited for the investment of depositor funds when 'those
funds are likely to be withdrawn from a given association in response
to a change in interest rates.
Given an inflow of funds into an association, that association
has little opportunity to invest these funds in anything other than
real estate lending opportunities. Table I provides a statistical profile
of the assets of insured California SLA, and this profile clearly demon-
strates that SLA opt for real estate loans over their statutory
alternative investment opportunities, cash and government securities
TABLE I
TOTAL ASSETS BY MAJOR CLASSIFICATIONS, INSURED CALIFORNIA
AND ALL U.S. SAVINGS ASSOCIATIONS
(in Millions of Dollars)
1965
1964
1963
1962
1961
1960
1955.
Total assets
Calif.
125,834
23,851
20,675
16,460
13 292
10 728
4,107
Total
real estate loans
U.S.
"$129,442
119,355
107,559
93,605
82,135
71,476
37,656
Calif.
$22,176
20,529
17,677
13,941
11,241
9,141
3,516
U.S.
*$1 10,202
101,333
90,944
78.770
68,834
60,070
31,408
*°P^eCl?mi;ary0rm'a *"*"• d L°an Data B°°k> 1966 Edition.
Cash and U.S.
govt, securities
Calif.
U.S.
$1,932
*$1 1,304
1,915
10,981
1,827
10,424
1,587
9,489
1.271
8,526
989
7,275
421
4,401
BROADENED LENDING AUTHORITY
47
Statutory considerations aside, the reason for this selective alloca-
tion is obvious as cash is a nonearning asset and government secur-
ities may not afford a high enough yield to cover the deposit and
operating costs of an association. On this latter point, the average
yearly rate paid on deposits in SLA in California is about 5.25 per-
cent, while high-grade bond yields, in relation to this rate, do not afford
a return that is sufficient to cover SLA deposit costs and all other costs,
in addition to earning a profit. This squeeze is apparent from the
data presented in Illustration 2, which is taken from Dr. Martin's
report. The average yearly rate paid through about mid-1966 on de-
posits at California SLA lies slightly below 5J percent. As can also
be seen from the data in this illustration as well as in Illustration 1,
the average rate on government bonds and treasury bills at mid-1966
does not fall above that deposit rate of SLA (which is a cost to SLA).
In fact, the average government bond rate is below the SLA average
deposit rate of about 5^ percent. Obviously, neither of these statutory
alternative investments for SLA offers an outstanding profit-making
opportunity. The average government bond rate is such that SLA would
on investment incur a loss. The same situation would probably prevail
with investment in treasury bills, especially when effect is given to the
nondeposit costs of SLA, which costs must also be covered before
profit is realized.
As can also be seen from the data in Illustration 2, the conventional
loan rate in California at mid-1966 was about 7 percent. When fees
and points are worked into this figure, the gross rate of return to SLA
would be higher than 7 percent. It appears, however, that the SLA
gross rate of return earned on conventional loans made at current
relatively high rates and earned on older portfolio loans at lower rates
(which loans represent the major portion of an association's portfolio)
is not high enough to provide SLA with the funds necessary to com-
pete in a rate war and at the same time maintain profitability.
While the term rate war is not really the appropriate term to de-
scribe the situation the SLA find themselves in — tight money is more
appropriate — the term, nonetheless, indicates the type of competi-
tion that has been developing for the saver's dollar. Illustration 1
provides data which when taken together with that data presented in
ILLUSTRATION 1
SELECTED INTEREST RATES
1962
1963
1964
1965
PEBCEIT
1966
FB* I0ME M0ITU6ES
y
Source : Monthly Economic Letter, First National City Bank of New York
48
COMMITTEE REPORT ON FINANCE AND INSURANCE
Illustration 2
Interest Rates Paid and Charged
California 4 U.S.
The cut in the lavingi pie change* . . .
1965 ,^ ... „ ,966
Stocb and Bends
Percent
6
5
4
3
2
U....U-
•»*»*
...«••
,.!»•
.*•»"
„%*••••!
Percent
S^^^^'^ZZ^'
Paid by:
1958 59 60
— Savings and Loans,
"'-Banks, Calif.
61
62
63 64 65
Charged for: -— Conventional Loans, U.S.;
by: '"" Treasury Bills, U.S.
1966
Calif.
Source : Dr. Preston Martin, "The Consumer's Changing Financial Needs, State and
National Trends Compared."
Illustration 2, presents a picture of the rate competition the SLA have
been faced with. The two charts visually point out the substantial
increase that has occurred in the average treasury bill rate and the
rate paid on certain other money market obligations. The rate paid by
banks to depositors has also increased, certainly so for a certain class
of depositors, but this fact is not fully reflected in Illustration 2. This
illustration does not give effect to the real competitiveness of banks in
the market for savings, because the bank rate shown includes the rate
paid on certificates of deposit as well as the rate paid on savings
deposits. If exclusive effect were given to the rate paid on bank certifi-
cates of deposit rather than to this rate lumped together with the
relatively lowrer rate paid on the banks ' other deposits, the bank rate
shown in Illustration 2 as of mid-1966 would be considerably higher.
From an analysis of these graphs, it can be determined that the compe-
tition for savings is intense. It was certainly so at mid-1966. In intense
competition for savings, SLA appear to be restricted from profitably
competing on a rate basis because of the peculiarities of their long-
term mortgage investment market, i.e., their older, lower rate loans do
not turn over fast engouh (a point developed further in the report).
As SLA cannot make worthwhile profits on their alternatives to real
estate lending, the present restricted lending policy of the SLA gives
rise to another problem when the real estate market is weak and the
SLA are, to the contrary situation discussed above, effectively compet-
ing for savings. This successful competition would result in a substan-
tial, steady inflow of dollar deposits to the SLA. Keeping in mind
the profit problems SLA would have with government bonds and treas-
BROADENED LENDING AUTHORITY 49
ury bills, it appears that the SLA would tend to place depositor funds
in a weak real estate market as against their other alternatives. Table
II indicates the cyclical nature of a segment of the California con-
struction industry.
TABLE II
NUMBER OF NEW PRIVATE DWELLING UNITS
AUTHORIZED BY BUILDING PERMITS IN CALIFORNIA
FOR STANDARD METROPOLITAN AREAS
1965* 140,376 1960 165,961
1964* 213,670 1959 195,905
1963* 260,997 1958 166,644
1962 210,958 1957 148,481
1961 176,167 1956 156,712
Source: California Savings d Loan Data Book, 1966 Edition
* Revised Data
With respect to the particular problem caused by a weak real estate
market and an inflow of savings to SLA, Dr. Martin had this comment
to make :
Dr. Martin : . . . the decisions to save and the decisions to bor-
row are made by two different groups. In the main, the savers are
not always the borrowers, and so these two kinds of money flows
do not always match. In the 1950 's, savings and loan associations
in California, and to a large degree in the United States, domi-
nated the savings market, and the principal need of the consumer
sector of the regional economy and the national economy was in-
deed mortgage debt. In this period, therefore, the financial re-
sources and the financial credit needs of consumers of households
matched most of the time. However, in some years the "fit" be-
tween resources and needs was not ideal, and 1963 is certainly the
most notable example. In 1963, savings went to savings and loans in
unprecedented volumes, and savings and loans had no legal choice
but to lend on mortgages if they were to maintain high rates of
return and to maintain their position in the savings market by
passing on these returns to savers. The result is rather generally
conceded to be an overbuilding of housing in the State of Cali-
fornia and, to some extent, in the whole United States. Further-
more, it may be that coupled with this there was an underlending
in the consumer sector. Consumer demand was certainly expand-
ing rapidly in 1963 and 1964, both regionally and nationally.
Aside from problems associated with the restricted nature of having
one principal investment outlet and in having a liquidity profile change,
another problem arises with respect to SLA statutory lending policy
in that this policy tends to prevent associations from effectively com-
peting for savings, i.e., change their liquidity profile through their
own efforts. By offering a higher rate of deposit interest, SLA can
remain competitive in the acquisition of savings and, therefore, work
to maintain a somewhat stabile liquidity profile. Increasing the deposit
rate of interest results in an association paying a higher rate on all
savings accounts, and thus significantly increases such an association's
cost of money. This cost is not so easily offset by increasing the associa-
tion's return on its real estate loans. This point was brought out by
50 COMMITTEE REPORT ON FINANCE AND INSURANCE
Mr. Dean Cannon who testified at the hearing for the California Sav-
ings and Loan League.
Mr Cannon: It is important that you understand that, when
our rate on savings is increased, the increase affects every dollar
in the institution— not just the money that comes in after the effec-
tive date of the increase. We must have some means of increasing
our earning power in times such as we are experiencing today if
we are to continue to be a viable industry and continue our con-
tributions to the economy of California. Although it is true the
money we are lending in the mortgage market today is bringing
a higher rate of return, these loans are made on an amortized
basis over a period of between 20 and 30 years and the result is
that there is no significant increase in the total earnings for our
institutions. It would take too many years to really have a measur-
able effect and thereby increase the amount of earnings needed
to pay the necessary rate for savings. We must, therefore, have
the flexibility to make shorter-term loans, to which real property
does not lend itself, so that the proper adjustments may be made
in earning capacity in accord with whatever the monetary climate
is at any given point in history.
As Mr. Cannon pointed out, SLA have a turnover problem in the
sense that they cannot quickly and effectively react to interest rate
changes in the marketplace. This turnover problem arises because of
the relatively long amortization period on the general real estate loan
or for that matter the average period during which the loan has life,
i.e., the period during which the encumbered property is not sold and
a new loan financed. The SLA are not turning over enough money every
year to reap benefits from the general up trend in interest rates.
Testimony at the hearing also developed the point that SLA prin-
cipal market, real estate lending, is undergoing a long-term structural
change. The significance to SLA of this change is that expenditures on
housing will increase but at a lesser rate than spending on other con-
sumer items. On this subject, Dr. Martin had this to say :
Dr. Martin : Consumer needs for financing not only changed
between 1963 and 1966, but they're changing over the long run.
This is in part because more and more households are of three
types : the young marrieds ; the empty nesters, who are retired or
who are about to retire; and the other individuals who are living
by themselves. Another circumstance which the financial institu-
tions of this country must cope with is the factor of changing fam-
ily size, particularly among young households. The average size
of a family is declining and has been declining since 1961. This is
true in California. The increasing importance of these three kinds
of households compared to the husband-wife-two-or-three-children
household is evidenced very clearly by the booming markets for
certain kinds of consumer goods and services . . . mobilehomes,
campers, vacation homes, boats and other leisure-time goods.
From the standpoint of present lending authority problems and the
public interest, an argument was made that when families buy homes
they frequently take out a loan at one institution for real estate and at
BROADENED LENDING AUTHORITY 51
another institution for furniture and appliances. Borrowing at different
institutions involves a credit check at each one and it is a process that
is economically inefficient and costly to the borrower. If the borrower
were able to obtain funds at one institution for purchase of his home
as well as the appurtenances, the one credit check and economies aris-
ing therefrom would better serve the public.
Dr. Martin : Our conclusion . . . indicates that on balance the
public would be better served if savings and loans had broader
lending powers, especially in the consumer field. The need for con-
sumer financing, though it is growing, is less dollarwise than that
for mortgage financing. Thus, mortgage lending is indicated to be
the prime function of savings and loans, with consumer lending
a residual one. However, the public is better served when finan-
cial and real resources are allocated according to the public's
changing needs. In the short run, wider lending power means
flexibility in lending to match flexibility in spending by consum-
ers.
Less compartmentalization and more flexibility among lenders
may lead to higher returns to savers over the business cycle and
may lead to lower consumer financing charges. It would certainly
enhance competition in the consumer financing industry, which
result itself is in the public interest.
A similar argument was made by Dean Cannon of the Savings and
Loan League.
Mr. Cannon: Years ago, the investment that was necessary for
furnishing and equipping a house represented a relatively small
part of the cost of moving into a new home. Today, our housing
requirements have changed, and these costs for furnishings and
equipment now represent from 10 percent to 20 percent of the pur-
chase price of the home, or from $2,000 to $4,000 for a $20,000
house. Normally, the family that buys this house will have used
its cash resources for the down payment and will have little or
no cash left to make these necessary purchases. They must then
seek financing from other sources, since savings and loan associ-
ations cannot now make loans on this type of security. Generally,
the financing available to them is on a short-maturity basis with
"add-on" interest rates, which makes the monthly payments high
at a time when the family can least afford it.
With package home financing, economies could be realized by
utilizing information already on file, thereby reducing the costs of
credit analysis, accounting, advertising, collections and other op-
erational activities. The public interest will thus be served by pro-
viding this type of package financing to the consumer, and it is
in this area of finance that we strongly feel our business must be
permitted to enter.
Mr. Gareth Sadler testified as to the department's view on broad-
ened lending power. He indicated that the department felt there was
some merit in providing SLA with greater flexibility with respect to
lending. Aside from this point, the department also recognized that
general lending parity should be maintained between state chartered
52 COMMITTEE REPORT ON FINANCE AND INSURANCE
associations and federal chartered associations. He added that the pri-
mary concern of his department was the orderly growth of the industry
and with a view to the impact upon the SLA of broadened lending au-
thority, the department was concerned with (1) what regulatory limi-
tations should be considered with any new lending authority and (2)
what the effect of broadened lending authority would be with respect
to the operation of the department.
Concerning limitations on broadening lending authority, Mr. Sadler
noted that the department had not gone into this subject in any great
detail primarily because the specific areas of additional authority had
not as yet been determined. He did, however, submit that bank regula-
tion provided an example of the approach SLA regulation might take.
In bank regulation, commercial, savings and trust operations of a bank
are distinct organizations established as such by the banking laws of the
State of California. In this connection, the type of broadened lend-
ing authority SLA are indicated to be interested in could be organized
from a regulation standpoint as a special department of the association
and separately licensed as such. Mr. Sadler was then questioned by
Chairman Moretti on specific matters concerning regulation of the in-
dustry.
Chairman Moretti : . . . , do you see a need for a change in the
reserve requirement for the savings and loans if their lending au-
thority were to be expanded ?
Mr. Sadler: Not necessarily. I think that the question probably
would resolve itself into an individual case-by-case basis; and
again, if I am correctly interpreting the procedures that are pres-
ently followed by the Department of Banking, they do make this
exact judgment in adjustments as between different departments
of a given bank. I think there's no question that a great majority
of our associations could properly undertake this and would have
adequate reserves. I think that it would call for a careful review
on an individual basis which would be a part of the review of the
staff and other qualifications of the lending institution.
Pursuing the question of direct lending as compared with the pur-
chase of consumer paper, Committee Chairman Bob Moretti ques-
tioned the Savings and Loan Commissioner, Mr. Gareth Sadler, as fol-
lows :
Assemblyman Moretti : How do you feel, Mr. Sadler, about the
possibility of direct lending on the part of the savings and loans
versus purchasing of consumer contracts where in one they do
their own credit checking and background work and in the other
case they are relying on someone else to do it and have not had
direct contact with the person who is being loaned the money?
Mr. Sadler : I think we may here be dealing with another ques-
tion which I am sure has arisen before in other financial institu-
tions and one of the normal safeguards which is used is to require
recourse arrangements on the part of the seller. I think that should
be an adequate answer; I'm not sure it is the only answer. I think
the goal should be to provide reasonable flexibility. I think it would
probably be better to approach the thing on a gradual basis but
BROADENED LENDING AUTHORITY 53
without restrictions outlawing a particular form of business ac-
tivity.
Dr. Martin was questioned as to whether SLA granted broader
lending power would tend to channel most of their funds into short-
term consumer loans as against the trust deed loan secured by real
estate, owing to the relatively higher rate of interest available on con-
sumer loans.
Dr. Martin: . . . portfolio decisions are not just a matter of
what yield do you get on various parts of the portfolio. For ex-
ample, such savings and loan associations will hold treasury securi-
ties in excess of that amount required of them in order to have
higher liquidity. Now the treasury security, particularly in the
short end of the scale, is usually the lowest yielding thing around.
But the management decision is made to hold a certain volume of
treasury securities. This is a mortgage lending institution, and it
will not succumb to yield as the sole criteria.
Concerning just what was meant by consumer loans, the following
comments by Assemblyman Jack Casey and Mr. Rittermal are of in-
terest :
Assemblyman Casey: So, actually we're talking on a broader
basis than merely just consumer financing of individual articles.
You're thinking of the purchase of accounts receivable and that
type of thing. You could move into department stores and purchase
their consumer paper and to automobile firms and purchase their
consumer paper.
Mr. Rittermal: I personally believe that we are. I think your
question relates to the originator of the loan, and I don't see that
this topic we're discussing necessarily develops simply in the
originator.
Mr. Jerald Schutzbank, the Corporation Commissioner, as an observer
at the hearing was called upon to answer certain questions. In the proc-
ess of testifying in this manner, he commented on the need to keep reg-
ulation of various industries on a uniform basis.
Mr. Schutzbank: I might take this opportunity, though, to ex-
press the one area in which I do have a point of view on that sub-
ject, and this is one on which I feel rather strongly with respect to
the industry as it exists today . . . Here, I 'm referring to the gen-
eral structure of regulations in industries such as this, where I do
believe there is imposed on the respective industries regulation
which is unreasonable only in the sense that it is not necessarily
uniform. The authority which is given to one agency over one in-
dustry is not necessarily the same as that which is given to another
agency with respect to another industry . . . consideration is
going to have to be given at some point in the context of the com-
mittee 's hearings here or elsewhere to the fact that there are many
entities now engaged in the consumer credit business, some of
which are regulated in that regard, some of which are regulated in
other regards, and some of which are unrelated in one way and
are not unrelated in another. The pattern is not as uniform as it
54 COMMITTEE REPORT ON FINANCE AND INSURANCE
should be in order to prevent unfair competition betweem the vari-
ous business enterprises. I think that one of the legitimate com-
plaints, if you can call it that, which the various industries have
made and which I think they are entitled to make, is that they
should, in any event, not suffer the difficulty of competing with
another industry in the same market under different rules.
... I think that it does go without saying that as you extend
that flexibility [broadened lending power] the need for uniform-
ity becomes all the greater.
Mr. Alvin 0. Wise, Jr., representing the California Loan and Finance
Association (composed of companies licensed to loan on the security
of personal property under the authority of the Financial Code and
supervised and regulated by the Division of Corporations) testified in
opposition to proposals to allow SLA to enter the consumer loan
field. He emphasized that SLA if they were to enter the consumer loan
field would do so, at least under existing circumstances, with certain
competitive advantages.
Mr. Wise : In the origin of the savings and loan movement, they
were afforded certain privileges as a class of lenders or as an or-
ganization. These are privileges which are not afforded to banks,
industrial loan companies, personal property brokers, or any other
classification of lenders. Examples of these privileges include the
fact that savings and loan associations are allowed to accumulate
a reserve of 15 percent of outstanding liabilities. As this accumu-
lation of money grows and the reserve account grows, they have a
tax advantage from income tax in that no income tax is required
to be paid upon the reserves. If this privilege were allowed, and
savings and loan were to loan money for consumer finance pur-
poses, the competitive disadvantage to personal property brokers,
banks and other lending institutions would be obvious. Another
privilege which we wish to call to the attention of this committee
is that savings and loans can borrow from the Federal Home Loan
Bank at a rate of interest lower than that which is available to com-
petitive lending institutions of any other kind. To permit savings
and loans to enter into the consumer loan market would be to
permit one class of lender to borrow federal money for the purpose
of lending on personal property where this privilege is denied to
personal property brokers. The Commissioner of Corporations, Mr.
Schutzbank, has already brought to your attention . . . the prob-
lem of regulation of loans in the consumer finance field. It is our
position that, if this committee should permit savings and loans
to enter into the consumer finance field, the regulations required of
our industry would have to be uniform and required of theirs.
Last, and perhaps most important, we wish to call to the commit-
tee's attention the question of whether or not permitting, under
state law, savings and loans to enter into a consumer lending busi-
ness would be constitutional. California is unique in that the in-
terest rate is fixed by the Constitution of this state, the basic in-
terest rate. Historically, in order to provide for certain types and
classifications of lenders, by constitutional referendum, lenders as a
BROADENED LENDING AUTHORITY 55
class were excepted. We have the banks ; we have personal prop-
erty brokers; [and] we have . . . industrial loan companies credit
unions, [and] small loan licensees. In the constitutional referen-
dum, each of these classifications of lenders was excepted from the
mandate of the Constitution and the power delegated to the Leg-
islature to fix their rates and regulate them. We seriously question
that any legislation which would authorize savings and loans to
enter into the special class of lender created by the constitutional
referendum, namely, personal property brokers who are by defini-
tion authorized to loan on the security of personal property, would
be constitutional.
SUBSEQUENT DEVELOPMENTS
Under new rules announced by the Federal Reserve Board, the Fed-
eral Deposit Insurance Corporation and the Federal Home Loan Bank
Board, the SLA and commercial banks are limited in the maximum
interest payments they can make on savings held at these institutions.
The new rate regulation will be in effect through approximately Octo-
ber 1, 1967.
In California, all Federal Home Loan Bank member SLA may now
pay up to 5.25 percent on depositor accounts with no maturity require-
ment. Compounded daily, this is an effective annual rate of 5.39 per-
cent. The maximum rate member banks of the Federal Deposit Insur-
ance Corporation or Federal Reserve Board may now pay on any time
or certificate of deposit of under $100,000 is 5 percent. This rate is -|
percent below the previous ceiling on such consumer type deposit ac-
counts. The net effect of this legislation and particularly that aspect
of it here described, is to establish or enlarge upon a consumer deposit
rate premium in favor of SLA as compared with banks.
INSURANCE INSOLVENCY FUND
INSURANCE INSOLVENCY FUND
RECOMMENDATIONS
The committee does not favor the alteration of the present order of
priorities of paying claims against insolvent insurers.
The committee would favor the granting of standby assessment pow-
ers to the Insurance Commissioner to pay claims against insolvent
workmen's compensation or casualty insurers. Such assessment pow-
ers should be limited to the extent assets of the insolvent insurer
are insufficient to pay claims arising out of insurance contracts.
(58)
INSURANCE INSOLVENCY FUND
Two recurring issues that faced this committee during the 1965 Gen-
eral Session concerned problems associated with the payment of claims
against insolvent insurance carriers. It is indeed unfortunate that this
state must concern itself with problems of insurance company insolven-
cies since we have gone to great lengths to prevent the existence of
such situations. We have in this state a regulatory scheme, including
minimum capital requirements for insurance companies, periodic ex-
aminations and audits of all insurance companies, and a rating law
that will allow for an adequate premium charge on risks. However,
we have not as yet developed a method of protecting a company from
poor or dishonest management or overly aggressive and unsound un-
derwriting. It is because of these latter reasons that most insolven-
cies occur.
During the 1965 General Session, this committee considered two bills
affecting the payment of claims against insolvent carriers. Senate Bill
545 proposed to alter the priority of paying such claims while AB 2410
would have established an insurance insolvency fund to pay all claims
against certain classes of insurance carriers. The former bill would re-
distribute claimants' rights to an inadequate pool of assets still favor-
ing some claims over others while the latter proposal would create a
new and additional fund out of which all claims would be paid.
The present priority system is set forth in Section 1033 of the In-
surance Code. That order of priority in numerical sequence is as fol-
lows :
1. Expenses of administration.
2. Unpaid charges due under the provisions of Section 736.
3. Taxes due to the State of California.
4. Claims having preference by the laws of the United States and
by the laws of this state.
5. All other claims.
SB 545 would change the above priority schedule by substituting
subdivision 5 above with subdivisions 5, 6, and 7, which are set forth
below :
5. All claims except those described in subdivision 7 hereof which
are based upon workmen's compensation and employer's liabil-
ity insurance contracts and any awards of the Industrial Acci-
dent Commission against the person being liquidated.
6. All other claims based upon insurance contracts allowed for
sums in excess of one hundred dollars ($100), except those de-
scribed in subdivision 7.
7. Claims on account of return premiums and other claims based
upon insurance contracts allowed for one hundred dollars
($100) or less.
8. All other claims.
(59)
60 COMMITTEE REPORT ON FINANCE AND INSURANCE
As is well known in liquidation proceedings, there is rarely an in-
stance when all creditors, i.e., claimants, are fully paid off. This is es-
pecially true in the case of involuntary liquidation. In view of these
facts, SB 545 appears to seek to move workmen's compensation claim-
ants one more step up the payment ladder and thus provide such
claimants a better change of full payment. This was one argument
used by supporters of the bill during the 1965 session. On closer analy-
sis, however, this is not the result. Current statutory provisions and
case law give workmen's compensation claims priority over most other
claims. One of these applicable code sections, Labor Code Section 4908,
reads as follows :
A claim for compensation for the injury or death of any em-
ployee or any award or judgment entered thereon, has the same
preference over the other debts of the employer, or his estate
and of the insurer which is given by the law to claims for wages.
Such preference is for the entire amount of the compensation to
be paid. This section shall not impair the lien of any previous
award.
Section 1204 of the Code of Civil Procedure sets forth the preference
for wages in any liquidation proceeding, and segments of this section
are here presented :
When any assignment ... is made for the benefit of creditors
. . . wages and salaries . . . rendered . . . within 90 days prior to
such assignment . . . and not exceeding nine hundred dollars ($900)
each, constitute preferred claims and liens as between creditors
of the debtor, and must be paid by the trustee, assignee, or re-
ceiver before the claim of any other creditor of the assignor, in-
solvent, or debtor . . .
The statutory preference of workmen's compensation claims was re-
affirmed in In Re Interstate Indemnity Co., 219 Cal. App. 2d 809, 815
(1963), where the court cited Labor Code Section 4908 and CCP Sec-
tion 1204:
Section 4908 of the Labor Code gives workmen's compensation
claims the same preference over the other debts of the employer,
or his estate and of the insurer which is given by the law to
claims for wages. The section extends such preference to the entire
amount of the compensation to be paid, unlike the preference ac-
corded claims for wages which extend only to wages earned in the
90-day period of employment prior to insolvency.
The preferential nature of a wage claim is established by the
provisions of Section 1204 of the Code of Civil Procedure. The
section applies to "any proceeding in insolvency or receivership."
In applying the above statutes to the existing order of payment con-
tained in Section 1033 of the California Insurance Code, it appears
that workmen's compensation claims already have priority over all of
the claims expressly set forth below such claims in SB 545. If the
existing statutory priority of workmen's compensation claims has force,
then the effect of SB 545 would be to move down rather than up such
claims. Under the existing system such claims are coequal with wage
INSURANCE INSOLVENCY FUND 61
claims. Under SB 545 wage claims, covered in subdivision 4 — as they
are under the present system of priorities, would be given a higher
priority than workmen's compensation claims, which would be covered
in subdivision 5, i.e., these claims are no longer coequal. Nevertheless,
workmen's compensation claims under SB 545 would continue to carry
the same priority over the same claims as is apparently set forth in
the existing order of payment. The actual effect of SB 545 is two-
fold: (1) to move workmen's compensation claims one step down the
payment ladder and (2) to break out certain types of claims falling
below workmen's compensation claims and affirmatively subordinating
them to other claims.
Thus, workmen's compensation claims would be subordinated to wage
claims, loss claims of $100 and more would be subordinated to work-
men's compensation claims, loss claims of less than $100 and return
premium claims would be subordinated to claims of $100 or more, and
finally, all other miscellaneous and trade creditors' claims would be
paid last. Those subordinated would be all loss claimants except the
workmen's compensation claimants, the return premium claimant, and
the trade creditor.
Who are the persons with claims against an insolvent carrier and to
what extent have such claims been satisfied in past insolvency liquida-
tions? Such claims represent many types of persons. They may be in-
jured workers filing a workmen's compensation claim, a third party
claimant filing a personal injury or property damage claim, the insured
himself with a personal injury or property damage claim, or a medi-
cal claim or a claim for the return of the unearned portion of the
yearly prepaid insurance premium, filed either by the insured himself
or by a premium finance company which has advanced the yearly pre-
mium on the security of the borrower/insureds, promissory note and
assignment of the return (unearned) premium. Such claims may be for
a few dollars in the case of a small loss claim or return premium
to many thousands of dollars for a large personal injury claim.
If the premium has been paid by a premium financer, who has
an assignment for the return premium, and he is able to collect the
return premium from the insolvent insurer, the borrower/insured will
not be liable under the promissory note. If, however, the premium
finance company cannot collect the return premium or unearned pre-
mium, it will move against the borrower on his promissory note. In
effect then, the borrower owes the premium finance company money
on the promissory note which was for insurance protection he will
not receive since the insurance company is insolvent and, in addition,
must come up with additional money to buy a new insurance policy.
Although this cost may be relatively small in comparison to a large
personal injury claim filed with the now insolvent insurer, it can, nev-
ertheless, represent a severe hardship to the person with limited finan-
cial resources.
In some insolvency cases, however, the premium finance company
which often is chartered as a state or national bank finds itself not
in a subordinated position, but in a paramount position to other claim-
ants against the insolvent carrier. This anomaly was pointed out by
g2 COMMITTEE REPORT ON FINANCE AND INSURANCE
the Insurance Commissioner, the Honorable Richard S. L. Roddis,
in testimony before this committee on September 16, 1966.
Commissioner Roddis : The bank has a form of off -record fluctuat-
ing noncontractual security interest known as a bankers' lien.
.Many banks engage in premium financing business, and I think
probably any bank that knew what it was doing and engaged in
that business and was dealing with one of these perhaps weaker
[insurance] companies . . . will to the extent that it can do so, in-
duce, if possible, the insurer with whom it has extensive financing
arrangements, to maintain a deposit in the bank or maintain cer-
tificates of deposit in the bank. If that company, that insurer, then
becomes insolvent, the bank, to the extent to which it has deposited
funds of the insurer in its possession, is not in the same situation
as the average return premium claimant. The bank at this point
. . . has a claim and, except as to workmen's compensation, the
claim has considerable legal force. By virtue of the banker's lien
it can offset against the loss so that they in effect come out with
100 cents on the dollar even though other claimants may receive
a lesser proportionate payment as a result of eventual liquidation.
... It is of interest that two companies which became insolvent,
Tower Indemnity Company, and a reciprocal interinsurance
exchange, which was under common management or common con-
trol with the people who controlled Tower . . . had premium fi-
nancing relationships with [a bank. The bank] held substantial cer-
tificates of deposit from both insurers. Initially, the bank took
the position that it could offset the deposit against its assigned re-
turned premium claims as to both companies.1
One method whereby all claimants of insolvent insurance company
would be assured of reimbursement is through the operation of an
insurance insolvency fund. Such a fund would obviate a priority sys-
tem of pajmient, at least for those claimants covered by the fund. The
rationale of insolvency fund would be consumer protection similar to
that afforded depositors at most banks and savings and loan associa-
tions through the Federal Deposit Insurance Corporation and the Fed-
eral Savings and Loan Insurance Corporation.
Several states have already created insurance insolvency funds cov-
ering one or more classes of insurance. The State of New York has
a Workmen's Compensation Surety Fund and a separate Motor Vehicle
Liability Surety Fund. The workmen's compensation fund provides
compensation and death benefits for persons with claims against an in-
solvent workmen 's compensation carrier which was admitted to do busi-
ness in that state. Each workmen's compensation insurer is required
to pay into the fund 1 percent of its net written premium per year.
However, payment into the fund is suspended when the fund equals
5 percent of the New York workmen's compensation loss reserves of
$2.3 million whichever is greater. Contributions are reinstated when
1 Assembly Interim Committee on Finance and Insurance, Transcript of Hearings on
Payment of Claims Against Insolvent Insurance Carriers, September 16, 1966,
pp. 45-46.
INSURANCE INSOLVENCY FUND 63
the fund falls below this level.2 The fund is administered by the Insur-
ance Department and the State Workmen's Compensation Board.
The New York Motor Vehicle Lability Surety Fund and Public Mo-
tor Vehicle Liability Surety Fund provide insolvency protection to per-
sons with claims arising out of motor vehicle accidents. These funds
are also financed by contributions from admitted liability carriers based
upon their written premiums.
Wisconsin has also established a Workmen's Compensation Surety
Fund. It is divided into threee separate funds ; a stock fund, a mutual
fund and a reciprocal fund. Each is supported by contribution of 1
percent of earned premiums of admitted workmen's compensation in-
surers. Payments into the fund cease when it equals 5 percent of the
loss reserves of the carriers.
The New Jersey fund is a Motor Vehicle Liability Fund and applies
only to motor vehicle liability carriers. The contribution rate is one-
half of 1 percent of net direct written premium per year with con-
tributions ending when the fund reaches 5 percent of net direct written
premium of the covered insurers. No claim of less than $100 is payable
from the fund which, of course, eliminates many return premium
claims and smaller motor vehicle property damage claims.
The State of Minnesota has a somewhat different system of insuring
the payment of workmen's compensation claims against an insolvent
insurer. Its statute provides for a prorata assessment of other ad-
mitted workmen's compensation carriers to cover any unpaid work-
men's compensation claims of an insolvent carrier. The total sum as-
sessed cannot exceed 1 percent of the workmen's compensation pre-
miums written in that state.
In addition, the federal government is becoming interested in the
problems created when an interstate insurer becomes insolvent. A sub-
committee of the United States Senate headed by Senator Thomas Dodd
of Connecticut conducted a two-year stud}7 of insurance insolvencies
among the so-called high risk automobile casualty companies. Near the
close of the 1966 congressional session, Senator Dodd introduced S.
3919 which would subject all interstate automobile insurers to manda-
tory participation in and financing of a Federal Motor Vehicle In-
surance Guaranty Corporation.
The Dodd bill would subject all interstate automobile insurers to
mandatory participation in and financing of the guaranty fund that
would protect policyholder claimants against insurer insolvencies; the
contractual performance of policies issued by intrastate insurers that
are reinsured in any part in interstate commerce also would be guaran-
teed on a mandatory participation basis; other intrastate insurers
could elect to apply for guaranty status.
The proposed corporation would be constructed and funded along
the lines of the Federal Deposit Insurance Corporation and the Federal
Savings and Loan Insurance Corporation, and would be modeled to re-
flect several features of the auto insurance guaranty funds of New
York and New Jersey.
The proposed corporation, in addition to its guarantee functions,
would be given sweeping examination powers to determine the
2 This description applies to the Workmen's Compensation Stock Surety Fund. A
separate Fund exists for mutual insurers.
(j4 COMMITTEE REPORT ON FINANCE AND INSURANCE
soundness of insurers seeking guaranty status, as well as the authority
to terminate an insurer's guaranteed status if it can be established
that the company has failed to make prescribed corrections of prac-
tices in the issuance of policies found to be unsafe or unsound.
The guaranty fund would be financed initially by the sale of $50
million of capital stock to the Treasury, to be repaid later ; the corpo-
ral ion also would be authorized to borrow up to $500 million from
the Treasury in the event extraordinary demands jeopardize the fund's
solvency. .
But guaranty fees paid by the participating insurers would main-
tain the fund on a self-supporting basis. The bill calls for a semi-
annual charge of one-eighth of 1 percent of each insurer's net
direct written premium ; this is estimated as sufficient to cover all
claims costs, as well as all administrative expenses of the corporation,
including those of examinations.
The guaranty fee computed on an annual basis, according to these
estimates, would amount to a charge of 37.5 cents to 75 cents on the
average automobile insurance policy.
The corporation, in the event a guaranteed insurer is declared in-
solvent by a state court, would assume any pending claims against its
guaranteed policies, and any other claims filed during the course of the
liquidation or receivership proceedings. The corporation would adjust
and settle any such claims only up to the policy limits, less mandatory
deductibles that would be applied to each claim, ranging from $100 on
third-party liability claims to $300 on policyholder claims.
On the payment of any claim, the corporation would succeed to the
rights of the policyholder or assured as against the insolvent insurer.
No matter what level of tax or contribution may be required to
create and maintain an insolvency fund, the cost of the fund will be
borne by the consumer since the insurance premium charged the in-
sured will reflect this additional cost. To this extent, the consumer
is buying insurance against insolvency. In another context, the con-
sumer can be thought of as paying for certainty when he pays the
insolvency fund tax. Insurance is supposed to substitute certainty for
uncertainty, but this definition of insurance is subject to qualification
inasmuch as certainty can be washed out through insolvency. An in-
solvency fund, therefore, provides a mechanism to effectuate the fore-
going definition without qualification, i.e., certainty would mean just
that — not certainty so long as solvency is maintained. As the consumer
is paying for the insolvency fund, he can be said to be paying to wash
out an infirmity in the economic system which causes certainty to fall
short of being an absolute.
Opinion is not uniform, however, on the advisability of establishing
an insurance insolvency fund in California. Many objections to it
were raised at this committee's hearings on the subject. The Insurance
Commissioner of the State of California objected to the fund on several
grounds.
^ Commissioner Roddis : In the first place, I would fear ... the
risk that the existence of such a fund would take the pressure
off of some insurance commissioners to do an agressive and per-
INSURANCE INSOLVENCY FUND 65
haps ever better job, or seeking- an ever better level of solvency
control and regulation.3
In rebuttal to this assertion, Mr. James Denebeim, Vice President
of Vista National Bank, asserted that the federal experience with the
Federal Deposit Insurance Corporation was exactly the opposite of
that which the commissioner thought might result in California.
Mr. Denebeim: . . . when the FDIC came in, the banks found
that instead of the State Superintendent of Banks and the Comp-
troller of the Currency being less regulatory they took now a more
zealous view of their position because they now had a fund to
protect as well as their normal duties. So, it worked just the
opposite. Instead of going to the point of being lazy, they went to
the point of increasing their ability. In addition, we got the
FDIC who came in on top of it and with greater zeal and started
to enforce the banking laws to protect — you might say — the fund.4
Secondly, the Insurance Commissioner felt that the existence of such
a fund might weaken the Insurance Department's position in the
courts when the department sought to obtain a court order placing a
company in conservatorship.
Commissioner Koddis : The parties before a court are usually, at
least in the first instance, the commissioner and the equity owners
who think the commissioner shouldn't have taken it over . . .
There's a certain tendency on the part of some judges, not all but
some, to feel that perhaps the commissioner acted too soon. My
own feeling is that there are cases that the presumptive position
should be the other way, but the company always has an explana-
tion, for example, that they could have written their way out of
the problem. You would have to know the record of some of
the litigation we have had in some of these insolvency proceedings
to really have the feel for the psychological problems, if you wish,
in court.
Now, with the fund in existence that psychology would be all
the greater because the equity owner should be in a position to
say "the Insurance Commissioner shouldn't have moved so ag-
gressively, we had a chance of salvaging this thing and nobody
would have gotten hurt if he had let us go on and run the string
out some more before he moved on us because, after all, there 's al-
ways that fund to back it up and policyholders would not have
been hurt." 5
The third objection was that good, healthy, well-run companies
should not be required to subsidize or protect the weaker, not so well-
run companies. Another objection concerned possible retaliatory taxes
that could be levied against California insurers doing business in other
states if California created an insolvency fund and required contribu-
tions into it from all insurers admitted to do busines in this state.
Commissioner Roddis: The addition of the assessment would
probably be viewed and construed under the retaliation constitu-
8 Transcript, page 51.
♦Transcript, page 91.
5 Transcript, pages 51-52.
(j,j COMMITTEE REPORT ON FINANCE AND INSURANCE
tional or statutory provisions of most other states as an additional
sment or tax, and probably to the extent to which it was ap-
plied to forms would be applied to California companies in every
other state on a retaliatory basis. The only way, of course, to avoid
retaliation would be to confine the assessment to California com-
panies, domestics alone, in which case obviously then the rate has
to be a great deal higher and you have the obvious problem of
equity. . . . G
The commissioner's position on the possibility of a retaliatory tax
being imposed upon California companies by other states was supported
by Mr. Perry Taft, Pacific coast manager and counsel of the American
Insurance Association.
Mr. Taft: ... in my experience in the western states, fortu-
nately we've been able to successfully persuade the state au-
thorities that they shouldn't apply it; but in Utah eight years ago
the State Tax Commission did attempt to apply on our New York
member companies, retaliation on both the automobile and work-
men's compensation solvency fund, and we went around and
around, almost to the point where we're going to court over it and
they finally backed down. So, in Utah, very definitely we ran the
risk of their attempting to apply this because the New York rate is
2 percent, the Utah rate is 2 percent, so they were equal in that
respect, so Utah figured that if a Utah company doing business
in New York had to contribute to this (fund), the Utah ought to
get the equivalent of that assessment for the State of Utah.
Eight now we're involved in a protracted series of negotiations
with the State Insurance Commissioner of Nevada in this very
same area on our New York member companies as a result of
Nevada having passed in 1963 for the first time a retaliatory law.
And the ironic thing about this Nevada situation is that in Nevada
they're trying to apply retaliation on a workmen's compensation
solvency fund on our New York companies, although our New York
companies can't even write workmen's compensation in Nevada
because it 's a monopolistic state fund.7
A representative of the insurance industry, Mr. John P. McFarland,
speaking on behalf of the Industrial Indemnity Company and the Fire-
men's Fund of San Francisco, suggested that what wras needed was not
insolvency fund but an increase in the capital and surplus requirements
an insurer would have to have in order to do business in this state.
Mr. McFarland: You will note that the trouble that we have
had has been with insurance companies that have been under
capitalized. They have been, in many instances, on reserve. The
commissioner cannot, as was testified to this morning, immedi-
ately go out and detect and wTave a red lantern the moment an
insurance company becomes under reserved. But if there is suf-
ficient capital back of the company, that is sufficient. Now, the
insurance industry is a little bit hesitant about coming forward
and suggesting increases in capital and surplus, because it looks
6 Transcript, page 53.
7 Transcript, pages 89-90.
INSURANCE INSOLVENCY FUND 67
as though we're trying to build up a competitive wall against
other people coming into the business. This is simply not so. But
our posture has to be guarded somewhat carefully lest we be ac-
cused of this. The insurance has, of course, let 's face it, a selfish in-
terest when we come to setting up state funds or other types of
funds to pick up the check on insurance losses. We don't like the
idea of furthering encroachment in private industry, quite
frankly.8
The committee does not feel that an adequate solution to the insol-
vency problem can be found in merely altering the present order of
priority of paying claims against an insolvent insurer. SB 545 fails
to improve the position of the workmen's compensation claimant. It
does, however, affirmatively subordinate other classes of claimants. It
is doubtful if any of these claimants would ever be made whole by the
device of affirmative subordination.
The concept of an insolvency fund has as its virtue the ability to
make whole all claimants who are covered by the fund. However, with
the exception of the standby assessment powers contained in the Minne-
sota statute, other types of funds contain inherent weaknesses or dan-
gers. The possibility of other states imposing retaliatory taxes on Cali-
fornia companies operating in these states is a real threat. If California
were to impose a tax or mandatory contribution on all insurers doing
business here, in order to support the fund, other states might view
this as sufficient to impose retaliatory taxes on California companies.
Therefore, the committee would only favor at this time that the
commissioner be granted standby assessment powers which would en-
able him to assess admitted carriers pro rata to the extent that an in-
solvent carrier 's assets were unable to satisfy claims based on insurance
contracts. Such assessment powers should extend only to workmen's
compensation carriers and casualty carriers. In addition, a sufficient
period of time should be given to the assessed carriers to meet the assess-
ment at the assessment dates so that no undue strain will be placed
upon the solvent carrier's reserves.
8 Transcript, page 72.
HEALTH INSURANCE AND ANTIDUPLICATION
PROVISIONS
HEALTH INSURANCE AND ANTIDUPLICATION
PROVISIONS
CONCLUSIONS AND RECOMMENDATIONS
The committee notes that the health insurance industry contracts
with insureds to cover certain expenses, and that some insureds sub-
mit claims and receive benefits in excess of covered expenses. How-
ever, the information available to the committee at this time does
not warrant a conclusion that any "insurance profit" is not used
by the insured to cover medical expenses incurred but not covered
by the policies. Since the insured has paid for both policies he should
be entitled to the cash benefit of the policies. Since the committee has
not been convinced that any potential savings through antiduplica-
tion provisions will be passed on to the consumer in the form of lower
premiums it cannot recommend such provisions at this time. If fur-
ther investigation shows such a saving will result and an adequate
system of informing insureds that their benefits will be limited by
antiduplication provisions is developed we will reconsider our rec-
ommendation.
(70)
HEALTH INSURANCE AND ANTIDUPLICATION
PROVISIONS
It appears that the health insurance industry is faced with a situa-
tion wherein some insureds can and do collect on a given claim bene-
fits which exceed related costs. This excess collected is termed an in-
sured's insurance profit (hereafter referred to as overinsurance profit).
When an insured is in a position where upon sickness or injury he
might be able to collect an insurance profit, he is considered to be
an overinsured.
If there are problems caused by the existence of overinsurance,
these problems can technically arise because of the fact that (1) both a
husband and wife are employed and covered as a spouse under the
other's group disability policy; (2) an individual, perhaps in recog-
nizing that many insurance policies do not reimburse the full value of
medical costs, holds, for instance, two policies — either both being indi-
vidual policies or one being an individual policy and the other a group
policy; and (3) an insured is covered under unemployment conten-
tion disability insurance, which is required by statute for a good many
employees in California, as well as being covered under a health insur-
ance plan with no exclusion clause relating to hospital benefits payable
under unemployment compensation disability insurance. Another over-
insurance situation can arise when an insured has medical coverage
under an automobile insurance policy as well as coverage under a health
insurance plan.
Assuming that an overinsurance problem exists, three basic forces
appear to underlie that problem: (1) increasing awareness on the part
of the public of the value of health insurance; (2) the growing utiliza-
tion of group insurance plans; and (3) the increasing number of hus-
bands and their wives who are both working.
Limited data are available that can be used as a reference to the
measuring of the dollar impact of overinsurance profit. A 1961 study
of hospital insurance in California 1 found that 6.9 percent or 15,700
hospital patients of a sample group received benefits which exceeded
their respective hospital costs. This overinsurance profit averaged $201
per person; aggregate overinsurance profit amounted to slightly over
$3,155,700. These figures did not take into account disability hospital
benefits which all of the sampled claimants were eligible to receive.
When these disability hospital benefits were taken into account, it was
found that 38.7 percent of all measured claimants benefited financially
from their hospitalization. While extensive data are not available con-
cerning the California overinsurance experience, and for that matter
the national experience, it is indicated that overinsurance profit is
being garnered by some insureds and that this profit is on an average
1 Nathan Sinai et al., Disability Insurance in California, Bureau of Public Health
Economic Research Series No. 11, University of Michigan (Ann Arbor, Michigan:
Braun-Brumfield, Inc., 1965) p. 163.
(71)
72 COMMITTEE REPORT ON FINANCE AND INSURANCE
and a per capita yearly basis amounting to a considerable sum of
money.
It has been argued that the overinsurance phenomenon gives rise to
problems for the insured, the insurer and the public. For example, it is
nerally held by those familiar with insurance economics that over-
insurance profit has been a direct causative factor accounting for in-
creasing health insurance premiums. The reasoning in support of this
view runs like this: With the supply of hospital facilities relatively
constant over a short period of time, a demand force based on getting
the most out of several health insurance policies can impart an unnat-
ural strain on hospital facilities and, therefore, contributes to or aggra-
vates the inflation of medical costs. This, in turn, leads to a conclusion
that a demand force of this type is inimical to the public interest. From
the insured's standpoint, it can be argued that overinsurance profit
engenders disrespect for insurance programs. It is indicated that this
profit and, for example, concomitantly performed unnecessary medical
service both work to distort rehabilitation programs and vitiate employ-
ment incentive.
To the extent that there exists an overinsurance problem, it is indi-
cated that underwriting procedures alone are not effective to remedy
such problem. Underwriting is ineffective because it must cope with
too many variables affecting benefit and cost measurement. Group bene-
fits are, for example, affected by collective bargaining processes ; medi-
cal costs will vary geographically. Both of these variables present un-
derwriting estimation problems for a mobile, unionized labor force. In
light of these variables, it would be possible for an insured to be an
underinsured at one point in time and an over-insured at another point
in time. Furthermore, relatively low group premiums would of neces-
sity increase if group underwriting were to be made more complex
through measurement at a given point in time of the overinsurance ex-
posure of each individual within the group.
It has been argued that while an insured may collect benefits which
exceed cost on a given claim, this so-called overinsurance profit cannot
really be considered as a profit at all when a broad perspective is
taken of an individual's health problems. This argument maintains
that there are many medical expenses not covered by health insurance
and that the covered medical expenses are not fully compensated for.
Inereiore, there is no overinsurance situation but rather an underin-
surance situation wherein the so-called overinsurance profit is used to
defray what would otherwise be an out-of-the-pocket expense. This
argument appears to hold that when once relatively more comprehen-
sive and full benefit health insurance policies are available at a reason-
able cost, then so-called overinsurance may present a real problem ; but
at the present time, the so-called overinsurance problem is illusory in
view of uncovered and uncompensated medical expenses that arise to
place an economic burden on insureds. An argument of this nature ap-
pears to maintain that what an insured pays for in the form of actual
insurance coverage is not the standard of measuring whether or not an
insured is overmsured but rather the standard should be that insurance
coverage that would be purchased if it were economically available
HEALTH INSURANCE AND ANTIDUPLICATION PROVISIONS 73
An interim hearing was held on May 31, 1966, in San Francisco re-
garding antiduplication provisions in health insurance policies. Such
provisions have been proposed as the most effective mechanism for han-
dling an overinsurance problem. The interest of the insurance industry
in effecting a solution to this alleged problem has resulted in sponsored
studies of such provisions and, in turn, these studies have led to the
formation of a group model antiduplication provision, and that provi-
sion is, in part, here set forth :
The "model" provision is based on two guiding principles.
1. Employees and employers will accept nonduplication provided
it permits recovery by the insured of all covered medical ex-
penses.
2. In order to be effective claim settlement has to be simple and
easily understandable to employers and claimants.
It is also important to note that the "model" provision was drafted
in a form which makes it adaptable to basic plans (i.e. hospital, sur-
gical and medical expense) as well as major medical.
Briefly the ' ' model ' ' industry provision works as follows :
1. It is a firmly established principle that when a claimant is in-
sured under two or more plans he should be permitted to re-
cover, in total, the amount of the reasonable and customary
charges for necessary items of medical expense that are covered
in whole or in part under any one of the plans before either plan
reduces its benefit payment. Such expenses are referred to as
' ' allowable expenses. ' '
2. Whenever one plan does not contain a nonduplication provi-
sion that plan must pay its benefits before the plan which does
have a nonduplication clause.
3. When two or more plans contain nonduplication clauses the fol-
lowing "order of benefit determination" establishes the se-
quence of payment :
a. the plan covering the patient as an employee pays before the
plan covering the patient as a dependent.
b. the plan covering the patient as a dependent of a male person
pays before the plan covering the patient as a dependent of
a female person.
c. where the order of payment cannot be determined in accord-
ance with these rules, the first plan to make payment will
be the one that has covered the insured for the longer period
of time.
4. The plan that pays first calculates benefits exactly as though
duplicate coverage did not exist.
5. The second plan to make payment will therefore reimburse the
claimant for all allowable expenses not covered by the other car-
rier provided this amount does not exceed the benefits payable
under the plan in the absence of duplicate coverage.
6. Benefit credit — that amount of money which is "saved" through
application of a nonduplication provision on a given claim —
accrues for a subsequent period, generally one year, as a credit
to be applied against future claims.
-\ COMMITTEE REPORT ON FINANCE AND INSURANCE
The net effect of this arrangement is that the claimant is either
reimbursed for 100 percent of his allowable expenses or receives the
full benefits payable under both plans that would have been allowed
if aeither plan contained nonduplication provisions.
indicated in the above, "allowable expenses" and "order of
benefit determination" are key features of the group model antidupli-
cation provisions. The term "allowable expenses" gives the broadest,
most absolute protection to the insured patient. In effect, it guarantees
thai the insured patient will be protected up to 100 percent of any
necessary, reasonable and customery item of expense, all or part of
which is covered under at least one of the plans insuring the person
for whom the claim is made.
"Allowable expenses" is a concept consistent with the overall pur-
pose of the nonduplication provision — that is, to conserve insurance
dollars which otherwise would be wasted because of an overinsurance
situation.
"Order of benefit determination" — the second guiding principle —
affords a reasonable, relatively simple criterion for determining the
order of responsibility each insurance plan shall assume in paying
benefits when a condition of overinsurance exists. This principle, of
course, does not apply unless at least two plans involved in the same
claim have a nonduplication provision.
"Excess carrier." In a situation where two plans exist — and only
one of the plans contains the nonduplication provision — the plan with
the provision automatically assumes secondary responsibility for bene-
fit payment. This would be true even though under the terms of "order
of benefit determination" the plan normally would be the primary
carrier for benefit payments.
HOW THE GROUP Av\ODEL ANTIDUPLICATION PROVISION
WORKS— A CASE STUDY
The Coverage : Tom Jones is covered under a group health insurance
plan provided by the ABC Corporation. His wife, Mary Jones, is
under a group plan provided by the XYZ Corporation. Under the ABC
plan, where Tom Jones works, his wife is included as a dependent
spouse. Under the XYZ plan, where Mary Jones works, her husband
is enrolled as a dependent spouse.
Illustrative Claim : Tom Jones is the insured patient. Hospital and
surgical expenses for an appendectomy performed on Mr. Jones total
$600. As Example A illustrates, in the absence of a nonduplication
provision combined benefits under two plans would amount to $850
C$400 in total benefits under the ABC Plan for hospital and surgical
expenses and $450 in total benefits under the XYZ Plan) — hence the
Jones family would realize a profit of $250.
In Example B, since only Tom Jones' plan contains the nonduplica-
tion provision, it automatically becomes the "excess carrier." Accord-
ingly, Mary Jones' plan assumes responsibility for paying first, and
her husband's plan, as the "excess carrier," pays the lesser amount.
In Example C, where both plans contain the provision, the situa-
tion is reversed. Tom Jones' plan becomes the "primary carrier" and
HEALTH INSURANCE AND ANTIDUPLICATION PROVISIONS 75
his wife's plan the "secondary carrier." Therefore, Mary Jones' plan
pays the lesser amount.
Dependent Children : In all three illustrations, had the patient been
a dependent child of Tom and Mary Jones, identical circumstances
would have prevailed. In Example A, the same profit would be realized
by the family. In Example B, the child would be covered first under
the mother's plan, which contained no nonduplication provisions. In
Example C, the father's plan would assume primary benefit responsi-
bility, and the mother's plan, secondary, consistent with the "order
of benefit determination" provision. The latter dictates that the plan
covering the dependent of a male person pays before the plan covering
the dependent of female person.
EXAMPLE A
WHEN NEITHER THE ABC PLAN NOR THE XYZ PLAN
HAS THE ANTIDUPLICATION PROVISION
Total allowable expenses for medical charges for appendectomy $600
Employee benefits payable by ABC Corporation (Tom Jones' plan) $400
Dependent benefits payable by XYZ Corporation (Mary Jones' plan)_ $450
Total benefits payable by both plans $850
Profit to Jones family $250
EXAMPLE B
WHEN ONLY ONE GROUP PLAN (i.e., ABC PLAN) HAS
THE ANTIDUPLICATION PROVISION
Total allowable expenses for medical charges for appendectomy $600
Dependent benefits payable by XYZ Corporation (Mary Jones' plan) $450
Employee benefits payable by ABC Corporation (Tom Jones' plan) $150
Total benefits payable by both plans $600
Out-of-pocket expenses $0
EXAMPLE C
WHEN BOTH PLANS HAVE THE ANTIDUPLICATION PROVISION
Total allowable expenses for medical charges for appendectomy $600
Employee benefits payable by ABC Corporation (Tom Jones' plan) $400
Dependent benefits payable by XYZ Corporation (Mary Jones' plan)_ $200
Total benefits payable by both plans $600
Out-of-pocket expenses $0
In both the 1963 and 1965 General Sessions of the Legislature, the
insurance industry sponsored a bill that was designed to incorporate
into the California Insurance Code an antiduplication provision pat-
terned after the group model antiduplication provision. In both ses-
sions, the bill was referred from committee to interim study.
Mr. Joseph D. Thomas, Chief Assistant Commissioner of the Cali-
fornia Department of Insurance, presented views on the subject of
antiduplication provisions in general and also testified as to the de-
partment 's position on this matter.
Mr. Thomas: . . . the existence of these reports [status reports
concerning overinsurance control and prepared by the insurance
industry at the request of the National Association of Insurance
Commissioners] indicates to the department certain things.
One is that both the commissioners and the insurance industry
believe that the lack of adequate contract provisions for eliminat-
ing or restricting duplication of benefits in health insurance pol-
icies is a serious and important problem.
. . . two, that solution, fair and acceptable to all interests, is
most difficult.
76 COMMITTEE REPORT ON FINANCE AND INSURANCE
The Chief Assistant Commissioner indicated that the department
believes there is an overinsuranee problem in California. He pointed
out that most other states permit some form of an overinsuranee pro-
vision in group policies and in guaranteed renewable and noncaneel-
lable individual policies. Since in his opinion the present provisions of
the California Insurance Code do not allow antiduplication provisions
to be written into health insurance policies, and in view of the factors
commonly cited as undesirable consequences of overinsuranee profit,
he presented certain department suggestions to alleviate problems as-
sociated with such profit.
Mr. Thomas: The California department does not believe the
final form of AB 1301 [submitted in the 1965 General Session]
is necessarily the one best solution. This proposed solution is com-
monly referred to as the Pettengill provision. You will recog-
nize that it was advanced as a solution only after the commissioners
[National Association of Insurance Commissioners] adopted a
somewhat similar but different provision ... in December, 1963
. . . [applicable] to both individual and group [policies].
The California department makes these suggestions :
One, that the law be changed to permit but not require the
Pettengill solution.
Two, that a law be enacted to: (1) state duplication is a prob-
lem; (2) describe the evils the problem creates; (3) state the
purpose of the law is to prevent these evils; and (4) authorize
the Insurance Commissioner to approve for use in group policies
one or more additional wordings which will reasonably and fairly
prevent, or decrease, overinsuranee and its attendant evils.
. . . three, serious thought be given to extending [the use of
any new provisions] to individual policies, particularly guaranteed
renewable and noncancellable health policies.
Under current California law, the overinsuranee proration provisions
permitted in individual policies are virtually ineffective. Proration is
not applicable where policies are written on a noncancellable or a
guaranteed renewable basis. Proration can be effectuated in a situation
where an insured having insurance policies with such proration provi-
sions issued by several insurers, has not given notice to an insurer of
coverage by another insurer. Since most policies are indicated to be
written on a guaranteed renewable basis, the insurer on notice appears
to be in a position where it cannot modify coverage commensurate
with other coverage. There are other problems with respect to proration
and individual policies. For example, premium adjustment between
several insurers for the purpose of determining an insured's return
premium is rendered more difficult by the fact that the expense in-
volved in determining such adjustment is considered by industry
sources to be prohibitive. Also, the insured is likely to be confused
by the proration process and return of premium. Furthermore, the
computation of the return premium is not easily effected where several
policies have different provisions.
A question was raised concerning the effect of antiduplication on pre-
mium rates. Mr. Thomas indicated that the effect of antiduplication
HEALTH INSURANCE AND ANTIDUPLICATION PROVISIONS 77
should be downward pressure on premium rates. This downward pres-
sure on rates would be realized owing to the intense competitive en-
vironment of the health insurance industry. He further indicated that,
under the present overinsurance situation, the additional medical ex-
pense attributable to that situation is passed on to consumers in the
form of higher premium cost. Thus, those insureds who do not choose
to collect an overinsurance profit still end up paying for some of the
added medical service caused by those insureds collecting such profit.
In response to a question concerning insurers taking into account
duplication of benefits in the calculation of experience tables, Mr.
Thomas pointed out that this is done with respect to hospital benefits
under unemployment compensation disability insurance by companies
writing other group health insurance.
Mr. Thomas : ... it would be considered in the relatively minor
areas where the California law now permits provisions which pre-
vent overinsurance. There is a permission in the California law,
for instance, in a group case, to exclude the benefits that you might
get under the [unemployment compensation disability insurance]
law and have the group policy be excess of anything that [this]
law provides. That definitely would be taken into account in esti-
mating the . . . premium for that type of a case as distinguised
from one which would duplicate the . . . benefits [under that
law].
Mr. Richard Edwards, Counsel of the Health Insurance Association
of America, testified on the need for passage of a bill which would per-
mit antiduplication provisions to be written into health insurance con-
tracts. While Mr. Edwards did not explicitly characterize this need as
an exigency, he did point out the passage of such a bill was needed
to improve, among other things, the underwriting of policies covering
employees under group contract in California together with employees
in other states permitting antiduplication provisions in group contracts.
Mr. Edwards: . . . my central purpose in being here is to try
to bring you to the belief that I have that it is imperative, abso-
lutely essential, that California enact legislation of the type de-
scribed by Mr. Thomas . . . , because all other states have legisla-
tion which now permits their Insurance Commissioner or director
or superintendent, to have this type of policy provision in group
basic contracts and in other types. California now has granted the
authority, already existing authority, to your commissioner to per-
mit this type of provision in major medical, group major medical
and group comprehensive contracts, but not in group basic con-
tracts. In that sense, California does not have this type of legisla-
tion, and it is sorely needed so that the group contracts may be
issued affecting employees in California where the status of the
group contract is outside of California and vice versa.
The other factor that has moved this from the area of desirable
legislation to absolutely essential legislation is, of course, the enac-
tion of Medicare. Medicare will create certain pressures on utiliza-
tion of medical care facilities that will reduce, if not eliminate,
any tolerance zone that existed before for excessive utilization by
reason of overinsurance.
78 COMMITTEE REPORT ON FINANCE AND INSURANCE
Mr. Edwards concurred with the testimony of Mr. Thomas to the
effect that the competition in the group health insurance market was
of a nature that any savings brought about through antiduplication
would tend to be passed on to the consumer in the form of lower pre-
mium cost. Mr. Edwards also pointed out that the proration approach
to overinsurance is impracticable in today's market owing to, for exam-
ple, relatively excessive administration cost in calculating proration of
benefits. While on the subject of proration problems, he was questioned
about other approaches to the elimination of overinsurance profit and,
in reply, indicated that proration and order of benefit determination
(antiduplication) were as far as he knew the only effective alternative
approaches to the problem of overinsurance.
In response to questions by Assemblyman Newton Russell regarding
antiduplication provisions in both group and individual health insur-
ance policies, Mr. Edwards indicated that the more urgent need for
such provisions was with group policies. This line of questioning also
covered the complexities of a situation where an insured has an individ-
ual policy and a group policy, with the latter containing an antidupli-
cation provision.
Assemblyman Russell: Is it practically impossible to put this
nonduplication provision in individual policies ?
Mr. Edwards: The situation on the individual policies differs
in this respect. In 1950, the . . . National Association of Insur-
ance Commissioners adopted a " model law," which all 50 states
have adopted, called the Uniform Individual Accident and Sickness
Policy Provisions Law. Now, it contains a series of overinsurance
provisions [and] those provisions are in the California Insurance
Code. It would require a separate amendment to achieve the same
type of thing on the individual side that I am suggesting for
the group side ... we would hope that both steps could be taken,
but there is no question about it — the most urgent need of the two
is for enabling legislation which will let your commissioner author-
ize it on the group side. We support both forms of legislation. We
would like to see the new overinsurance provisions on both individ-
uals and groups.
Assemblyman Russell: What if you have a situation where you
have a group policy that has these provisions in it, and I have an
individual policy [without such provisions]. Would [the insurer
on my individual policy curtail benefit payments] ?
Mr. Edwards: In the Pettengill provision, there is a section
called ' ' definition of a plan ' ' and the definition of a plan recites the
forms of coverage which you will take into account in determining
whether benefits have exceeded the cost of an illness or a disability.
Many insurers do not include individual policies in that definition
of a plan, which means that in those circumstances they ignore
individual policies. Our recommendation to you . . . would be
that we would hope that that discretionary device . . . could be
left to the Insurance Commissioner to administer as the pattern
of financing medical care changes . . . [So], . . . if the definition
of a plan in the group contract you describe includes individual
policies, then, in effect, the individual policy would be primary and
the group would be secondary.
HEALTH INSURANCE AND ANTIDUPLICATION PROVISIONS 79
Concerning the passage of antiduplieation legislation, Mr. Lewis Kel-
ler, representing the Association of California Life Insurance Compa-
nies which sponsored antiduplieation bills in.the 1963 and 1965 General
Sessions, indicated that a two-step process, that is to say, separate in-
troduction and enactment of a group antiduplieation bill and an indi-
vidual antiduplieation bill, would be more desirable than a single in-
clusive bill. The reason for this legislative bifurcation of related subject
matter arises from the fact that interest groups of each class of insur-
ance have separate views concerning antiduplieation. Apparently, anti-
duplication in an individual policy appears to present more complex
problems relative to those problems associated with group antidupliea-
tion. As the process of ironing out problems of individual antidupliea-
tion might slow up passage of group antiduplieation, the introduction
of separate pieces of legislation was thought to be the better procedural
approach.
Assemblyman Jack Casey questioned Mr. Edwards on the mechanics
of overinsurance collection and as to how such collection procedures
would be affected by antiduplieation. Mr. Edwards indicated that if
an insured failed to identify other coverage, and if, for instance, a hos-
pital and a doctor were to submit bills to each insurer, the insured
would receive payment from both insurers. Verification of doctor bills
is for the most part a very informal process, but as a consequence of
this informality, overinsurance can become a problem. At this point
Assemblyman Jack Casey raised the following question :
Assemblyman Casey: Isn't this more of a problem with admin-
istration rather than legislation 1
Mr. Edwards : It is a problem with administration, but in Cali-
fornia, uniquely, the commissioner at this moment has no authority
to authorize the insurers to solve the problem by administration
and that is all we are asking for.
A question was directed to Mr. Edwards by Assemblyman George
Willson concerning possible administrative changes the insurance in-
dustry would effect upon passage of legislation of the type that was
under discussion.
Mr. Edwards: I would hope that the enactment of the type of
legislation that we are urging would be followed by a ruling from
your Insurance Commissioner authorizing the Pettengill provision
as one of the means for achieving this end and then the insurance
companies would have, instead of a problem, [relief from] the prob-
lem, because as it stands now, they already have the administrative
machinery set up by reason of the fact that all other 49 states per-
mit this provision. . . . All we are asking for is that your commis-
sioner be given what the other 49 commissioners have so [that giv-
ing your commissioner new power] will . . . remove an admin-
istrative impediment instead of requiring creation of new admin-
istrative machinery.
Assemblyman Willson: . . . well, then, the simple solution you
are seeking is that we change the state law to allow the commis-
sioner to permit the companies to sue for the overage, is that is?
gQ COMMITTEE REPORT ON FINANCE AND INSURANCE
Mr. Edwards : Well, not to sue for the overage. ... to the best
of my knowledge this provision has been operating in the other 49
states . , and in California in respect to major medical compre-
hensive . . . and I have yet to encounter a single lawsuit where
the right to recovery provision is involved. What more often hap-
pens on the right of recovery provision is that if discovery is made
that the individual withheld the information as to other coverage,
the insurer simply telephones or writes to the insured [and requests
remittance]. ... in many instances where the request ... to be
remitted is declined, insurers still very often do not litigate be-
cause it is considered bad insurance relations.
With respect to payment on covered expenses under the Pettengill
provision, Mr. Edwards indicated that such expenses would be cov-
ered 100 percent. On this subject of coverage of expenses, however, a
previous question and answer exchange between Assemblyman Victor
Veysey and Mr. Joseph Thomas was as follows :
Assemblyman Veysey: . . . when you really look at it . . .
most cases of duplicate coverage because [of] the deductions and
the other costs that are involved, is it generally possible for an in-
dividual to really make an overall profit by having duplicate cov-
erage ?
Mr. Thomas: Yes, it is possible. The Insurance Commissioner
did consider the point that you are pointing up [and] that perhaps
the man should be allowed to collect 110 percent or something like
that.
A question was raised by Assemblyman Jack Fenton with respect
to the merchandising of insurance policies with antiduplication provi-
sions contained therein. Specifically, Assemblyman Fenton was con-
cerned about a lack of consumer counseling to the effect that such con-
sumer might be purchasing unneeded insurance.
Assemblyman Fenton: Is somebody going to counsel him and
say, now you don 't need this — this is taken under the group policy
and you don't need this? They are going to give him everything
he asks for, aren't they? . . . they give him everything he wants
and then [will] come the time when they are going to say, well,
you can't get this because it is covered under group policy ....
Mr. Edwards: I believe, sir, the very fact that 80 percent of
the employers and unions accepting new major medical contracts
have now included this provision in those contracts demonstrates
their faith [in antiduplication]. . . . most agents will explain to
the insured his needs and will take into account his group cover-
age. ... I am sure there are exceptions that can be found, but I
think this kind of legislation has to be directed to that overwhelm-
ing majority, and, if you adjust it to the exception, you really
leave the majority exposed to this risk that I have identified.
^ On the subject of lower premium costs, Mr. Edwards was ques-
tioned as to his views on the effect of antiduplication on premium
cost. He indicated that the experience has been a lowering of group
contract premium charges by the member companies of the Health
HEALTH INSURANCE AND ANTIDUPLICATION PROVISIONS 81
Insurance Association of America who instituted the Pettengill provi-
sion.
A considerably different viewpoint with respect to a so-called over-
insurance problem and any need to remedy that problem was presented
by representatives of the Kaiser Foundation Health Plan. Inherent
in their argument, in fact, explicitly set forth, is that overinsurance is
denned too narrowly. Taking a broader perspective, they argued that
there is not overinsurance but rather underinsurance. On this matter
Mr. Jerry Phelan of Kaiser had this to say :
Mr. Phelan : . . . most policies have little or no coverage of such
things ... as application for drugs. Take the . . . man who is in
the hospital but he has overinsurance in the amount of $200 on
hospitalization, but when he is released from the hospital he has
to take drugs on an outpatient basis for a year and say those
drugs at $20 a month are going to cost him around $250 for the
coming year. Under AB 1301 no portion of the $200 excess on
the hospital could be applied to pay for those drugs. However, the
same man, even if he had an operation and suffered a deficit of
$200, the overinsurance in the hospitalization could be applied to
that. ... we think that the definition of "allowable expense " is
too restrictive and that [this] definition should be expanded to
cover any medical expense or any health care expense that the in-
dividual might have in the coming year or whatever the claim de-
termination period might be.
Mr. Gibson Kingren, also testifying for Kaiser, had these comments
to make :
Mr. Kingren: There has been a great deal of discussion about
overinsurance. I suggest that we raise the question [as to what
overinsurance is]. If I have a heart attack and have to take anti-
coagulants the rest of my life at an expense of $25 to $35 per
month, plus periodic checkups, normally not included in health
insurance programs, and my insurance policies pay me $100 or
$200 over what my expenses are while I'm in the hospital, can
anyone say that I am overinsured ?
Mr. Phelan suggested that in determining overinsurance the expenses
of a family unit should be the criterion of measurement. In this respect,
it was pointed out that a situation can exist where a dependent, for
example a child, will have less insurance coverage than the primary
insured.
Mr. Phelan: Take the case of the father and child in an auto-
mobile accident. If the father, again, has a $200 excess on his hos-
pital, but the child needed an operation but there is not sufficient
surgical coverage under either policy for the child, then no por-
tion of the father's $200 excess could be turned over to satisfy
any deficit benefits for the child. ... we would suggest that since
the family, for insurance purposes [is a] single consuming unit,
that all expenses of all members of the family be put in the base
to determine whether there is overinsurance.
g2 COMMITTEE REPORT ON FINANCE AND INSURANCE
Regarding the lack of incentive to recover brought about by overin-
surance profit, Mr. Phelan submitted that an individual has in given
situations a legitimate incentive to attempt to remain in the hospital
for the full limit of his hospital benefits. For example, where he is
hospitalized and overinsured for overhospitalization but facing conva-
lescence in a nursing home where he has no insurance coverage, such
a situation of incentive would arise. In this connection and with re-
spect to the need to have effective utilization of medical facilities, the
application of the hospital excess to the cost of residence at a nursing
home would, in the foregoing example, effect better utilization of facili-
ties. At any rate, it was argued that the incentive to remain in the
hospital in such a situation is not an incentive founded merely upon
a desire to make a few dollars.
Mr. Phelan took a definite stand against antiduplication in individ-
ual policies and against consideration of individual policies in deter-
ming excess coverage.
On the subject of malingering and overinsurance, Mr. Gibson King-
ren suggested that it is not easy for a person to malinger. In this con-
nection, he pointed out that a doctor admits a person to a hospital;
the patient himself does not effect admittance. The inference to be
drawn from this is that doctors will make use of some objective stand-
ard in determining the need for admittance. Hence, it would be a
rare case where one is admitted to a hospital without some reason
for being there. Nevertheless, previous testimony by other individuals
on this very point brought forth a view that some doctors tend to be
biased in favor of their patient 's request.
Turning to the subject of inflated costs and overinsurance, Mr.
Kingren had this comment to make :
Mr. Kingren: Inflates costs to whom? I don't know, because if
you deny a patient the right to fully protect himself against medi-
cal expenses, you have inflated the patient's cost [and] lowered
the insurance company's costs. If the insurance companies want
to lower premiums, there are some obvious approaches. Published
data show that certain classes of individual policies pay out as
little as 10 cents in claims [on] the premium dollar. This results
in a high rate of profit which might be lowered by either a more
liberal benefit schedule or lower premiums.
In discussing the motive of insureds in obtaining several health in-
surance policies, Mr. Kingren felt this reflected the desire of people
to want more protection. The insured is trying to cope with uncertainty.
He does not have a worthwhile premonition as to what his medical
expenses will be, but he does have some notion of the fact that most
insurance policies do not cover all medical expenses. If improvement
is needed in the field of health insurance, Mr. Kingren indicated that
the insurance industry should first work toward effecting more com-
prehensive medical coverage before the industry concerns itself with
the so-called problem of duplicated benefits.
The California Labor Federation, represented by Mr. Clint Fair, did
not take a firm position with respect to the adoption of antiduplication
provisions in group health insurance policies. This organization, how-
HEALTH INSURANCE AND ANTIDUPLICATION PROVISIONS
ever, was very much interested in what would happen to insureds cov-
ered under group policies were antiduplication to be effected. As
group insurance is a negotiated fringe benefit, the federation, on be-
half of its individual members, was indicated to have a vested interest
in the disposition of benefits under such negotiated policies. Neverthe-
less, while no opposition to such duplication was presented, the federa-
tion submitted that it would find it difficult under present circum-
stances to support legislation like that of AB 1301. The federation ex-
pressed more of an interest in developing more comprehensive health
insurance programs. On this point the federation's views appeared to
coincide with the view presented by a Kaiser Foundation Health Plan
representative concerning comprehensive coverage. On the matter of
lower premium costs, Mr. Fair expressed a view to the effect that he
was not convinced that antiduplication would in fact result in lower
premium costs. Furthermore, if there did come about a savings owing
to the implementation of antiduplication and these savings were not
passed on to insureds in the form of relatively lower premiums, Mr.
Fair felt that there was no certainty that such savings would be passed
on in the form of greater policy benefits. While Mr. Fair did not di-
rectly oppose antiduplication, the tenor of his comments reflected a
skepticism as to certain alleged results of antiduplication.
Mr. Paul Putnam of the Public Health League who, at the hearing,
spoke for Blue Cross, indicated that the latter organization was in
favor of antiduplication. With respect to California Physicians Serv-
ice (a corporation under the authority of the Attorney General), this
organization, whom Mr. Putnam also spoke for, was indicated to be
actively working on proposals to eliminate benefit duplication. Aside
from these brief comments, Mr. Putnam chose not to elaborate on the
views already presented concerning inflated medical costs as a conse-
quence of benefit duplication except to say that both of the aforesaid
organizations believe that overinsurance profit does increase medical
costs.
printed in California office of state printing
L-2517— 100 2-67 1M
ASSEMBLY INTERIM COMMITTEE REPORTS
1965-1967
VOLUME 16 NUMBER 10
FINAL REPORT OF THE
ASSEMBLY INTERIM COMMITTEE ON PUBLIC
UTILITIES AND CORPORATIONS
TO THE CALIFORNIA LEGISLATURE
(House Resolution No. 710(q), 1965)
MEMBERS OF THE COMMITTEE
JOSEPH M. KENNICK, Chairman
F. DOUGLAS FERRELL, Vice Chairman
DON A. ALLEN ALAN G. PATTEE
WILLIAM T. BAGLEY JOHN P. QUIMBY
CLAIR W. BURGENER PHILIP L. SOTO
CHARLES E. CHAPEL WILLIAM F. STANTON
CLAYTON A. DILLS JAMES E. WHETMORE
LEROY F. GREENE JOHN C. WILLIAMSON
LESTER A. McMILLAN
EUGENE R. LEYVAL, Committee Consultant
DON I. FOLTZ, Committee Consultant
ARLENE JESPERSEN, Committee Secretary
January 10, 1967
Published by the
ASSEMBLY
OF THE STATE OF CALIFORNIA
HON. JESSE M. UNRUH HON. CARLOS BEE
Speaker Speaker pro Tempore
HON. GEORGE N. ZENOVICH HON. ROBERT T. MONAGAN
Majority Floor Leader Minority Floor Leader
JAMES D. DRISCOLL
Chief Clerk of the Assembly
LETTER OF TRANSMITTAL
Assembly Interim Committee on
Public Utilities and Corporations
Sacramento, January 10, 1967
Hon. Jesse M. Unruh
Speaker of the Assembly
and Honorable Members
Dear Speaker Unruh and Members
Pursuant to House Resolution No. 710 section (q) of the 1965 Cali-
fornia Legislature, your Assembly Interim Committee on Public Utili-
ties and Corporations submits its report of functions and activities
during the 1965-67 interim.
Respectfully submitted,
Joseph M. Kennick
Chairman
(8)
TABLE OF CONTENTS
Page
Letter of Transmittal 3
Report of the Study Group on Rock, Sand and Gravel Resources
With Table of Contents 7
Utility Regulation
Regulation of Ambulance Rates 43
Power Blackout 44
Telephone Solicitation 45
(5)
HOUSE RESOLUTION NO. 531
RELATING TO ROCK, SAND AND GRAVEL RESOURCES
REPORT TO THE ASSEMBLY
COMMITTEE ON PUBLIC UTILITIES
AND CORPORATIONS
MEMBERS OF THE STUDY GROUP
Dr. Horace N. Gilbert, Chairman
Professor of Business Economics
California Institute of Technology
Dr. Ian Campbell, Vice Chairman
State Geologist, Division of Mines and
Geology (Currently Director, California
State Department of Conservation)
Lyman Gillis
Assistant State Highway Engineer
Operations Department of Highway Trans-
portation Agency and Public Works
A. C. Keith
County Surveyor and Road Commissioner
Riverside County
John E. Roberts, A.I.P.
John Roberts & Associates, Inc.
Planning Consultants
R. G. Trevorrow
President
Pacific Cement & Aggregates, Inc.
Jack D. Wickware
Assistant Legal Counsel
League of California Cities
Laurence Wilson
President, 1965-66
American Institute of Planners
California Chapter
EX-OFFICIO
Stanley M. Lourimore, Deputy Legislative
Counsel
California State Legislature
SECRETARY
Don Reining, Executive Secretary
Southern Californa Rock Products Association
CONSULTANT
Sam Schauerman
Dean of Physical Sciences
El Camino College
December 1, 1966
(7 >
PUBLIC UTILITIES AND CORPORATIONS 9
November 16, 1966
Assemblyman Joseph M. Kennick
Boom 3132, State Capitol Building
Sacramento, California
Dear Mr. Kennick :
I am happy to transmit herewith the report of the Study Group on
the Rock, Sand and Gravel Resources of the State of California, au-
thorized by House Resolution No. 531. Our group whs asked to exam-
ine disputes between the aggregate industry and local zoning authori-
ties, and, if possible, to find a basis for resolving those disputes.
The Study Group has completed its work. I am most pleased to re-
port that our recommendation is a unanimous one : it preserves the es-
sential features of the powers of local authorities with regard to land
utilization, and it makes a significant move in the direction of recog-
nizing the great interests of the larger community in securing access to
much needed natural resources.
The membership of the study group was well balanced: it included
(a) representatives of the zoning authorities, particularly the city and
county governments and a professional planner serving them, (b) the
aggregate industry in both the northern and southern areas of the
state, (c) the State Highway Commission, which uses approximately
one-third of the annual output of the industry, and (d) the public in
the persons of the Director of Conservation for the State of California,
and the chairman of the Study Group, Professor of Business Econom-
ics, California Institute of Technology. We were pleased to have the ad-
vice of Stanley M. Lourimore, Deputy Legislative Counsel, State of
California, throughout our deliberations.
The testimony presented at our five meetings was by invited per-
sons representing the points of view concerned with the problem. They
were not public hearings in the usual sense. We had access to the re-
ports of the four hearings held in 1963 on the same problem, under
House Resolution 376, which were in the nature of public hearings. We
did not think it necessary for our particular assignment to repeat them.
I am sure that you will be pleased to know that there was 100 percent
attendance by the eight members of the Study Group at our seven meet-
ings, five of which were hearings and two closed for the purpose of de-
bating our conclusions. The expenses of the members in attending these
meetings were met entirely by themselves. We are proud of this demon-
stration of interest, and of confidence in the assignment given us by
your committee.
On behalf of the Study Group, I wish to give recognition to the im-
portant contributions of Don Reining who served as our secretary, and
to Sam Schauerman who served as our consultant. Mr. Reining, Execu-
tive Secretary of the Southern California Rock Products Association,
scheduled our meetings, prepared the agenda, and arranged for the
transcription of testimony presented. Mr. Schauerman, Dean of Physi-
cal Sciences, El Camino College, drafted our report. As you can read-
ily imagine, this involved tedious review of voluminous testimony, ex-
tensive research, and thorough field work. The good spirit that char-
2— L-1767
JO ASSEMBLY INTERIM COMMITTEE
acterized the work of the Study Group extended to our relationship
with Mr. Reining and Mr. Schauerman.
The problems of conservation and of urbanization loom large in
our great state. Our Study Group believes that it has made an initial
contribution toward the resolution of the particular problem of the
rock, sand and gravel industry in its relation to local zoning authorities.
We hope that our report will prove useful to you and your committee.
Respectfully yours,
Horace N. Gilbert
Professor of Business Economics
Chairman of the Rock, Sand and
Gravel Study Group
CALIFORNIA LEGISLATURE
1965 Regular (General) Session
HOUSE RESOLUTION NO. 531
Relative to the Rock, Sand, and Gravel Resources of the State
Whereas, During the 1963-65 interim period the Legislature received
considerable testimony on the subject of the orderly development of the
state 's sand, gravel and rock resources and found within that testimony
a sound basis for concern ; and
Whereas, The Assembly Committee on Public Utilities and Corpo-
rations, in its report of January 11, 1965, to the Legislature, declared
that there is a need to resolve disputes between the aggregate indus-
try and local planning authorities and thereby acknowledged that con-
sideration of further testimony by the committee "is not likely to pro-
duce meaningful results until the interested parties have resolved their
differences ' ' ; and
Whereas, The Assembly Interim Committee on Public Utilities and
Corporations, in its report, recommended that the Legislature establish
a specialized group of technically qualified persons to attempt to formu-
late a workable solution to the sand, gravel and rock development is-
sue ; now, therefore, be it
Resolved by the Assembly of the State of California, That the Rules
Committee be directed to authorize the creation of a "study group" to
inquire into the problems presented by the depletion, or loss of availa-
bility through other causes, of the rock, sand, and gravel resources in
this state. The "study group" shall report its findings not later than
December 1, 1966, together with recommendations for action, including
specific legislative proposals necessary to adequately protect and pre-
serve the rock, sand and gravel resources of this state ; and be it further
Resolved, That the members of such "study group" shall be ap-
pointed by and shall conduct its affairs under the direction of and
shall be responsible to the Chairman of the Assembly Interim Commit-
tee on Public Utilities and Corporations, and that the study group
shall remain in existence only until December 1, 1966, at which time
it shall report to the Assembly Interim Committee on Public Utilities
and Corporations.
(11)
TABLE OF CONTENTS
Page
SUMMARY OBSERVATIONS AND RECOMMENDATIONS 15
Recommendations ] 5
Possible Next Steps 16
INTRODUCTION 18
BACKGROUND
The Geology 19
The Economics 20
Land Use Regulation 21
Summary 23
A DISCUSSION OF THE PROBLEMS
Depleting Resources and Conservation 24
Extractive Operation and Reclamation 26
The State's Role 28
PROPOSED SOLUTIONS
State Control
1. Mineral Aggregates Bill 30
2. State Land Bank 31
3. State Appeals Board 31
Regional Control
4. Los Angeles Basin Rock, Sand, and Gravel District 32
Local Control
5. Continuous, Cooperative and Comprehensive Planning 33
6. Local Conservation Commissions 34
Inventory
7. A Pilot Program 34
8. A Systematic Approach 35
APPENDIX A. Draft of Legislation 36
APPENDIX B. List of LLR. No. 531 Hearing Witnesses 40
MAP
A. Transport Costs per Ton of Rock and Sand 42
(13)
SUMMARY OBSERVATIONS AND RECOMMENDATIONS
The summary observations and recommendations that were agreed
upon by the Study Group in a meeting held on October 12, 1966, are
the result of much discussion and compromise. They represent the
most acceptable solution found for the problems of conserving rock,
sand and gravel to which unanimous support could be given. Final
agreement was reached on the following points :
1. Rock, sand and gravel resources are vital to the private and public
construction industry which, in turn, is a necessary adjunct to
the rapid population growth in the state.
2. The problems of conserving natural resources are by their very
nature broad in scope and thus suggest a regional approach to
study and planning.
3. Land use regulation should remain an important function of city
and county governments.
4. The state's role should be one of establishing a public policy on
conserving rock, sand and gravel as well as other natural resources,
and assisting local and regional agencies in their efforts toward
implementing the policy.
5. Recent interest in federal legislation to control open pit mining
and reclamation was noted by the Study Group.
RECOMMENDATIONS
The following recommendations requesting action by the California
State Legislature are respectfully submitted to the Assembly Committee
on Public Utilities and Corporations:
1. It is recommended a pilot study involved with the inventory of
rock, sand and gravel reserves in an area of critical shortage as
determined by the State Geologist be inititated by the State Legis-
lature at public expense. The study should be conducted by the
State Geologist with assistance from other public agencies and
qualified consultants approved by him. The performance and
phases of a consultant's study should be subject to the general
supervision and direction of the State Geologist.
The "inventory study" should provide sufficiently comprehen-
sive data relating to reserves to permit its use by industry, public
and quasi-public planning agencies in determining needs for the
future. This implies a regional concept to the study and to the
use of this information in planning. Every encouragement should
be given to the regional cooperative planning agencies, Southern
California Association of Governments and the Association of Bay
Area Governments, to become involved in making the study and
to the data and conclusions in planning.
In addition, legislation would provide for a continuing interest
in regional studies on a systematic basis so that all areas of the
state could have the benefit of adequate information for regional
(15)
16 ASSEMBLY INTERIM COMMITTEE
planning and local decisions. The pilot study area would be one of
the more critical areas, but it is assumed other regions will eventu-
ally face a similar need.
2. To provide for continuing study in a systematic manner, it is rec-
ommended financial assistance be provided to the local and re-
gional agencies. The funding of Senate Bill 703, Section 2205
of the Public Resources Code is suggested for this purpose.
3. The State Planning Law requires that certain basic elements be
included in every master or general plan formulated by planning
bodies. The Study Group recommends the necessary amendments
to said planning law to provide for the identification of rock, sand
and gravel deposits to serve the planning area, as well as other
natural resources, be a required element in every master or general
plan.
4. The adoption of a resolution by the state to encourage cities,
counties and regional associations to cooperate with the Division
of Mines and Geology is recommended. A draft of this proposed
r {solution as well as the recommended legislation is found in Ap-
pendix A.
POSSIBLE NEXT STEPS
It is apparent from the report that the Study Group considered
seriously the possibility and wisdom of transferring traditional
authority over land use from local to regional and even state jurisdic-
tions, to a greater degree than has been recommended. Such points
of view were expressed by individual members who entertained a
haunting concern that a sufficiently bold position had not been taken.
Might it not be better to accept the fact that intensive urbanization
and the proliferation of zoning authorities creates new problems that
demand new methods for their solution? These members of the Study
Group believed that the real challenge, in view of the inexorable trend
of the times, is to adapt our institutions so that they will help, not
hinder, the well-being and development of our larger communities. All
members were aware of the oft-repeated claim that the winds of change
may be blowing with respect to the traditional authority of local juris-
dictions over some aspects of land use.
The rising tide of interest in conservation with regard to many
natural resources in addition to rock, sand and gravel, may be becom-
ing irresistible, and the acute problems associated with urbanization
are exhibiting explosive characteristics. Significant evolutionary steps
have already been taken in the direction of increasing the role of
regional organizations and authorities, in efforts to solve both groups
of problems. The federal government has initiated action through
tlic Appalachian Regional Development Act that relates to the ways in
which state and local authorities take steps to meet such problems.
In the interest of unanimity and in the belief that a first, even if
modest, step holds promise of resolving at least some of the disputes
between the aggregate industry and local zoning authorities, the Study
Group did not put alternative recommendations to a vote. Experience
will indicate the need, if any, of further, more aggressive, legislative
action.
PUBLIC UTILITIES AND CORPORATIONS 17
The positions of the aggregate industry and of the zoning authori-
ties, are set forth clearly in our report. The fact that they could
agree on a recommendation is pleasing, and it may lead to construc-
tive developments. But the question can still be asked "Are the best
interests of the larger community, in this case the people of the State
of California, being served by indication of ability to work out local
and even regional solutions to the problems of land use?" Some of the
members of the Study Group, possibly a majority, were not convii;
that those broader interests would be best served.
The aggregate industry is young; it has made progress in the direc-
tion of operating efficiency and pro-social orientation. Competition is
keen. Zoning authorities have only recently been confronted with the
special problems of wasting natural resources and of dynamic urban-
ization. The Study Group has observed that progress has already been
made, sometimes with the aid of informal and advisory organizations,
in resolving problems of land use. Constructive developments of this
kind are promising, but they might well be aided and accelerated by
the proposals set forth in our recommendations.
INTRODUCTION
Under House Resolution No. 376, four separate hearings were con-
ducted on the subject of "zoning of rock, sand and gravel deposits and
the establishment of reasonable and uniform limitations, safeguards
and controls over future production." 1 The resolution was assigned to
the Assembly Interim Committee on Public Utilities and Corporations.
The testimony to the committee revealed certain basic conflicts
which have occurred around excavation operations. The economic im-
portance of excavating the aggregate near the point of consumption
can lead to conflicting concepts of land use, objections by some home-
owners, and increasing demands for control or even banishment of op-
erations. As a result, sand and gravel deposits are being lost to other
uses and primary sources of this important resource are being rapidly
depleted. Since no single workable solution was presented to the com-
mittee, a recommendation was made for the adoption and assignment to
the Assembly Committee on Public Utilities and Corporations, a house
resolution that enables the Assembly to create a "study group" to
recommend specific legislative action.2 It was felt a meaningful solu-
tion could only result from the meeting of the minds of various par-
ties in a concerted effort to resolve their differences.
House Resolution No. 531 was adopted as recommended in 1965.
Members of the Study Group were carefully chosen to represent var-
ious capabilities in the field of government and the sand and gravel
industry. The guidance of a practical economist with a considerable
interest in the subject as chairman of the group was acquired.
1 Assembly Interim Committee Reports, 1963-65, Assembly Interim Committee on
Public Utilities and Corporations, Vol. 16, No. 9, p. 9.
-Ibid., p. 10
(18)
BACKGROUND
THE GEOLOGY3
Sand and gravel is a non-renewable resource that is formed and de-
posited by nature. Man cannot manipulate the patterns in which the
deposits are located. The location of any extractive site is restricted
by the facts of geology to the boundaries of the sand and gravel bear-
ing lands. However, the presence of quality deposits does not insure
their accessibility for development. In addition to the natural limita-
tions, supply and demand, transportation, land ownership and land
use considerations can impose significant plant location restrictions.4
The bulk of California's sand and gravel is obtained from stream
deposits, both past and present. The rugged mountains are drained
by streams which transported and deposited huge volumes of materials
in channels, floodplains, and alluvial fans. The natural abrasive ac-
tion of stream transport grinds up and removes most of the soft weak
rocks and concentrates the harder, firmer particles. The maximum size
of gravel gradually decreases downstream and commercial, production
centers in the deposit where the proper blend of sand and gravel can
be obtained. Fortunately, many favorable portions of the streams oc-
cur in the flat-lying areas near population centers, as for example,
the San Joaquin River near Fresno, the American River near Sacra-
mento and the Santa Clara River in Ventura County.
Alluvial fan deposits also are widely exploited for aggregate. Fan
deposits ordinarily contain lenticular beds of poorly sorted sand and
gravel, interbedded, because of the frequent shifting of the stream,
with varying proportions of silt and clay. One of the major sources
of aggregate for the San Francisco Bay area is the alluvial fan of
Alameda Creek near Niles in Alameda County. The principal sources
of aggregate for the Los Angeles County area are the alluvial fans of
Big Tujunga and San Gabriel Rivers.
In spite of their advantages, some stream deposits are not exploited
because of such economic factors as poor quality, inaccessibility, exces-
sive distance to market, insufficient tonnage of material available and
restrictive local legislation. Certain deposits are unsuitable because
they contain physically unsound or chemically reactive rocks. Some
thick deposits may contain severely decomposed material at shallow
depths beneath seemingly fresh and durable materials. Thus, although
superficially it may appear that sand and gravel deposits are located
throughout the state, not everywhere are they equally suitable.
Crushed stone from quarries in bedrock or "ledge rock" is used for
many of the same purposes as sand and gravel particularly where
stream deposits are not adequate or of sufficient quality to be economi-
cally mined. If the demand is sufficient to warrant the expense in-
volved, material from deposits containing harmful proportions of det-
rimental substances may be beneficiated or processed to reduce the
detrimental components to an acceptable level.
3 See Transcript Vol. 2, Harold Goldman, pp. 39-42.
* Bauer, Anthony M., Simultaneous Excavation and Rehabilitation of Sand and Gravel
Sites, University of Illinois, p. 10.
(19)
20 ASSEMBLY INTERIM COMMITTEE
THE ECONOMICS
Sand and gravel production in California rose from 4.7 million tons
in 1920 to 113 million tons valued at 129 million dollars in 1964. Cali-
fornia is the leading producer of sand and gravel in the nation, produc-
ing one-seventh of the nation's total. About one-third of the total
California production is from the Los Angeles area. There are ap-
proximately 800 producers in the state, half of which are commercial
operations; the other half are contractors for government agencies.5
The continued influx of population with resulting demands for
homes, multiple dwellings, commercial and industrial buildings, high-
ways, and public works projects accounted for an increase in produc-
tion of 100 percent between 1954 and 1964. Sand and gravel are used
primarily as aggregate in mixtures with portland cement or asphalt
by the construction industry. The construction industries represent
annual expenditures in the 7 billion dollar range which should reach
the 10 billion dollar mark by 1970.6
The largest single user of aggregate products is the state. It has
been estimated 35 percent of the sand and gravel produced is used by
the various state agencies.7 The Division of Highways estimates in
building freeways that each $100 of construction uses approximately
1\ tons of sand and gravel materials of all categories. An eight-year
planning program approved by the division June 6, 1966, calls for
construction costs totaling approximately 3.87 billion dollars by 1975.
This program will require 290.6 million tons of sand and gravel by
using the above conversion figures. In addition, the Department of
Water Resources estimates indicate a need for approximately 1\ million
tons of concrete and asphaltic concrete aggregates for the State Water
Project by 1972.8
Sand and gravel for aggregate is by nature a large tonnage com-
modity of low unit cost. The price of sand and gravel has not risen
proportionately with other construction materials. For example, 10
years ago in the bay area, one ton of sand sold for $1.21, f .o.b. plant ;
today, a ton of sand sells for about $1.30, f.o.b. plant. Prices have
remained remarkably stable in spite of rising operational costs because
operators have absorbed some of these increased costs themselves and
offset others by means of automation. Expensive machines are needed
for the modern operations and a modest plant at today's prices would
cost -J of a million dollars.9 Total production costs per ton of aggregate
are low enough that even slight differences in operating cost of com-
petitive plants may determine their commercial success or failure.10
The single factor which most escalates the delivery price of sand and
gravel is the distance of haul under present practices and regulations.
The figure 5^ a ton mile is commonly used to estimate transportation
5 See transcripts, Vol. 2, Harold Goldman, p. 39.
8 Ibid., p. 39.
7 Assembly Interim Committee Reports, 1963-65, Vol. 16, No. 9, p. 9.
8 From interviews in Sacramento, June 21, 1966.
0 See transcript, Vol. II, Harold Goldman, p. 42.
10 Division of Mines and Geology, Mineral Commodities of California, Bulletin 176,
1957, p. 513.
PUBLIC UTILITIES AND CORPORATIONS 21
charges.11 Should the hauling distance be increased by 20 miles, the
price of aggregate would increase $1 per ton. This could easily repre-
sent an increase of 50 to 100 percent on the delivered cost of sand and
gravel to the consumer. Some idea of the effect distance has on the price
of aggregate delivered to the consumer is indicated on Map A, which
was prepared by H. Zinder and Associates, Incorporated.
LAND USE REGULATION
In California, city and county governments find their source of power
to enact land use regulations in the Constitution, Article XI, Section
11 which provides :
"Any county, city, town or township may make and enforce within
its limits all such local, police, sanitary and other regulations as are
not in conflict with the general laws. ' '
The limitations on those police powers are: (1) The regulation must be
local. (2) Such regulations must not conflct with the general laws of
the state. (3) Certain constitutional limitations which result from court
interpretations. In general, the latter limits are imposed by courts when
they find the local governments are "arbitrary, unreasonable or con-
fiscatory. ' ' 12
Land use regulation is an important function of city and county
governments. Zoning ordinances for whatever purpose ususally define
standards aimed at fostering public health, safety or general welfare.
The Study Group reviewed a representative sample of zoning ordi-
nances regulating quarry operations, the results of which are reported
here.
Zoning regulations determine land use and development and are
considered as tools for expression of public policy. Metzenbaum
cautions, ' ' Unless a zoning ordinance can successfully meet the require-
ment of being reasonable in its application, and unless it is enacted
for the purpose of protecting the public safety, health or welfare, it
cannot be expected to meet with the approval of the courts. And this
is as it should be. . . . Unfortunately, some have become so strongly
inclined toward the benefits of zoning as to look upon it as a cure-all
for every civic evil, and they vigorously resent any suggestion to the
contrary. A careful survey, however, discloses that zoning is not a
panacea. It is a step in the right direction, and if appropriately —
reasonably — applied and sensibly practiced, it will have ever-broad-
ening beneficial effects. ' ' 13
Sand and gravel extractions in most areas of California are permitted
in zones allowing such multiple uses as agricultural or industrial uses.
A few cities or counties have adopted exclusive natural resources or
gravel zones while others are considering such legislation.14
Permits or outright zone changes for the extraction of rock, sand and
gravel in districts not automatically permitting such use are obtained,
11 See transcript, Vol. I, M. C. Lorenz, p. 118.
12 Herring, Frances "W., Editor, Open Space and the Law, Institute of Governmental
Studies, University of California, Berkeley, 1965, p. 7.
13 Metzenbaum, James, The Law of Zoning, Vol. 1, 2nd Ed., p. 10.
14 See Transcript, Vol. 1, Milton Breivogel, p. 68 ; Vol. 1, Forrest S. Dickason, p. 42 ;
Vol. 1, M. C. Lorenz, p. 117 ; Vol. 3, James Fairman, p. 51 ; Vol. 4, Bill Living-
stone, p. 2.
22 ASSEMBLY INTERIM COMMITTEE
nerally, through application to the local agency having jurisdiction
over the deposit. Public hearings may be required to be held in conjunc-
tion with these applications at which time arguments for and some-
times against the issuance of such permits are heard. Quarry zones, con-
ditional uses or variance permits so approved are generally accompa-
nied by standards or conditions which are designed to effect compati-
bility with the use of affected properties.
There is little uniformity in the zoning or use permit regulations
established by local jurisdictions. Indeed, there may be differences in
the conditions imposed on the various use permits within a particular
area depending on what the local government believes is desirable and
necessary to make an operation at that location compatible with adja-
cent land uses. Where ordinances are established to regulate the sand
and gravel operations, however, there are some common elements.
The ordinances generally outline conditions to be met by the indus-
try in maintaining and operating a quarry or they require the opera-
tor to specify these conditions as part of the application for a use or
zone permit. It is common to require the property lines to be speci-
fied and limit excavation to within 25 or 50 feet of the boundaries. This
is particularly true when the boundary borders another person's prop-
erty, public highway or street, and certain types of easements. To avoid
erosion problems, the excavation is required to slope within specified
limits or to have terraced sides.
In an effort to provide for public safety and to screen the exterior
appearance of excavations, the ordinances often require perimeter
fences and landscaping wherever adequate water supplies are found.
Dust is required to be controlled particularly on roads leading in and
out of the sites, and noise and vibration is required to be held to a
minimum. Often the access and hauling route to be taken by truck
traffic is part of the conditions of the permit. Mention is made also of
spillage from the trucks on public roads. Operating hours are fre-
quently regulated particularly when the operation is near residential
areas.
The regulations may require certain procedures to protect streams
and water bearing strata. Drainage of water accumulated in pits may
be required also. Compliance with requirements of the Air Pollution
Control Board is mentioned in some ordinances.
Permit or application fees are charged by some authorities as well
as inspection fees. Liability insurance is often required of the operator.
Bonding may be part of the ordinances especially where provisions are
made for reclamation of the site. There is a trend to require reclama-
tion plans at the time of application or within a brief time period fol-
lowing the granting of a permit.
Time limits are sometimes made a part of the conditions of a use
permit. Whether such limits are one year, five years or more, a reap-
plication or review may be required and may involve an additional
public hearing. Whether such a time limit is part of the ordinance or
not, provisions may be made to revoke or suspend a permit on sufficient
cause and with due process.
Perhaps no single ordinance will contain all of the above elements.
The contents of the ordinances viewed by the Study Group varied from
PUBLIC UTILITIES AND CORPORATIONS 23
very general and brief regulations to legislation which was quite speci-
fic on almost all the topics mentioned.15 More stringent conditions
seem to be found where the quarry operations border urban develop-
ment and where homeowners are most likely to object to extraction
operations.
In some jurisdictions the conditions are allowed to vary. The ordi-
nances in these instances often treat the conditions as guidelines which
might be applied in toto, in part, or not at all.
SUMMARY
Though the rock, sand and gravel industry lacks the glamour of other
mining ventures, its products are used in huge quantities as basic mate-
rials for concrete and asphaltic concrete. Production of these materials
in California make this the state's second largest mining industry in
terms of volume and dollar value.16
"To be suitable for use as concrete aggregates, the sand and gravel
deposits must have the following characteristics :
1. The cost of extraction and processing must be low.
2. The deposits must have acceptable physical and chemical prop-
erties.
3. The deposits must be located close to the market. (A hauling dis-
tance of only 20 miles can double the costs.)
4. The producer must have the legal right to extract the deposits,
process them, and transport the materials to the population cen-
ters."17
Land use controls which affect the location of a sand and gravel oper-
ation and control the excavation, processing and transporting of these
products are presently the responsibility of the city or county in which
the deposit is located. The regulations include standards which vary
from one jurisdiction to another and which are designed to control
quarry operations for public health, safety and welfare. There is a
trend to include planning for reclamation of mined lands as a condi-
tion of use.
15 See Transcripts, Vol. II, Jack Wickware, Appendix.
18 Moore, William W., Editor, Engineering- Bulletin No. 29, Dames and Moore, p. 1.
" Ibid., p. 1.
A DISCUSSION OF THE PROBLEMS
DEPLETING RESOURCES AND CONSERVATION
People are both a blessing and a problem to the sand and gravel
industry. As a community begins to grow, a demand or market for the
gregate products is created. The high-bulk, low-cost product is ex-
tracted as close to the consumer as possible (the population centers).
Continuing growth means more and more residential, commercial and
industrial sites are located in the rural areas. The urban developments
approach and then surround established gravel pits and cover potential
deposits while demands for the products continue to increase because
of the needs of an expanding population for the material, for its
structural growth.
These new neighbors of the industry register complaints which in-
clude excessive noise and dust, depreciated land values, safety hazards
and depleted unsightly pits. Testimony to the Study Group provided
no evidence to substantiate or refute these claims. Several examples
were cited, however, where reasonable and effective zoning ordinances
combined with conscientious and responsible producers have successfully
operated without complaint.18 In spite of this, continued pressure par-
ticularly at public hearings conducted for zone changes, new permits
or renewed permits result in some denials to the industry and in stricter
restrictions on operations.
At one time, the producer could move to more remote locations re-
ducing the available supply of aggregate (albeit, requiring increased
transportation costs), but today the sand and gravel deposts are limited.
The reserves in the San Gabriel Valley are estimated to reach deple-
tion in ten years and the Tujunga Cone in seven years. These are major
sources for the Los Angeles metropolitan area.19 New deposits in remote
locations are removed far enough from the consumer that increased
costs are a real economic factor.
Industry representatives warn that available deposits of sand and
gravel are rapidly dwindling. Their concern is for the lack of adequate
planning for the utilization of natural resources in many areas
where the deposits are located, the opportunity for emotional rather
than objective decisions provided by present procedures in local use
permit and zoning change hearings and the lack of regional planning
to conserve this resource which may deny consumers of neighboring
communities low-cost aggregate.20
The testimony presented to the Study Group revealed few instances
where the city or county General or Master Plan provided specifically
for sand and gravel resource areas. In the more usual case, therefore,
the plans have failed to identify valuable and necessary aggregate
reserves, and this despite the fact that projected population increases,
18 See transcripts, Vol. I, Forrest Dickason, p. 12; Vol. 5, Paul Foxworthy, p. 2; Vol.
5, Crawford Williamson, p. 30-31
10 See transcripts, Vol. I, John Kerfoot, p. 15, 16.
20 See Transcripts, Vol. 1, E. O. Rodeffer, p. 2; Vol. I, John Kerfoot, p. 23 and 25;
VoLn',Bruce Bravo, p. 64 ; Vol. Ill, Glenn Rick, p. 16 ; Vol. IV, Stewart Adler,
?• 39 ; Vol. V, Crawford Williamson, p. 29 ; Vol. II, Bruce Woolpert, p. 62 ; Vol.
II, William Downing, p. 29.
(24)
PUBLIC UTILITIES AND CORPORATIONS 25
and urban expansion, imply an immediate planning need to identify
and conserve a vital natural resource. The deposits are often not iden-
tified until encroached upon by residences. Each decade, urban settle-
ment in the United States extends over an additional 15,000 square
miles in and around the metropolitan complexes. It is the smaller urban
places that take up most of the land used or withdrawn from other uses
by new urban growth, and yet their land use problems have had little
or no planning or policy attention.21
Although local agencies are becoming more active in cooperative
planning with regard to many problems of regional character, planning
in relation to natural resources and the aggregate industry has received
insufficient attention. A notable exception is the inter-governmental
body, Amador-Livermore Valley Rock, Sand and Gravel Study
Committee.22 This committee is made up of representatives of the indus-
try and several local governments for the express purpose of recom-
mending solutions to problems of conservation, zone regulations and
site rehabilitation.
The need to conserve sand and gravel resources is recognized by
some local officials. The Los Angeles City Council and Planning Com-
mission authorized a study, completed in 1954, which strongly indicated
the need to conserve and utilize reserves.23 Ventura County recently
hired a private consulting firm to survey the available resources and
predict the future needs.24 The City of San Diego entered into a coop-
eratively financed study with the California State Department of Con-
servation, Division of Mines and Geology, which includes a survey of
the rock, sand and gravel resources in the city and which is to be
utilized by the city planning department to develop a report recom-
mending actions to conserve deposits, control operations and provide
for rehabilitation.25 Orange County also conducted a study in 1965 on
sand and gravel resources of the county.26
The most consistently mentioned deterrent to effective planning and
ultimate conservation is the lack of information.27 Most of the studies
conducted by local jurisdictions and the Division of Mines and Geology
lack an inventory approach which would estimate the quantity and
quality of each deposit. The studies are said to be further limited by
the fact that the majority of resource areas identified are lands owned
or leased by the industry neglecting other possible deposits. The best
and sometimes only source of information is from the industry. Re-
sourceful and responsible producers have not only furnished the most
detailed information on deposits but have served as an effective
force in the conservation of aggregate resources. It has been largely
through their efforts and long-range investments that sand and gravel
deposits are preserved.
21 See Transcript, Vol. I, B. O. Rodeffer, p. 2.
22 See Transcript, Vol. II, Warren Harding-, William Parness, William Downing,
pp. 1-29.
23 See Transcript, Vol. I, Calvin Hamilton, p. 102.
2i See Transcript, Vol. I, M. C. Lorenz, p. 115-116.
25 See Transcript, Vol. Ill, Glenn Rick, p. 8 ; James Fairman, p. 31.
26 See Transcript, Vol. I, John T. McGinnis, p. 37.
27 See Transcript, Vol. I, Frank G. Bonelli, p. 61 (many others).
26 ASSEMBLY INTERIM COMMITTEE
It is difficult to ascertain what data and what form the information
should take to be most helpful to those who would make use of reports.
"We are launching urban development and environmental geology
studies that relate to the problems of environmental health, transporta-
tion, land use, and urban and regional planning. The problem of urban
expansion into areas of potential quarry sites and the realization that
construction materials may be denied for the very development pro-
grams that require them has become but one facet of this kind of study.
Water supply and production, foundation problems, drainage prob-
lems, and a variety of land use problems all require geological informa-
tion. Unfortunately, we have not known how to secure this informa-
tion in minimum time for maximum return, nor have we known how
to prepare reports that could and would be used by the city planner
or engineer. We are concerned with project evaluation and review
techniques for urban and regional studies."28
Conservation of sand and gravel implies setting land aside for agri-
cultural or some other nonconflicting use until circumstances require
extracting its resources. Much of this land may be suitable for subdivi-
sions, commercial or other conflicting use. The land then may need to be
preserved for many years with a less profitable interim use leading pos-
sibly to a type of inverse condemnation.29 Industry representatives ex-
pressed a willingness to purchase or lease such land provided there was
some assurance the aggregate could be mined.30
In addition to the long-range planning, conservation suggests zon-
ing regulations that will avoid conflicting land uses. An exclusive nat-
ural resource or sand and gravel zone could require posting of the prop-
erty to inform land owners in the vicinity that a quarry operation is or
will be in this area. Urban encroachment in these areas, however, may
bring pressure upon local officials to consider zoning changes that will
prohibit sand and gravel extraction.
EXTRACTIVE OPERATIONS AND RECLAMATION
In spite of increased efforts by responsible producers to conduct oper-
ations in a compatible manner and to comply with all land use and
other regulations, there is continued opposition to quarry sites in many
locations. The opposition may be based on misconceptions resulting from
a picture of the operations of years past or the few producers who, as
may be found in any field, perpetuate a bad image. Responsible pro-
ducers take advantage of the opportunities for improved public accept-
ance and for the dissemination of factual information to correct these
misconceptions. Production of rock, sand and gravel is limited to loca-
tions selected by nature, and when such locations are virtually sur-
rounded by urban development, it is appreciated that production ac-
tivities are subject to operating conditions sufficient to assure reason-
able compatibility with other uses.
Industry representatives have pointed out that judicious and ob-
jective determination of land uses may be difficult under the pressure of
objecting homeowners. They express concern that local decisions can
a* Hambleton, Dr. W. WM "Education of Geologists for Geological Surveys," Journal
of Geological Education, June 1966.
» See Transcript, Vol. I, M. C. Lorenz, p. 118 : Vol. V, Paul Foxworthy, p. 5.
3° See Transcript, Vol. TV, Stewart Adler, p. 42 ; Vol. I, John Kerfoot, p. 30.
PUBLIC UTILITIES AND CORPORATIONS 27
vacillate.31 Cooperation between the industry and zoning authority to
avoid this kind of pressure and to improve mining operations is pos-
sible.32
Some zoning decisions have placed a time limit on conditional use per-
mits. The objections to having such restrictions include :
1. Insufficient time to amortize the original investment.
2. Serves as a deterrent to long-range planning and expensive im-
provements.
3. Sets the tone for relations between the industry, government, and
community through expensive and time-consuming public hear-
ings.33
Arguments in favor of a time limit for review generally include :
1. To determine the producer's compliance with conditions of the
permit.
2. To provide an opportunity to review land use problems and any
changes in conditions which may have occurred within the time
period.34
Reclamation of depleted sand and gravel deposits is becoming com-
mon practice in the industry. Examples of such projects can be found
in the National Sand and Gravel Association's publication "Case His-
tories" and in California through testimony presented to the Study
Group.35 As population expands and land use becomes more intense,
three criteria for a reclamation program emerge — public pressure, regu-
lations, and land value.
People see examples of a scarred countryside brought about by de-
serted mining operations and use this as one basis for opposing sand
and gravel operations in some areas. One of the basic objectives of rec-
lamation, then, is to improve the industry's image to the public. Local
authorities are also becoming more concerned about an ultimate use of
the land. This is reflected in the trend to include in zoning regulations
some provisions for planned reclamation and land development. The
Study Group also learned of legislation at the federal level which is
under consideration and which has as one major objective the reclama-
tion of open pit mines. The third criterion for land reclamation is the
incentive offered by increasing the land value.36
The types of reclamation projects completed or proposed include
residential, commercial, industrial, recreational (Vasona Reservoir in
Santa Clara County), agricultural and flood control developments. In
some instances, the pits would be filled and brought back to their origi-
31 See Transcript, Vol. I, E. O. Rodeffer, p. 2 ; Vol. I, John Kerfoot, p. 25 ; Vol. II,
Bruce Bravo, p. 64.
32 See Transcript, Vol. I, Forrest S. Dickason, pp. 43-44; Vol. I, Milton Breivogel,
p. 65.
33 See Transcript, Vol. II, William Downing, p. 18; Vol. Ill, Glenn Ricks, p. 10;
Vol. V, Crawford Williamson, p. 33.
3* See Transcript, Vol. II, William Fraley, p. 31 ; Vol. Ill, James Fairman, pp. 40-41.
35 See Transcript, Vol. I, E. O. Rodeffer, p. 9 ; Vol. I, John Kerfcot, pp. 31-32 ; Vol. II,
William Downing-, p. 22 ; Vol. II, Karl J. Belser, p. 69 ; Vol. IV, Dan Mikesell,
p. 17 ; Vol. V, Crawford Williamson, p. 30.
3<5 Bauer, Anthony M., Simultaneous Excavation and Rehabilitation of Sand and
Gravel Sites, A Report of a Research Project, University of Illinois, p. 28.
9£ ASSEMBLY INTERIM COMMITTEE
nal level and in other cases, the development takes advantage of the new
land contour. A use of depleted pits that is receiving a great deal of
attention, particularly in the Los Angeles area, is sanitary land fill.
The annual refuse disposal in Los Angeles County is estimated at 9
million tons. Through a joint power agreement with the City of Los
Angeles, Hie county has set up a trust fund to acquire disposal sites
for future use. Proposed sites include quarry zones in the San Fernando
Valley and San Gabriel Valley. These areas can be obtained through
condemnation proceedings should such action be required.37
Sanitary fills frequently are looked upon with much disfavor by
homeowners in the vicinity of the disposal site. Some officials are con-
cerned, too, about underground water pollution.38 Experiments with
plastic lined pits and jute with plastic mixed lining are being conducted
to allow sanitary fill below the water table level. In other cases, the use
of Kt clean" or inorganic fill through and above the underground water
table has permitted the upper reaches of a depleted pit to be used for
rubbish disposal.
If possible, the most opportune time to plan reclamation of quarries
is prior to the start of excavation. This allows the producer to divert
part of his capital towards reclamation and provides the community
planners an opportunity to project future land use patterns.39 It is un-
realistic, however, to expect such a plan to remain inflexible in the face
of changing land use, to place a time limit on reclamation, or to re-
claim the land while extraction is proceeding in the same immediate
area.40
THE STATE'S ROLE
The Study Group devoted a major share of its attention to deter-
mining the role that the state should assume to resolve some of the
problems concerning sand and gravel extraction and, in particular,
preservation of deposits. An extreme viewpoint would suggest the state
should pre-empt the zoning and regulation of sand and gravel quarries,
removing such authority from the local jurisdictions. The opposite end
of the spectrum would require no action by the state, and assumes the
cities and counties along with the industry will cooperatively solve
their problems in the best interests of all concerned. Neither view was
considered practical by the Study Group, but rather a solution was
thought to lie somewhere between these extremes.
Removing the police power of local governments in relation to this
resource is opposed by local agencies and some industry represent-
atives on several grounds. This power has been traditionally exercised
locally as granted by the State Constitution.41 Special consideration for
one industry by pre-empting control in this field will open the door
to many other equally concerned interest groups.42 State control will
remove the determination of land use and standards of operation from
the people most affected by the location of quarry sites.43 In addition,
"Reining Don, Our Natural Resources, A Speech delivered to the National Sand and
s^PSSZl1-^???0^1.01!' February 8, 1966.
™ iee transcript, Vol. I, E. O. Rodeffer, p. 10 ; Vol. I, John Kerfoot, Pp. 31-35.
<noee Transcript, Vol. II, William Downing, p. 19 ; Vol. II, Harold Goldman, p. 46.
4i q £ranscr}Pt, Vol. I, John Kerfoot, p. 34 ; Vol. II, Harold Goldman, p. 46.
i* o transcript, Vol. I, Louis Nowell, p. 84 ; Vol. II, William Parness, p. 15.
! Iee transcript, Vol. V, Paul Foxworthy, p. 4.
« See Transcript, Vol. I, Milton Breivogel, p 79
PUBLIC UTILITIES AND CORPORATIONS 29
uniform regulations which would be applied throughout the state could
not take into account the variety of situations presented by the geog-
raphy and geology of the various areas.44 Only the local jurisdictions
can accurately evaluate the maximum benefit to be gained from a
property and how best this property fits the concept of a balanced
community.45 Finally, there is no assurance that by pre-empting this
field the problems as they exist today will be solved.46
To maintain the status quo on the other hand, is unrealistic ac-
cording to industry representatives who warn that unless there is in-
creased concern and action to conserve aggregate near population cen-
ters, there will be significant economic consequences for the citizens
in the form of increased construction costs.47 The best chance for ac-
complishing this, it is argued, is by providing an appeals board or
broader controlling body.48 One industry representative stated local
officials cannot always make objective decisions when a crowd of home-
owners oppose a zoning change or the granting of a use permit, par-
ticularly when the opposition is based on emotion rather than reason.49
Help is needed, too, where zoning authorities do not realize adequate
controls can be utilized in a quarry operation to protect the public.50
A common fault found with local planning and zoning is the lack of
regional considerations which will become more critical as populations
increase and sources of sand and gravel decrease.51
Several problems were identified in relation to a lack of regional
planning. First there is the question of whether local planning and
zoning officials will take as broad a view of regional needs as is required
for the best use of deposits within a local jurisdiction. Indeed, the pro-
duction and use of aggregate products are very often not in the same
jurisdiction.52 Conserving and extracting sand and gravel deposits
may depend on avoiding extreme variations of control, particularly,
where these controls affect the producers ability to be competitive
within the region. Finally, a deposit or quarry operation which is an-
nexed to a new jurisdiction may be more easily protected when it is
part of a regional plan.
Considerable agreement was found in proposing the state should as-
sume a greater responsibility for assisting local governments with
more detailed information on the location, quantity and quality of
deposits. An inventory that would provide decision making bodies
with essential data not now available making it possible to develop
more comprehensive plans to conserve sand and gravel requires study
in depth. Many cities and counties lack the finances and technical
personnel to conduct an inventory study.53
44 See Transcript, Vol. I, Calvin Hamilton, p. 104; Vol. II, William Downing, p. 19;
Vol. II, Bruce Woolpert, p. 59.
45 See Transcript, Vol. II, William Downing-, p. 17 ; Vol. Ill, James Fairman, p. 36.
46 See Transcript, Vol. Ill, Charles Porter, p. 44.
47 See Transcript, Vol. V, Crawford Williamson, p. 29.
4S See Transcripts, Vol. II, Bruce Bravo, p. 64 ; Vol. I, John Kerfoot, p. 24.
4f' See Transcript, Vol. I, E. O. Rodeffer, p. 2.
50 Ibid., p. 6.
31 See Transcripts, Vol. I, John Kerfoot, p. 23 ; Vol. I, Forrest Dickason, p. 48 ; Vol. I,
Milton Breivogel, p. 66 ; Vol. I, M. C. Lorenz, p. 121 ; Vol. Ill, Ray Kepner, p. 30.
52 See Transcript, Vol. IV, Stewart Adler, p. 46.
53 See Transcript, Vol. I, John T. McGinnis, p. 41 ; Vol. I, Forrest S. Dickason, p. 47 ;
Vol. I, Frank Bonelli, p. 61 ; Vol. I, Calvin Hamilton, p. 106 ; Vol. Ill, James
Fairman, p. 37.
PROPOSED SOLUTIONS
The preceding sections of this report have pointed out that rock,
sand and gravel are essential to the economy of the state and vitally
important to the entire construction industry. As is readily apparent,
aggregates must be extracted where suitable deposits are found and,
to be economically useful, they should be produced near the consumer.
The deposits must be of sufficient quality to meet the specifications of
various private and public construction projects and of sufficient
quantity to justify a large investment in plant.
The report also points out the importance of local land use regula-
tions. The many factors which are necessarily considered in planning
and zoning can best be evaluated by the local officials. The require-
ments for complete and accurate information would apply equally to
any public agency who is faced with the determination of land use.
The authors of the Ventura County study reached the following con-
clusions :
1. Land uses such as housing can be designated in many areas while
sand and gravel resources are found in only limited quantity and
consequently should be protected from less vital land uses.
2. City, county, and state agencies should evaluate the future supply
and demand of industrial minerals to avoid the almost impossible task
of protecting these minerals after the deposits are surrounded by ur-
ban housing.
3. The government agencies in cooperation with producers should
develop satisfactory ordinances for operating and reclaiming open-pit
mines.54
Much of the testimony heard by the Study Group would support
these conclusions. The action that may be required to implement them,
however, becomes a point of contention among the various groups repre-
sented. The following proposals calling for specific legislation at the
state level have been suggested by various individuals and discussed
by the Study Group.
STATE CONTROL
1. Mineral Aggregates Bill. This legislation would put zoning, per-
mits and quarry operation regulations under a state agency. The bill
would delegate to this agency the power to license the excavation and
production of mineral aggregates, adopt and enforce rules and regula-
tions controlling such operations and approve and supervise the execu-
tion of reclamation plans for areas from which the aggregates have
been extracted. The powers so delegated to the state are preempted by
the state to the exclusion of cities and counties.
The purpose of the bill would be to secure the public interest in con-
tinued availability of rock, sand and gravel, and their production
under uniform regulations operative throughout the state. The regula-
tions would afford protection against injury or serious annoyance to
person or property and provide for the reclamation of the lands.
"Moore, _ William W., Editor, "The Urban Threat to the Sand and Gravel Industry,"
Engineering Bulletin, No. 29, Dames & Moore, pp. 8-9.
(30)
PUBLIC UTILITIES AND CORPORATIONS 31
Opposition to legislation of this type would be vigorous and wide-
spread. The objections to land use decisions at the state level include re-
moval of those decisions from the public most affected, variety of alter-
natives are known best by local authorities, and the impossible task of
designing uniform regulations with the variety of situations. There is
insufficient evidence to justify the removal of police powers of the local
governments over a specific type of land use and placing such pwoers
at the state level.
2. State Land Bank. A proposal for conserving sand and gravel
deposits on the urban fringe would give power to the state to acquire
land in advance of need, plan its use, and then lease it to private in-
dustry to develop according to the plan. The legislation would require
determination of projected needs, appropriation of funds to acquire the
land, and some procedure for choosing the private company who would
be willing to excavate the aggregate.
The objective would be to remove control of sand and gravel deposits
from local jurisdictions and place responsibility for development with
the state. Local pressure in opposition to quarries would then be less
effective.
The cost to the state, thus the taxpayer, would be significant. In addi-
tion, Article I, Section 14 of the California Constitution states that
private property can be taken under eminent domain power only for a
public use. To interpret sand and gravel extraction as a public use is
not acceptable. To require that all the lands so acquired be developed
for public use following depletion of the aggregate is unrealistic. Little
support was found for this suggestion, though, in a specific situation
it might be acceptable and advisable. A program in Phoenix, Arizona,
for example, is designed for multiple-use projects where land is ac-
quired for park purposes, with interim uses for excavation of sand
and gravel, followed by sanitary fill.
3. State Appeals Board. This suggestion was for an act to be added
to the Public Resources Code. It provides for a State Resources Appeals
Board consisting of the Director of Conservation and 10 additional
members appointed by the Governor, with the advice and consent of
the Senate. Representatives would be chosen from the cities, counties,
industry and the public. Producers or citizens could appeal to the
board any local decision relating to a zoning ordinance or action on a
conditional use permit or variance or other permit affecting aggregate
production. The appeals board would have the power to overrule the
local decision. A review would only be made when an appeal is regis-
tered with the State Resources Appeals Board by affected parties.
The purpose of such an act would be to prevent unreasonable deci-
sions or conditions and limitations affecting natural resources. Equal
protection would need to be provided for the general public. Such an
agency would be expected to be concerned with the regional implica-
tions of the city and county decisions.
Some producers looked upon this proposal as the best possible solu-
tion. It would provide a body between the city or county and the courts
that the producers expect would be concerned about the regional needs
and would not be influenced by objecting property owners. The police
power of local zoning authorities would be preempted to the extent that
local decisions could be reversed.
32 ASSEMBLY INTERIM COMMITTEE
City and county representatives and some producers do not see this
as a solution. They argue that there is nothing omnipotent about a
state body and that the local needs are in fact better met at that level.
Cities and counties question legislation which will benefit special interest
groups and are concerned about opening the door to other groups who
might desire the same treatment. They believe regional planning can
be brought about through cooperative organizations such as the Asso-
ciation of Bay Area Governments and the Southern California Associa-
tion of Governments.
Seine members of the committee believe the importance of sand and
-ravel to the economy of the state and the inadequate protection cur-
rently being given to future reserves at the local level make this pro-
posal worthy of consideration. The relatively brief time that coopera-
tive government planning organizations have functioned, particularly
in southern California, may have prevented their official concern over
depletion of the resource. Such concern would be welcomed by produc-
ers and public alike. No one of the Study Group advocated wholesale
removal of zoning powers from the local governments.
REGIONAL CONTROL
Each of the above proposals could be assigned to a regional agency
which would bring the control closer to the people and provide the
same advantages attributed to state control. The need for regional con-
siderations is emphasized by the fact that the Amador Valley is a pri-
mary source of aggregate for the bay area, and San Bernardino will
eventually be a primary source for Los Angeles city.
4. Los Angeles Basin Rock, Sand, and Gravel District. This pro-
posal would result in an act to be added to the Public Resources
Code. A sand and gravel district would be established in the Los
Angeles area where the depletion of aggregates is most critical. The
board of directors of the district would be empowered to (a) inventory
the sand, gravel and rock resources of the area; (b) prepare a master
plan for conservation and development of the resources; (c) provide
information and recommendations to the local jurisdiction in line with
the above actions; and (d) hear and determine appeals from local
decisions in zoning or permit proceedings which affect production and
distribution of rock, sand and gravel in the district.
The board membership would include representatives of the cities,
counties, industry and public. The district board would be empowered
to tax the production of rock, sand and gravel for the purpose of
defraying the costs of conducting district business.
Proponents for legislation state it could be desirable for several rea-
sons: The advantages of regional study and planning would be real-
ized ; action would be taken in one of the more critical regions of the
state and could serve as a test program for possible adoption else-
where as the need arises ; a designated body as an agency of the state
but with only regional jurisdiction would be able to improve the rela-
tions between the public, government and industry through education
and study.
Opposition could be expected on the same basis as any other legisla-
tion wrhich would threaten local zoning authority. In addition, exist-
ing state laws would allow for similar regional actions on a voluntary
PUBLIC UTILITIES AND CORPORATIONS
basis. Evidence of such voluntary activity, however, in relation to con-
serving our natural resources is sketchy and needs encouragement.
A question arises with regard to the tax on producers to meet the
district expenses. If the natural resources are important to the econ-
omy of the region and state, then taxing should perhaps be distributed
on that basis.
LOCAL CONTROL
Some opponents of state or regional control legislation insist that
the problem can be handled at the local level if certain enabling leg-
islation is enacted. The need generally identified is for more informa-
tion and education. Several proposals were investigated by the Study
Group and are included here.
5. Continuous. Cooperative and Comprehensive Planning. This
proposal assumes the effective tools for preserving sand and gravel de-
posits and controlling quarry operations are based on area-wide and
long-range planning. Restrictions such as inadequate information tend
to keep the potential benefits of local planning from being fully real-
ized. In addition, the scope of planning and action may embrace prob-
lems far beyond the limited concern of local jurisdictions. A compre-
hensive regional general plan which identifies sand and gravel deposits,
then, should provide necessary information for local policy determina-
tion.
The multiplicity of agencies and factors which must be considered
in local determination of lands to be used for sand and gravel pro-
duction suggest a need for a regional approach to planning. The im-
portance of regional study of mineral resources is advanced by Dr. W.
W. Hambleton, ,;We have been active in the field of regional economic
studies and applied product research and development. For the past
several years we have involved people from geophysics, statistics, pe-
troleum engineering, mining engineering, geology and econometrics in
studies to develop methodologies for regional economic analysis. Re-
gional economic growth is not simply a consequence of a discrete set
of local decisions, and every sizable injection of new investment brings
with it a train of related economic events characterized by a multi-
plier effect. . . . \Ye are dealing increasingly with the whole field of
a system analysis and operati ::s research in the economics of the
mineral industries. " 7i'J
Powerful inducement to engage in area-wide planning could be pro-
vided by the state in the same way as the Federal Housing Act.
Funds for planning and study would be provided to a metropolitan
area when there is continuing, comprehensive and cooperative plan-
ning by counties and cities. The legislation should require that the
general plan for a region identify the location of natural resources.
Area study commissions on mineral resources might be formed volun-
tarily with adequate incentive.
The legal requirements for local zoning decisions would be unaf-
fected, though recommendations from the regional planning' agencies
would be sought or required. Frances AY. Herring says. -'The re-
quired review of local zoning decisions by a higher jurisdiction, when
rs Hambleton, W. W.. '-Education of Geologists for Geological Surveys." Journal of
Geological Education, June, 1966.
34 ASSEMBLY INTERIM COMMITTEE
such decisions bid fair to affect neighboring communities or the region
as a whole, is a desirable new tool of zoning administration."56 The
conservation of natural resource districts designated on a master plan
would possibly require an exclusive zone for that use before planning
might have much effect. Multiple use should at least be restricted to
nonconflicting uses such as agriculture, forestry, and recreation.
6. Local Conservation Commissions. The state might enact legisla-
tion enabling local conservation commissions to receive some funds for
the purpose of studying the problems, inventorying the deposits and
recommending legislation within a local jurisdiction. The commission
would not have powers beyond those already granted local governments,
but rather would serve a purpose in placing emphasis on problems
not now receiving sufficient consideration. Hopefully, a coordinated
and vigorous local program in cooperation with industry could develop
a conservation program; more thought would be given to alternative
land uses, and influence on the public might be realized through a
concentrated information program.
Adequate legislation exists now for cities and counties to move in
this direction. The Division of Mines and Geology is authorized to
enter into agreements with local governments to investigate resources
in order to prevent their loss to urbanization through Senate Bill
703, Section 2205 of the Public Kesources Code. Lack of funding has
curtailed activity in this area, but the possibility does exist. A serious
question arises, then, whether there would be a need for and use of this
type of legislation.
INVENTORY
A special consideration was given to the need for an inventory
because this was the most frequent suggestion for legislative action.
The need for assistance stems from the high cost and lack of technical
personnel to accomplish a detailed study at the local level. Without
additional information, though, local officials may be unable to deter-
mine the value of any particular deposit and the justification for con-
servation of that deposit.
The advantages in having the state, through the Division of Mines
and Geology, coordinate inventory investigations are as follows : The
information would be uniform which has advantages for both Cali-
fornia and its cities and counties ; the investigations are more readily
controlled assuring accuracy and usability; and the studies could be
conducted only where the need exists. To consider a detailed statewide
inventory of deposits is unwarranted and financially prohibitive.
Several concepts have been advanced to suggest the role the state could
play in providing funds and other assistance for an inventory.
7. A pilot program could be launched utilizing state and local re-
sources by choosing a metropolitan area for detailed inventory. It
possibly should be an area where the problem of depleting resources
is most critical such as Los Angeles or San Francisco. The legislation
would provide for funding and the basis for local and state cooperation.
The coordination of such a program could be placed with the State
Division of Mines and Geology with latitude to involve public agencies
» Herring, Frances W., Open Space and the Law, Institute of Governmental Studies.
University of California, Berkeley, 1965, p. 102.
PUBLIC UTILITIES AND CORPORATIO .>.-,
or private consulting services where such assistance might be advan-
tageous.
8. A systematic approach could be taken whereby state assistance in
inventory studies would be controlled under predetermined conditions.
A systematic accumulation of pertinent data such as the life of existing
deposits, population growth, changing economic conditions, trends in
urban development, etc., could be fed to a central state or regional
agency. The data could be arranged or processed in such a way that
it becomes most useful in determining where the critical problems will
exist with regard to depletion of sand aud gravel deposits. The in-
formation would have to be filed in an easily retrievable way.
AYhen a certain region approaches a predetermined situation where
the future conservation will be made difficult by problems known to
exist, an inventory of additional deposits will be encouraged. Coopera-
tive involvement of the state, industry, and local governing bodies
could provide incentive to make a thorough study of the region, share
the cost among the various interests, and assure some uniformity of in-
formation. It is conceivable that an approach such as this could lead
to greater understanding by the industry and governments of each
other 's problems.
Under either of the above proposals, the role the State Geologist
would assume should be clearly defined. A suggestion that he be made
available in zoning change or permit proceedings as an expert witness
did not receive adequate support. It would be difficult for him to be
an expert in the many considerations of land use. In addition, testify-
ing at local hearings has been against tradition and reserved primarily
for the private consultant.
The use of private consultants or consulting firms as well as other
public agencies in special phases and special situations in developing
the inventory would perhaps be advisable inasmuch as the Division
of Mines and Geology does not now have all the necessary equipment
and is presently understaffed for such an exhaustive survey. The
coordination and direction could be handled by the present staff
working in close cooperation with the area representatives. The distribu-
tion of information might also be centralized with this agency.
APPENDIX A
An act to add Chapter 2.5 (commencing with Section 2220)
to Division 2 of the Public Resources Code, relating to rock,
sand, and gravel, and making an appropriation therefor.
The people of the State of California do enact as follows:
1 Section 1. Chapter 2.5 (commencing with Section 2220)
2 is added to Division 2 of the Public Resources Code, to read :
3
4 Chapter 2.5. Rock, Sand, and Gravel
5
6 2220. The Legislature hereby finds and declares that ;
7 (a) Rock, sand, and gravel are essential to the economy
8 of California and vitally important to public and private con-
9 struction in this state.
10 (b) These materials must be extracted where suitable de-
ll posits are found, and, to be economically useful, they must be
1 2 produced near the point of consumption.
13 (c) In many regions of the state, the rock, sand, and gravel
14 supply situation is extremely critical since the deposits of
If) these materials which are presently available for production in
16 that area will be exhausted within a few years.
17 (d) Other potential sources of rock, sand, and gravel to
18 meet the continually increasing demands of the state and other
19 public and private users of rock, sand, and gravel cannot now
20 be used due to the policies and practices of the public agencies
21 which have jurisdiction over the areas in which these potential
22 sources are located.
23 (e) In order to protect the future economic growth and de-
24 velopment of the state and to insure that an adequate supply
25 of rock, sand, and gravel will continue to be available at a rea-
26 sonable cost in any region of the state where the rock, sand,
27 and gravel supply situation is now, or hereafter becomes, ex-
28 tremely critical, it is imperative that the State Geologist be
29 required to (1) cause an inventory to be made of the rock,
30 sand, and gravel resources of any region of the state in which
31 the State .Geologist determines that there is a serious threat
32 that an adequate supply of rock, sand, and gravel will not con-
33 tinue to be available at a reasonable cost; (2) prepare recom-
34 mendations for the conservation and development of the rock,
35 sand, and gravel resources of the region; and (3) provide in-
36 formation derived from the inventory and the recommenda-
37 tions to the public agencies, and organizations of public agen-
38 cies, within the region.
39 2221. Whenever the State Geologist determines that there
40 is a serious threat in any region of the state that an adequate
41 supply of rock, sand, and gravel will not continue to be avail-
42 able at a reasonable cost, he shall cause an inventory to be
43 made of the rock, sand, and gravel resources of the region.
(36)
PUBLIC UTILITIES AND CORPORATIONS 37
1 2222. The inventory shall be made by the Division of Mines
2 and Geology or, if the State Geologist determines that the divi-
3 sion is unable to make the inventory, shall be made by any
4 other person or organization selected by the State Geologisl
5 pursuant to a contract which is approved by the Director of
6 Conservation.
7 2223. The inventory shall determine, among other things,
8 both of the following :
9 (a) The location, quantity, and quality of the rock, sand,
10 and gravel resources within the region which are presently
11 available for production.
12 (b) The location, quantity, and quality of the rock, sand,
13 and gravel resources within the region which could be de-
14 veloped for commercial or public use.
15 2224. Based upon the information derived from the inven-
16 tory, the State Geologist shall prepare recommendations re-
17 garding the conservation and development of the rock, sand,
18 and gravel resources of the region.
19 2225. The State Geologist shall furnish to public agencies,
20 organizations of public agencies, and producers of rock, sand,
21 or gravel, within the region, and to any other persons, agen-
22 cies> or organizations which request such information and rec-
23 ommendations, the following information and recommenda-
24 tions :
25 (a) Information regarding the location, quantity, and qual-
26 ity of the rock, sand, or gravel resources within the region
27 which are presently available for production or which could
28 be developed for commercial or public use.
29 (b) The recommendations of the State Geologist regarding
30 whether any rock, sand, or gravel resources should be cur-
31 rently developed and used or should be conserved for future
32 nse-
33 (c) Information and recommendations regarding the man-
34. ner in which any rock, sand, or gravel resources may be de-
35 veloped for commercial or public use.
36 (d) Any other information or recommendations which the
37 State Geologist determines may be necessary to insure that an
38 adequate supply of rock, sand, and gravel will continue to be
39 available at a reasonable cost within the region.
40 2226. The State Geologist may request any person, public
41 agency, or private agency or organization to aid or assist him
42 in carrying out the duties which are imposed upon him by
43 this chapter.
44 2227. The State Geologist may receive, on behalf of the
45 state, for use in carrying out the provisions of this chapter,
46 any gifts or grants of funds from any person, public agency,
47 or private agency or organization.
48 Sec. 2. The sum of ($ ) is hereby ap-
49 propriated from the General Fund to the Division of Mines
50 and Geology of the Department of Conservation for expendi-
51 ture in carrying out the provisions of Chapter 2.5 (commenc-
38 ASSEMBLY INTERIM COMMITTEE
1 ing with Section 2220) of Division 2 of the Public Resources
2 Code with respect to one region of the state selected by the
3 State Geologist pursuant to the provision of such chapter.
TENTATIVE DRAFT
BUDGET BILL ITEM
1 ______ For expenditure by the State Geologist,
2 pursuant to Section 2205 of the Public Re-
3 sources Code, in providing financial assist-
4 ance to local and regional agencies for spe-
5 cial studies and investigations relating to
6 rock, sand, and gravel resources
TENTATIVE DRAFT
An act to amend Section 65302 of the Government Code,
relating to planning.
The people of the State of California do enact as follows:
1 Section 1. Section 65302 of the Government Code is
2 amended to read :
3 65302. The general plan shall consist of a statement of de-
4 velopment policies and shall include a diagram or diagrams
5 and text setting forth objectives, principles, standards, and
6 plan proposals. The plan shall include the following elements :
7 (a) A land use element which designates the proposed gen-
8 eral distribution and general location and extent of the uses
9 of the land for housing, business, industry, agriculture, rec-
10 reation, education, public buildings and grounds, and other
11 categories of public and private uses of land. The land use
12 element shall include a statement of the standards of popula-
13 lion density and building intensity recommended for the var-
14 ious districts and other territory covered by the plan.
15 (b) A circulation element consisting of the general location
16 and extent of existing and proposed major thoroughfares,
17 transportation routes, terminals, and other local public utili-
18 ties and facilities, all correlated with the land use element of
19 the plan.
20 (c) A natural resources element which designates the gen-
21 eral distribution and general location and extent of natural
22 resources. The natural resources element shall include, among
23 other things, the location, quantity and quality of the rock,
24 sand, and gravel resources within the area covered by the
25 plan.
TENTATIVE DRAFT
ASSEMBLY CONCURRENT RESOLUTION NO.
Relative to encouraging cities, counties, and regional associations to
cooperate with the Division of Mines and Geology.
"Whereas, Rock, sand, and gravel resources are essential to the econ-
omy of the State of California and vitally important to public and
private construction in this state ; and
Whereas, The problems of development and conservation of these
natural resources are by their very nature broad in scope and thus
suggest a cooperative approach to study and planning ; and
Whereas, The cooperation of cities, counties, and regional associa-
tions with the Division of Mines and Geology of the Department of
Conservation is a vital element in the development and conservation
of the rock, sand, and gravel resources of the state ; now, therefore, be it
Resolved by the Assembly of the State of California, the Senate
thereof concurring, That the Members of the Legislature respectfully
urge cities, counties, and regional associations to cooperate with the
Division of Mines and Geology of the Department of Conservation in
the development and conservation of the rock, sand, and gravel re-
sources of the state.
(39)
APPENDIX B
HOUSE RESOLUTION NO. 531
A List of Hearing Witnesses
(In order of testimony)
Volume 1 — Los Angeles — September 28, 1965
E. I). Rodeffer : Director, Southern California Rock Products Association ; Presi-
dent, Rodeffer Industries.
John Kerfoot: President, Southern California Rock Products Association; Presi-
dent. Owl Rock Products Company.
John T. McGinnis: Vice Chairman, Orange County Planning Commission.
Forest S. Dickason : County Planning Director, County of Orange.
Dale Heinly : Attorney at Law, Santa Ana.
Frank G. BonelU: Supervisor, First District, Los Angeles County.
Milton Breivogel: Director of Planning, Los Angeles Regional County Commis-
sion.
I - n is Nowell : Councilman, First District, City of Los Angeles.
Calvin Hamilton : Director of Planning, City of Los Angeles.
M. C. Lorenz: Director, Department of Public Works, Ventura.
Volume 2 — San Francisco — December 7, 1965
James Fales, Jr.: City Manager, Pleasanton.
Warren R. Harding : City Councilman, Pleasanton ; Chairman, Amador-Liver-
more Valley Rock, Sand and Gravel Study Committee.
W. H. Parness : City Manager, Livermore.
William Downing : President, Kaiser Sand and Gravel Company ; Member, Ama-
dor-Livermore Valley Rock, Sand and Gravel Study Committee.
William Fraley : Director of Planning, Alameda County. Mr. Fraley read a state-
ment from John D. Murphy (Chairman, Alameda County Board of Super-
visors) .
Harold B. Goldman: Geologist, Division of Mines and Geology, California
Department of Conservation.
Bruce Woolpert : Planning Commissioner, Santa Cruz County; President,
Granite Rock Company.
Jack Cedarblade : Executive Secretary, Northern California Rock, Sand and
Gravel Producers Association. Mr. Cedarblade read statements from E. F.
Brovelli (Member of the State Mining Board) and Karl J. Belser (Director
of Planning, Santa Clara County).
Jack Bravo: California Rock and Gravel Company.
Howard L. Reese : City Manager, Fremont.
Volume 3 — San Diego — January 18, 1966
Michael C. Fletcher: President, Ed Fletcher Company.
Glenn A. Rick : President, Rick Engineering Company. Mr. Rick represented San
Diego County Rock Producers Association.
James Fairman : Director of Planning, City of San Diego.
Charles E. Porter: Assistant to the City Manager, City of San Diego.
William A. Craven : Executive Assistant, San Diego County Board of Supervisors ;
Planning Commission, Oceanside.
Roy M. Kepner : Natural Resources Specialist, San Diego County Department
of Agriculture.
Volume 4 — Riverside— April 12, 1966
William R. Livingston : Assistant Planning Director, Riverside.
Paul Anderson : Supervisor, Riverside County ; President, California Super-
visors' Association.
Daniel D. Mikesell: Vice-Chairman, Board of Supervisors, San Bernardino
County.
Stuart L. Adler : President, San Bernardino and Riverside Counties Rock Pro-
ducers Association.
Dick Bowman : Chief, Division of Resource Management, Bureau of Land Man-
agement District Land Office, Riverside.
(40)
PUBLIC UTILITIES AND CORPORATIONS 41
Volume 5 — Sacramento — May 17, 1966
Paul Foxworthy : City Manager, Azusa.
Jack M. Merelman : Legal Counsel, County Supervisors Association of California.
Crawford Williamson : Teichert & Son.
Richard Rathfon : Assistant City Manager, Sacramento.
12
ASSEMBLY INTERIM COMMITTEE
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UTILITY REGULATION
In accordance with the ongoing interest of the Public Utilities and
Corporations Committee in matters involving regulation of public utili-
ties, the following subject areas were studied.
REGULATION OF AMBULANCE RATES
One hearing was conducted on September 13 and 14, 1966, in San
Diego.
Scope
As a result of a federal regulatory agency decision that ambulance
firms are in interstate commerce, employees of such firms are now cov-
ered by the provisions of the Fair Labor Standards Act, In order to
meet increased labor costs private ambulance firms are finding it nec-
essary to raise rates and, in some cases, seek subsidies from govern-
mental bodies to continue operation.
The Public Utilities Code does not name ambulance rates as being
under the jurisdiction of the California Public Utilities Commission.
Regulatory jurisdiction at the state level currently rests with the De-
partment of Motor Vehicles and the California Highway Patrol. The
regulatory jurisdiction of these departments appropriately relates to
vehicles and safety equipment. At the present time, regulation of ambu-
lance rates exists at the city and county levels of government.
In the larger urban areas, the administrative and economic capacities
of local government generally make it possible to provide for ambulance
service at rates which have been adequately reviewed and approved
by local authorities. In many of the smaller cities and rural areas of the
state, limited budgetary and administrative capacities may preclude
local authorities from exercising such regulatory functions. The result
in these areas is often inadequate ambulance service at expensive rates.
In view of these factors, it was the intent of the committee to inquire
into the feasibility and wisdom of granting the California Public Utili-
ties Commission jurisdiction over ambulance rates.
Positions
Representatives of cities testified that regulation of ambulance serv-
ices and rates beyond the local level is not desirable. Factors such as
population density, street patterns and geography vary considerably
throughout the state and have a direct influence on the organization
and economics of ambulance services. Local authorities are best quali-
fied to determine and react to these variables.
Spokesmen for the ambulance industry agreed with the concept of
local control of ambulance services. There was general agreement, how-
ever, that many rural areas need financial assistance in order to provide
adequate ambulance service at reasonable rates.
Analysis and Recommendation
The committee concluded that ambulance services are primarily a
para-medical facility. The arguments for local jurisdiction are com-
(43)
44 ASSEMBLY INTERIM COMMITTEE
pelling. Since there is general agreement that economic problems are
responsible for high rates, the matter of financial assistance should be
pursued with a view to administration at the local level in accordance
with state standards. The committee recommends that this subject be
approached as a public health matter. The committee concluded that
ambulance rates should not be regulated by the Public Utilities Com-
mission of the State of California.
POWER BLACKOUT
One hearing was conducted on December 15, 1965, in Sacramento.
Scope
As a result of the power failure in the northeastern states in Novem-
ber, 1965, there had been widespread speculation as to the possibilities
of a similar occurrence in California. The committee was interested
in learning about California 's posture with respect to power blackouts.
Positions
The committee heard testimony from representatives of electric utili-
ties in California, cities, and state officials.
California electric utilities were pioneers in long distance, high
voltage transmission. Methods were developed in California to protect
long transmission lines and to guard against losing power loads. Elec-
tric utilities in California employ equipment which will automatically
unload part of the system in the event of frequency irregularities. This
type of equipment was generally not in use in the northeastern part of
the United States at the time of the power failure in 1965. There are
a great number of ties connecting the northeastern utilities together and
a serious power failure on one system pulled other systems down.
In California, each electric utility system carries enough genera-
tion in reserve to protect its own system. Its ties will open automati-
cally before any failure on one system pulls another system down. Since
this action takes place over a wide area, it is dependent on a great many
relays. The chances of any malfunction are extremely remote. Should a
malfunction occur there would not be an overall effect such as was ex-
perienced in the northeast.
On the state level the California Disaster Office is part of the Gov-
ernor 's office and is basically a planning and coordinating agency.
Whenever an emergency or natural disaster occurs, the Disaster Of-
fice is charged with coordination of mutual aid and disaster relief ac-
tivities provided by state and federal agencies and local jurisdictions
throughout the disaster area, The State Electrical Operating Engineer
of the California Disaster Office is charged with coordinating individ-
ual electric utilities in the event of a complete electric breakdown in
California.
The State Fire Marshal is empowered to establish minimum regula-
tions for fire safety, which includes emergency power, especially for
lighting, in schools, public gathering places, emergency facilities such
as hospitals and state-owned buildings. Enforcement of these regula-
tions is delegated almost completely to local authorities.
A representative of the League of California Cities testified that vir-
tually all cities have equipped themselves with independently oper-
PUBLIC UTILITIES AND CORPORATIONS 4.")
ated standby power equipment for the essential emergency services in
case of limited power failures.
Analysis and Recommendation
Power failures of a limited nature due to such causes as traffic acci-
dents, storms and equipment failure cannot be completely eliminated
in California. However, emergency procedures and standby power
sources have been provided for by state agencies, California electric
utilities, virtually every city and important facilities such as hospitals.
Such measures are designed to minimize the extent and duration of
any possible power failure in California.
Testimony at this hearing did not disclose the need for legislation to
avoid a power blackout such as occurred in the northeast.
TELEPHONE SOLICITATION
One hearing was held on October 4 and 5, 1966, in Compton.
Scope
The committee 's interest was in the area of uninvited telephone solici-
tation calls to private residences. The term uninvited is used to de-
scribe telephone calls made from a list of names, addresses or telephone
numbers without regard to whether or not the party being called has
indicated any prior interest in receiving such a call. Telephone solici-
tation is generally used for charitable fund raising, political cam-
paigning and for commercial purposes.
While telephone solicitation is not prohibited under present law, the
committee was aware of widespread concern and annoyance on the part
of private telephone subscribers over uninvited telephone solicitation
for commercial purposes.
Positions
Testimony was heard from housewives, senior citizens, witnesses rep-
resenting consumers, charities, law enforcement, telephone companies
and the California Public Utilities Commission. Hearing notices were
mailed to numerous firms known to be involved in telephone solicita-
tion. None of these firms sent representatives to testify before the
committee.
Witnesses representing telephone companies and the California Pub-
lic Utilities Commission testified that, under present law, telephone
service must be provided without regard to the fact that telephone
equipment may be used for uninvited calls to private residences for
commercial purposes.
Testimony before the committee was overwhelmingly opposed to this
type of telephone usage. At issue is the individual's right to privacy
in his own home as opposed to the rights of legitimate businesses and
organizations to advertise and sell their products, services or special
cause.
Telephone solicitation for charitable purposes and for political cam-
paigning were distinguished as generally nonobjectionable in view of
the high public purpose served by such causes.
Representatives of law enforcement agencies testified to the high in-
cidence of fraud involved in commercial telephone solicitation. A pub-
4(J ASSEMBLY INTERIM COMMITTEE
lie agency in one metropolitan area processed approximately three hun-
dred cases of fraud in one year. A high percentage of these cases
were traced to telephone solicitation.
The committee received recommendations ranging from outright pro-
hibition of commercial telephone solicitation to various restrictions on
this type of telephone usage. Representatives of law enforcement agen-
cies testified that enforcement of outright prohibition or restrictions
on commercial telephone solicitation per se would involve difficult
problems of identification and proof.
Analysis and Recommendations
The committee found strong opposition to uninvited commercial tel-
ephone solicitation on the part of private telephone ratepayers. Testi-
mony from law enforcement officials revealed an alarming incidence
of fraud related to uninvited calls to private residences for commer-
cial purposes. In view of the fact that difficulties of proof and identi-
fication would frustrate effective enforcement of outright prohibition
or restrictions on uninvited commercial telephone calls to private resi-
dences, the committee does not recommend such an approach at this
time.
The committee concluded that, as a first step, legislation should be
enacted providing that where a sale or contract results from an initial
contact by an uninvited telephone solicitation call to a private resi-
dence, the party who had received the uninvited telephone solicitation
call shall have the power to rescind the contract for a period of fifteen
days after the contract is formed. This will provide private residence
telephone ratepayers the opportunity to reconsider the matter free from
any sales pressure on their telephone or in their homes. The commit-
tee believes that public awareness of such legislation would limit the
possibility of fraud and discourage this type of telephone usage. The
committee recommends that such legislation should not apply to rate-
payers whose telephones are installed for business purposes. A review
of the effectiveness of such legislation should be undertaken by the
Legislature, allowing for a reasonable period of operation.
An act to add Article 2.5 (commencing with Section 17550) to Chapter
1 of Part 3 of Division 7 of the Business and Professions Code, re-
lating to ousiness solicitation.
The people of the State of California do enact as follows:
Section 1. Article 2.5 (commencing with Section 17550) is added
to Chapter 1 of Part 3 of Division 7 of the Business and Professions
Code, to read :
Article 2.5. Solicitation by Telephone
17550. A contract resulting from an unsolicited telephone commu-
nication to a private residence by a solicitor for commercial purposes
may be rescinded by the solicited contracting party. The power to
rescind must be exercised within fifteen days after the making of such
contract.
o
_ ._ printed in California office of state printing
L.- 17(5 7— 100 12-68 1,800
Volume 19
ASSEMBLY INTERIM COMMITTEE REPORTS
1965-1967
REPORT OF THE
ASSEMBLY INTERIM COMMITTEE
ON SOCIAL WELFARE
MEMBERS OF THE COMMITTEE
JACK T. CASEY, Chairman
WILLIAM F. STANTON, Vice Chairman
Number 14
ROBERT E. BADHAM
CLAIR W. BURGENER
JOHN L. BURTON
EUGENE A. CHAPPIE
EDWARD E. ELLIOTT
WINFIELD SHOEMAKER
JOHN G. VENEMAN
JANUARY 1967
THOMAS JOE, Consultant
MARY VIRGINIA KALES, Secretary
A REVIEW OF REHABILITATION
POLICIES AND PROGRAMS
Published by the
ASSEMBLY
OF THE STATE OF CALIFORNIA
JESSE M. UNRUH
Speaker
GEORGE ZENOVICH
Majority Floor Leader
JAMES DRISCOLL
Chief Clerk
CARLOS BEE
Speaker pro Tempore
ROBERT T. MONAGAN
Minority Floor Leader
LETTER OF TRANSMITTAL
California State Legislature
Assembly Committee on Social Welfare
January 5, 1967
Honorable Jesse M. Unruh
Speaker of the Assembly, and
Honorable Members of the Assembly
State Capitol
Sacramento, California
Gentlemen :
The Assembly Interim Committee on Social Welfare submits herewith
its report to the Legislature on 1965-67 Interim studies. This report is
devoted to the following subject :
A Review of Rehabilitation Policies and Programs
The attached report presents a brief review of each problem and sets
forth the general conclusions and recommendations of the Committee
for the legislation which seems indicated. These conclusions and recom-
mendations are the result of a series of public hearings and additional
research conducted during the interim period.
Respectfully submitted,
Jack T. Casey, Chairman
William F. Stanton, Vice Chairman
Robert E. Badham (with reservations)* Edward E. Elliott
Clair W. Burgener Winfield Shoemaker
John L. Burton John G. Veneman
Eugene A. Chappie
* To Recommendations 2, 4, 11, 12, and 16.
(3)
PREFACE
This report has to do with the total subject matter of rehabilitation.
Five public hearings were held which dealt with various programs of
the Department of Rehabilitation, but there is no attempt here to dupli-
cate the hearing transcripts. Committee hearings held on this subject
were as follows :
Nov. 22-23, 1965 — Review of existing vocational
LOS ANGELES rehabilitation policies in
California
Dec. 3, 1965 — California Industries for the
SAN FRANCISCO Blind
Dec. 7, 1965 —Contracts
SACRAMENTO
Dec. 21, 1965 — Business enterprise program
SAN DIEGO
March 2, 1966 — Interagency transfers
SACRAMENTO
Anyone interested in reading the complete transcripts should contact
the Committee office.
In this report, an attempt is made to consolidate and synthesize many
of the questions and ideas brought out in the hearings, particularly
those which are significant for legislative action. The recommendations
made are in the nature of broad policy proposals rather than of legisla-
tive bills. These proposals must be viewed in the context of the present
relationships between the Department of Rehabilitation and other
agencies, and are, therefore, not narrowly confined to that administra-
tive jurisdiction.
The report begins with a statement of the Committee's legislative
recommendations, followed by three supporting sections. These are :
1) a summary and description of the existing programs of the Depart-
ment of Rehabilitation, 2) a discussion of financing, and 3) an analysis
of issues brought out by the hearings.
(4)
TABLE OF CONTENTS
Title Page 1
Letter of Transmittal 3
Preface 4
Recommendations 7
Section I : Summary and Description 9
Section II: Financing 14
Section III : Policy Review, Findings and Recommendations 16
Section IV: Conclusion 29
Appendixes 33
(5
-L-1682
RECOMMENDATIONS
1. It is the Committee's judgment that the present scope of activities
of the Department of Rehabilitation is too broad. The Committee
recommends that the Department's proper role be the direct voca-
tional training and placement in competitive employment of the
physically and mentally disabled.
2. In order to permit the Department of Rehabilitation to concentrate
on its primary task, within its limited ceiling of Federal reim-
bursement, the Committee recommends that such prevocational
programs as the Orientation Center for the Blind and the Field
Service Counselors for the Blind be transferred to the Department
of Social Welfare, which has no ceiling on Federal reimbursement
and which is the chief social service agency. It is further recom-
mended that the State Department of Social Welfare be renamed
the Department of Social Services.
3. The Committee recommends that a study be made of the feasibility
of applying orientation and field service counseling programs
to other disability groups.
4. Because of the proven value of the present Orientation Center
for the Blind, the Committee recommends that all necessary budg-
etary support be provided for the hiring of sufficient staff to per-
mit full utilization of the facility. It has been estimated by the
Department that an additional $60,000, of which $15,000 would
be State money, would be required to fully staff the Orientation
Center.
5. The Committee also recommends that the Department of Social
Welfare recognize the Department of Rehabilitation as the employ-
ment training agency for public assistance recipients who qualify
for rehabilitation services.
6. In order to encourage disabled public assistance recipients to par-
ticipate in on-the-job training, the Committee recommends that
provision be made in the law for the exemption of a portion of
earnings in determining the welfare aid grant.
7. The Committee views the present cooperative agreements between
the Department of Rehabilitation and other agencies as pilot proj-
ects which shoidd be reviewed by the Legislature before they
are reauthorized or expanded.
8. The Committee takes the position that the Department of Reha-
bilitation should not provide purely medical rehabilitation where
this is available under the State Medi-Cal Program.
(7)
8 ASSEMBLY INTERIM COMMITTEE ON SOCIAL WELFARE
!>. In regard to the Business Enterprise Program, the Committee rec-
ommends that the Legislature limit the percentage of the oper-
ators' trust fund which can be used for new expansion purposes.
TO. The Committee also recommends that an intensive study be made
of the feasibility of establishing a system of financial incentives
to encourage business enterprise operators to begin independent
ventures in the food service field.
11. The Committee recommends that a distinction be made between
workshops which provide temporary work training in marketable
skills and workshops which offer work adjustment or permanent
employment. It is further recommended that public and private
work adjustment and long-term workshops be transferred to the
jurisdiction of the State Department of Social Welfare.
12. The Committee recognizes the special value of the present work
activity centers serving 200 mentally retarded Aid to Totally Dis-
abled recipients through the Social Service Amendments to the
Social Security Act. The Committee, therefore, recommends ex-
pansion of such services to a greater number of mentally retarded
recipients through increased Budget support.
13. The Committee urges the Department of Rehabilitation to give
even greater emphasis than it already has to the inclusion of its
clients in training programs for the general population, such as
MDTA, apprenticeship programs, public and private trade
schools, colleges and universities, and on-the-job training. The
Committee recommends engaging more of the private sector in the
rehabilitation of disabled persons through some type of incentive,
instead of establishing separate rehabilitative training facilities.
14. The Committee recommends the establishment of a Board to re-
view and adopt regulations of the Department of Rehabilitation in
public hearings which are clidy publicized. The Committee also
recommends that the Board of Rehabilitation hear complaints and
settle grievances for clients or applicants for service. On the basis
of testimony and other information coming to the Committee, it
lias been found that the Department's necessarily broad policy-
making discretion requires that concerned individuals, organiza-
tions, and other departments be apprised of regulation changes
in advance of their adoption and that a fair hearing procedure
be available for clients.
15. The Committee recommends that the Board of Rehabilitation and
the Legislature cooperatively establish priorities for rehabilitation
services and that every effort be made to provide rehabilitative
services and training for employment to the culturally disadvan-
taged, without retarding the growth of programs for other physi-
cal J \j and mentally disabled persons.
16. Finally, the Committee urges the Legislature to memorialize Con-
gress to remove the ceiling on Federal Rehabilitation matching
funds.
SECTION I
SUMMARY AND DESCRIPTION
GENERAL INFORMATION
Through action of the State Legislature, the Department of Reha-
bilitation was established on October 1, 1963, but all of its units had
existed before that time. It has three major programs : Vocational Re-
habilitation Service, Disability Certification, and Rehabilitation of the
Blind. The Department of Rehabilitation is one of four Departments
within the Health and Welfare Agency. The Department provides em-
ployment services to the physically and mentally handicapped in the
State and attempts to reduce dependency through a wide variety of
restorative and retraining services.
The Department is headed by a Director and a Chief Deputy Di-
rector, and is organized into four sections, an Administrative Services
Section, a Division of Vocational Rehabilitation, a Division of Disa-
bility Determination, and a Division of Rehabilitation of the Blind.
The Division of Vocational Rehabilitation has approximately 500 total
positions, the Division of Rehabilitation of the Blind has approximately
200, and the Disability Certification Program has 225, for a total of
1,000 positions in 42 offices and 2 districts.
The Department of Rehabilitation had 40,024 cases referred to it
during 1964, of which 9,025 were accepted for service. Of an active
caseload of 20,171 during 1964, 3,044 were closed as rehabilitated. An
additional 3503 cases were closed before rehabilitation could be un-
dertaken due to factors such as loss of contact, the indifference of the
client, or an increase in degree of disability. An additional 1,246 cases
were closed although the person never achieved employment after re-
ceiving the rehabilitation services.
The Federal law broadly defines who is eligible for service. States
have the discretion of selecting for rehabilitation any individual with
a mental or physical defect affecting his employability, as long as the
rehabilitation plan is realistic and "feasible." California's Department
of Rehabilitation has the stated policy of giving priority to persons
with major handicaps requiring long-term and intensive effort rather
than those with relatively minor disabilities remedied by eye glasses,
hearing aids, braces, or trusses. The Department has the expressed
policy of not helping those who might find employment on their own
or who would be likely to be assisted elsewhere. Selection of clients
is not based necessarily on the need to show quick results ; on the other
hand, individuals whose potential is judged to be extremely limited,
and who are considered unlikely to benefit from the program, are not
accepted either. An applicant's disability may not be considered suffi-
ciently serious to warrant rehabilitation training or, on the other end
of the scale, his disability may be so severe that he does not meet the
"feasibility" criterion. Even within this selective framework, the De-
partment is financially capable of serving only a small percentage of
(9)
10 ASSEMBLY INTERIM COMMITTEE ON SOCIAL WELFARE
those needing rehabilitation services. The 1965 Amendments to the
Federal Rehabilitation Act have allowed the inclusion of sociocultural
factors in the determination of disability, which further broadens the
clientele, but makes selection sometimes even more difficult.
For the numbers, earnings, and occupations of successful rehabili-
tants for the fiscal year ending June 30, 1965, see Appendixes 1
and 2. Types of services provided are shown in Appendix 3. Ap-
pendixes 4-6 show the types of disabilities of the clients. Appendixes
7-12 cites their income and its sources. Appendix 13 gives the age,
race, and sex of the clients. Appendixes 14 and 15 give a comparison
by states of the number of referrals, cases accepted, and per capita
expenditures, while Appendixes 16-18 show the number of rehabili-
tants nationwide since 1920, and the disabilities and occupations of
rehabilitants on a national basis.
VOCATIONAL REHABILITATION
Vocational rehabilitation has been a function of State Government
since 1921. In fact, it is one of the oldest of California's social pro-
grams. The current Vocational Rehabilitation Division in the Depart-
ment of Rehabilitation offers diagnosis and evaluation, vocational guid-
ance, and other services aimed at bringing disabled individuals to the
point of employment. These other services include, but are not limited
to, maintenance, transportation, prosthetic devices, medical or psychia-
tric treatment, on-the-job training, personal tutoring, supplies, and
placement of selected individuals in small business enterprises. Work
evaluation, training, and employment may be provided in privately
operated sheltered workshops. Individuals may be supported through
high school, junior college, or university as part of their rehabilitation
training.
The central administrative unit of the Division is in Sacramento,
with regional supervisory offices in Oakland and Los Angeles, and 11
district and 23 branch offices. Rehabilitation counselors, located in the
district and branch offices, have the primary responsibility for re-
habilitation. They maintain continued personal contact with their
clients and perform the necessary tasks of testing, counseling, referral,
and employer public relations. The rehabilitation plan is the result
of the joint efforts of the counselor and the client.
1. Caseload
The Vocational Rehabilitation caseload has been increasing; the
total of active cases has grown from 16,000 in 1960-61 to approximately
_!(U)00 in 1963-64. The number of cases carried from year to year
has risen from 9,000 to 11,000 in the three-year period from 1960-61
to 1963-64, while new cases accepted have increased from 6,000 to
9,000 in the same period.
Total cases closed yearly have increased from 6,330 to 7,750 in the
aforementioned combined three-year period. Cases closed as rehabili-
tated have slowly, but gradually, increased from 2,487 in 1960-61 to
3,045 in 1963-64; cases closed, unemployed after plan developed,
have increased from 1,050 in 1960-61 to 1,245 in 1963-64. Cases closed
for other reasons still make up a plurality of the cases, going from
REHABILITATION POLICIES AND PROGRAMS 11
2,841 in 1960-61 to 3,502 in 1963-64. These other reasons are not speci-
fied by the Department.
Within the Division of Vocational Rehabilitation, there are speci-
fic programs, including' rehabilitation services to recipients of Old
Age Survivors and Disability Insurance (OASDI), the industrially
injured, and some patients in mental hospitals.
2. Cooperative Agreements
In addition to its direct functions, for the past year, the Depart-
ment of Rehabilitation has been authorized to engage in interdepart-
mental contract agreements which are rehabilitative in nature. The
Department of Rehabilitation provides funding and staff to opera-
tions within the facilities of other departments. The essential pur-
pose of these cooperative agreements is to provide a necessary rehabili-
tation element in programs of the Departments of Corrections, Public
Health, Mental Hygiene, and Education. Over $8 million of Federal
money has been authorized to the Department of Rehabilitation to
augment and initiate rehabilitation services in the programs of these
other agencies.
As an example of a cooperative interdepartmental agreement, the
Legislature authorized the Department of Rehabilitation to utilize
$750,000 of Federal funds in 1965-66 to develop programs in local
school districts. The purpose of these programs is to provide voca-
tionally oriented experiences to mentally retarded and physically hand-
icapped young people while they are still in school. Programs of this
type were established in approximately 25 school districts.
Another cooperative program between the Department of Rehabil-
itation and Youth and Adult Correctional agencies, assigns rehabilita-
tion counselors to both inmates and parolees. Agreements with the
Department of Public Health focus on the strengthening of counsel-
ing and referral services to Crippled Children's Services and to
the regional diagnostic centers for the mentally retarded. In addi-
tion, cooperative programs are being developed with the Department
of Public Health to provide vocational rehabilitation for alcoholics.
Another joint program, this time with the Department of Mental
Hygiene, authorizes the placement of rehabilitation counselors in State
Hospitals for the mentally ill and retarded and establishes a special
program for the mentally retarded at Agnews State Hospital.
The major theme dominating these cooperative agreements is that
of strengthening existing social programs by the infusion of a voca-
tional rehabilitation element, while achieving maximum utilization of
Federal funds.
There is also a special project that is being carried on by the Division
of Rehabilitation Services for recipients of public assistance. This pro-
gram places vocational rehabilitation counselors in count}?- welfare of-
fices to determine whether disability is a factor in a recipient's unem-
ployability and whether rehabilitation services would be useful. Al-
though the Aid to the Blind and Aid to the Totally Disabled categories
provide some rehabilitation clients, there is also a major potential for
rehabilitation services in the Aid to Families with Dependent Children
(AFDC) category. It has been estimated that at least one-third of
12 ASSEMBLY INTERIM COMMITTEE ON SOCIAL WELFARE
AFDC parents have a disability or health problem, which may make
them eligible for rehabilitation services.
The results so far of the efforts to rehabilitate recipients have been
minimal. Only 850 Public Assistance recipients were rehabilitated
through the Department of Rehabilitation in 1964-65. Of these, only
90 wore Aid to Totally Disabled recipients, out of a total caseload of
75,000 in this category.
DISABILITY DETERMINATIONS
There are two offices within the Department of Rehabilitation which
deal exclusively with disability determinations for OASDI benefits.
More than 100,000 disabled Californians and their families receive
Social Security Disability Benefits amounting to between $100 and $150
million annually. Although this is a Federal program, the benefit
claims by disabled persons are adjudicated by the Division of Dis-
ability Determination of the Department of Rehabilitation.
Social Security Benefits for disabled workers under age 65 were
first authorized by Congress in 1956. The eligibility requirements have
been extended since then and the numbers of persons included grows
larger every year. The typical beneficiary is a married man under
age 60, disabled by a cardiovascular or nervous system disease. He
has a wife and two dependent children and his monthly benefits range
between $254 and $300 per month.
In addition to determining the extent of disability for purposes of
OASDI, the Division staff studies the case folder of each benefit appli-
cant. If the information submitted for OASDI purposes indicates a
potential for rehabilitation, the case is referred to the Division of
Rehabilitation. Six thousand cases w7ere referred in 1965-66 on this
basis, out of 59,600 determinations made during this time. The client
is not actually seen until he is contacted by the Division of Rehabili-
tation.
REHABILITATION OF THE BLIND
The third major program is the Division of Rehabilitation of the
Blind. Like the Division of Vocational Rehabilitation, this division
provides counseling, physical restoration, vocational training, and job
placement, in this case for clients who are blind or severely visually
handicapped. Blind clients are served by counselors specializing in
rehabilitation of the blind, unlike other counselors whose caseloads usu-
ally represent a variety of disabilities. During the fiscal year 1964-65,
155 legally blind and another 290 visually handicapped clients were
rehabilitated by the division.
In addition to the general vocational rehabilitation program for the
blind, the division has several special programs. These programs are
pioneering in nature and have been of special interest to the Legis-
lature because of their possible applicability to other disability groups.
These programs are described briefly.
Orientation Center for the Blind:
This is a short-term residential rehabilitation center for the blind
with new quarters opened in Albany in 1964. It has a capacity of 40
clients and a projected workload of 100 clients per year. All residents
receive instruction in mobility, communication skills (braille and
REHABILITATION POLICIES AND PROGRAMS 13
typing), techniques of daily living, and the development and reorien-
tation of hand skills through shop work, sewing, and cooking.
At present, the Orientation Center has only 23 clients. The Depart-
ment has limited the Center to this number because of lack of financing
for sufficient staff to serve the total capacity.
Field Rehabilitation Services:
This program provides prevocational rehabilitation services (typ-
ing, braille, mobility, self -care) to the blind and severely visually
handicapped at home, in hospitals, and in institutions. The program also
offers counseling and orientation for families of the newly blind.
Industrial Rehabilitation Services:
The Department of Rehabilitation operates two types of rehabili-
tation workshops: the California Industries for the Blind and the
Opportunity Work Centers.
The Opportunity Work Centers consist of three rehabilitation work-
shops which provide training and employment to over 100 blind and
otherwise disabled workers. These are subcontract shops primarily en-
gaged in assembly and packaging.
California Industries for the Blind is composed of three manufac-
turing rehabilitation workshops producing government contract items
and commercial products and offering employment to up to 230 blind
and otherwise disabled workers.
Business Enterprise Program:
This is a training and placement program for operators of vending
stands, snack bars, and cafeterias. The program provides employment
opportunities to more than 250 blind operators and, in addition, they
employ over 200 other disabled workers. Also included is a training
program in food service occupations for the nonblind disabled for
placement in competitive employment. Installations are located in pub-
lic buildings and industrial establishments.
There are 11 State Civil Service administrators working with the
blind operators. The operators earnings are shown in the following ta-
ble:
BUSINESS ENTERPRISE PROGRAM
OPERATORS EARNINGS
Number of
Vending
Food Service
Monthly
Percentage
Operators
Stands
Operations
Earnings
of the Total
34
24
10
Under $200
13.9
70
39
31
$201-$400
28.7
61
26
35
$401-$600
25
37
15
22
$601-$80O
15.2
21
7
14
$801-$1000
8.6
6
2
4
$1001-$1200
2.4
5
3
2
$1201-$1400
2.1
3
2
1
$1400-$1600
.5
5
3
2
$1601-$1800
2.1
2
1
1
$1801-$2200
.8
3— L-1682
SECTION II
FINANCING
The State Department of Rehabilitation is the smallest and newest
department under the Health and Welfare Agency. Since the Depart-
ment of Rehabilitation's establishment as a separate department in
1963, the Federal Government has played a leading role in the ex-
pansion of its fiscal base. During this period, the State's financial
contribution has not changed. The State Legislature has merely au-
thorized the expenditure of the additional Federal funds without pro-
posing specific new programs.
During the year 1964r-65, the Department received $1.04 of Federal
matching for every $1.00 of State money used to carry out the rehabili-
tation function. The total budget for that year was $13.5 million.
The Federal Rehabilitation Act was amended to change reimburse-
ments for the fiscal year 1965-66. California benefitted more than any
other state. The ratio of Federal funds previously allocated to the
states was influenced heavily by per capita income factors, which
had worked to the detriment of California as a high income state.
Now all states receive reimbursement at a 75-25 ratio, which doubles
the amount of rehabilitation money available to California at no in-
crease in State costs. Even prior to this new development, the De-
partment showed rapid financial growth, as is shown below.
Total Expenditures:
Total State-Federal expenditures by the Department of Rehabilita-
tion have risen from approximately $9.5 million in 1962-63, to $13.5
million in 1964-65. Projective estimates by the Department of Finance
show that the Department of Rehabilitation will have expended some
$22.2 million in this past fiscal year, 1965-66. It is estimated that
the Department of Rehabilitation's budget will total $31.5 million
for the present fiscal period, 1966-67, more than a tripling of ex-
penditures over a four-year period.
General Fund Expenditures:
Actual expenditures from the State General Fund by the Depart-
ment of Rehabilitation have risen from $3.8 million in 1962-63 to $5.3
million in 1964-65. The State General Fund authorization for Rehabili-
tation for 1965-66 was $5.7 million. The appropriations request for
the 1966-67 period was reduced to the amount expended from the
General Fund by the Department of Rehabilitation in 1964-65, an
amount of $5.3 million.
Federal Fund Expenditures:
The difference between the total expenditure by the Department of
Rehabilitation and monies from the State General Fund is made up
by Federal funds. Such Federal funds amounted to $3.6 million in
1962-63 and $5.2 million in 1964-65
(14)
REHABILITATION POLICIES AND PROGRAMS 15
Expenditures for Cooperative Rehabilitation Services:
The Legislature authorized the Department of Rehabilitation to ex-
pend some $8.7 million in Federal funds for the Cooperative Rehabili-
tation Services Program for fiscal 1965-66, which would provide a total
statewide program of $17.4 million. The Department of Finance esti-
mated, however, that only $3.7 million would actually be utilized for
the program during the 1965-66 fiscal period, since program growth
has not kept pace with available financing.
In the 1965-66 review of Budget requests, the Legislative Ana-
lyst suggested that some criteria be established to evaluate the Cooper-
ative Rehabilitation Services Program and its massive infusion of ad-
ditional Federal monies into the programs of the cooperating State
Departments and Agencies.
Summary 1965—66 Fiscal Year Expenditures for the
Department of Rehabilitation:
State General Fund $5,467,000
Federal Matching Funds 9,477,000 *
Cooperative Rehabilitation Services (Federal funds) — out of a
total authorized of $8.7 million 3,734,000
Disability Certification Program (OASDI) 3,504,000
TOTAL FUNDS EXPENDED BY THE DEPARTMENT OF
REHABILITATION $22,182,000
* Due to the passage of HR 8310 by the last Congress, the percentage of Federal
matching funds was increased from a sharing of 51.19% to 62.5% in the 1965-66
fiscal year to 75% in the current fiscal year. Thus, the State General Fund monies
of $5.7 million appropriated, matched by approximately the same amount in
Federal grants, engendered an additional $3.6 million in Federal funds for this
past fiscal year, for a total Federal matching of $9.4 million.
In the 1966-67 fiscal year, with a General Fund expenditure of
$5.3 million, at a Federal matching ratio of 75%, there will be an
increase in Federal funds of $8 to $10 million.
DEPARTMENT OF REHABILITATION
TOTAL FEDERAL-STATE EXPENDITURES
62-63 $9.5 Million
63-64 $11.1 Million
64-65 $13.5 Million
65-66 $22.5 Million
66-67 $31.5 Million (Estimated)
SECTION III
POLICY REVIEW, FINDINGS AND
RECOMMENDATIONS
A review and in-depth analysis of State rehabilitation policies and
practices is especially timely, in view of the fact (pointed out in the
previous section) that the Department's budget has more than tripled
in the last four years. The increase in Federal funds available for
the employment rehabilitation of disabled persons is the result of
growing nationwide concern in this field. California's program is de-
veloping rapidly under the stimulus of Federal dollars, but the State
Legislature has provided scant direction and has played a relatively
passive role. The Legislature has not initiated major rehabilitation
policy during the last 12 years and has authorized little in the way
of additional State financing. The 1959 Report of the Joint Interim
Committee on the Education and Rehabilitation of Handicapped Chil-
dren and Adults, Senator James J. McBride, Chairman, represents
the last comprehensive review of the rehabilitation field by the Legis-
lature.
Although the Department of Rehabilitation is the smallest social
agency in California, its task is given high priority by the public and
by government officials. The Department does not undertake this task
alone, but works in a broad field along with the other social agencies.
''Rehabilitation" is a goal of virtually every social agency in the State.
The functions of the various agencies in relation to this goal must be
differentiated. It is the duty of the Legislature to pinpoint the re-
sponsibility of each department in the achievement of the aims of
rehabilitation. The major task of the Committee at this point is to de-
fine the function of the Department of Rehabilitation vis-a-vis the
other departments, so that the Legislature may consider the financing
and legislation necessary to fulfill this function.
A UNIFORM LEGISLATIVE VIEW
The Legislature has consistently expressed and proven its concern
for the rehabilitation of the disabled. However, the many legislative
proposals which have been enacted all too often represent a piecemeal
approach. The rehabilitation program has been augmented at va-
rious times, according to the urgings of special interest groups and
the availability of favorable Federal matching. These factors, along
with the failure of the Legislature to reevaluate rehabilitation policy,
have resulted in a patchwork program, with pieces scattered among
various departments.
As previously indicated, any comprehensive analysis cannot be ar-
bitrarily limited by departmental jurisdictions. The Committee would
be failing in its duty if it merely recommended adjustments and modi-
fications within the established programs of the Department of Reha-
bilitation. In order to go beyond existing departmental lines, a func-
(16)
REHABILITATION POLICIES AND PROGRAMS 17
tional orientation to the problems of rehabilitation is offered here. This
functional viewpoint provides the necessary means of dividing the
broad responsibility among various agencies on a systematic basis.
A functional perspective emphasizes type of service, as opposed to
a clientele orientation, which looks at services in terms of a particular
class of persons. Occasionally, a functional and a clientele orientation
may coincide : Objective characteristics of a class of persons, such as
physical disability, blindness, or retardation, may define service needs
peculiar to a particular class. While this may occur in some cases, it
is contended here that most service needs cut across categorical lines
and that a functional method of organization best meets these needs.
A strictly client-centered orientation has a number of disadvantages ;
first, there is a great likelihood that several departments or divisions
would be duplicating a whole gamut of services — each for the group
it serves. (We see this happening currently in many State programs.)
In addition, responsibility is difficult to pinpoint in cases where a
group does not fit into any existing client category. Furthermore, there
is inequality of service, with some persons receiving greater benefits
based on group membership rather than on need for service. A
clientele-centered bureacracy leads to fragmented and piecemeal pro-
gram development and repetition of programs which cut across group
lines.
It is recognized that special interest groups will continue to argue
for a clientele-centered department for themselves, a department which
may include services ranging from the granting of assistance, to help
with self -care, to placement in gainful employment. But the conten-
tion of the Committee is that any group of persons, whether blind,
disabled, retarded, or otherwise disadvantaged, vary among themselves
as to characteristics and needs, and that many characteristics and needs
are shared with other groups and with the general population. It is
further contended that there should be a distinction between welfare
programs which maintain the individual economically and in his
•capacity for self-care and self-improvement, and vocational rehabili-
tation programs which propel him to economic independence. These
functions should not be mixed in a single administrative structure,
whether organized on the basis of a clientele-orientation or some other
basis. The more varied a department's responsibility, the less primary
is the concern with vocational counseling and placement.
As the Director of the Department of Rehabilitation stated in a hear-
ing held on December 7, 1965, "I think the chief function of the
Department of Social Welfare is income maintenance, and in the proc-
ess of keeping family income up to a reasonable level, they are also
charged with the responsibility of doing what they can to get them
back to work. Our responsibility is strictly rehabilitation, whether
they come from welfare, from an institution or . . . right out of school
or whether they are just not in any of these situations, but because
of an automobile accident or injury or something like that, they lose
their job and they need to have somebody come in and help them get
going again, even though they aren't (economically) dependent."
18 ASSEMBLY INTERIM COMMITTEE ON SOCIAL WELFARE
CONCEPTS OF REHABILITATION
The Committee sees the Department of Rehabilitation's task as that
of training the physically and mentally disabled in marketable skills
Leading to competitive employment. Self-care, self-improvement, and
social adjustment are certainly prerequisites to successful economic re-
habilitation, but they are secondary to the Department of Rehabilita-
t ion's goals.
The Committee feels that legislative and budgetary augmentations,
which have expanded and added to the Department's functions, should
bring a direct measurable return in terms of client employment, rather
than in terms of maintaining or improving personal adjustment. Job
success for the disabled is important not only for economic reasons, but
because of the by-product of social and psychological benefits to the
individual. Many personal adjustment problems can be improved
through gainful employment. This is not to deny that many disabled
persons must be trained to accept and live with their disability, but
such training is not primarily vocational in character and should be
the function of a more appropriate agency.
In order to concentrate the efforts of the Department of Rehabilita-
tion in the proper channels of vocational training, the existing programs
must be scrutinized. Some present functions of the Department need
to be redefined or transferred as a precondition to a proper focus on
strictly rehabilitation functions which are the major means of breaking
the cycle of dependency. Not only is it more logical for the Department
of Rehabilitation to concentrate its efforts on employment preparation
and placement for practical and accountability reasons, but this speciali-
zation should result in better utilization of Federal matching funds.
The Federal Government does allow rehabilitation matching for pre-
vocational adjustment training, as well as vocational training itself.
However, there is a ceiling on Federal rehabilitation funds. Therefore,
priorities must be set, as the establishment of too many goals will
dilute the use of the funds.
It is not always easy to draw the dividing line between vocational
and prevocational activities. Probably no one could fail to see the dis-
tinction between prevocational instruction in personal grooming and
communication skills (braille or lipreading) and vocational activities
such as on-the-job training in private employment. Many activities in
the rehabilitation sphere are not so easily differentiated. But some guid-
ing distinction between the two must be formulated by the Legislature
in order to make the Department of Rehabilitation primarily account-
able for vocational training. Otherwise, the Department may continue
to develop nonvocational programs in a cradle-to-grave approach to
clients.
The functions of other departments would also be clarified if the
Department of Rehabilitation's function were delimited in terms of
vocational training for disabled and socially handicapped persons. The
Departments of Education, Social Welfare, Mental Hygiene, and
Employment could then gear their own activities to coordinate with,
but not duplicate, the Department of Rehabilitation's primary efforts.
The Department of Rehabilitation is, therefore, protected from assum-
ing the burdens of other departments in such areas as compensatory
REHABILITATION POLICIES AND PROGRAMS 19
education, vocational training for the nondisabled, and the provision of
social services of a nonvocational nature. In addition, in no case should
the Department provide purely medical rehabilitation when it is avail-
able under the State Medi-Cal Program.
The problem of setting limits to the scope of the Department of
Rehabilitation has been further challenged by the 1965 Amendments
to the Vocational Rehabilitation Act. These amendments have extended
the definition of disability by giving greater weight than ever before
to sociocultural factors. A person with educational and cultural disad-
vantages may find that a minor defect prevents him from obtaining
gainful employment and, therefore, makes him eligible for rehabilitation
services. A person without these disadvantages of background presum-
ably would be able to overcome a minor disability on his own and
would not be eligible for rehabilitation services. Under the broadened
definition, the client will still have a verifiable mental or physical defect,
but an emphasis on the sociocultural factors contributing to his un-
employability is also permitted.
While any attempts to better the situation of the disadvantaged is
commendable, this new emphasis raises major issues in regard to financ-
ing and setting priorities. In 1964-65, the Department of Rehabilita-
tion turned away over 25,000 of 40,000 persons referred for service.
The Department itself acknowledges that even the total 40,000 referrals
constitute only a fraction of the disabled persons in need of vocational
rehabilitation. However, because of financial limitations, the Depart-
ment admits that it is unable to serve three-fourths of those coming to
it for service, much less to seek out those who have never been referred.
Therefore, even with the new Federal funds coming to the Department,
it is doubtful that adequate attention can be given to this large clien-
tele which now includes the disadvantaged.
The Department of Rehabilitation, in testimony presented in the
hearings before this Committee, declared the policy of serving the "hard
core" disabled, rather than those with minor disabilities who could be
more easily placed. Is the serving of the less disabled, even though
culturally disadvantaged, a retreat from this position? It is already
difficult to steer a middle course between those who are "unfeasible"
for rehabilitation and those who are not sufficiently disabled, without
injecting this new element. The primary reason the Department gives
for serving only a selected group of the disabled is lack of financing.
Should the additional Federal financing now available be used to extend
rehabilitation services to a larger proportion of the traditional clientele,
or should it be used to offer services to a new class of disabled persons ;
the socioculturally disadvantaged who may have only minor discernable
mental or physical defects ?
The Committee recommends the establishment of a Board to review
and adopt regulations, hear client complaints, and, in cooperation with
the Legislature, set priorities for rehabilitation services. This Board
shall make every effort to fulfill the needs of the culturally disadvan-
taged, without retarding the growth of programs for other physically
and mentally disabled persons. This may require the use of the funds
and programs of other departments in the service of the disadvantaged.
It may also mean an additional State appropriation for rehabilitation
purposes.
20 ASSEMBLY INTERIM COMMITTEE ON SOCIAL WELFARE
There follows a discussion of the specific issues raised in the Com-
mittee hearings on rehabilitation.
POLICY IMPLICATIONS OF COOPERATIVE AGREEMENTS
During the past fiscal year, as has been briefly mentioned, the De-
partment of Rehabilitation initiated and completed several contract
agreements with other State agencies and local school districts. At
the completion of the current fiscal year (1966-67), in excess of $8
million of Federal rehabilitation money will have been infused into
programs of other departments. A brief discussion of the policy im-
plications of such agreements is merited.
The Legislature has always urged that the maximum resources be
brought to bear on any given problem, whether in the field of reha-
bilitation, education, or medical care. At the same time, however, the
Legislature has also insisted upon holding agencies fully responsible
for specific areas of financial investment. The determination of respon-
sibility requires particular clarification in regard to interdepartmental
agreements.
The issue can be discussed by using a few examples. The Department
of Corrections is charged with the responsibility and is given financial
support for the broad purpose of rehabilitating law violators and re-
turning them to society. This is rehabilitation not only in vocational
terms, but certainly economic rehabilitation is a major part of the
goal. Likewise, special education programs for handicapped children
are the responsibility of local school districts and the State gives spe-
cial reimbursement to enable the particular needs of the handicapped
to be met. One of the major considerations of special education pro-
grams for the handicapped is preparing the children for adult life
and work.
During the past year, these programs and other broadly rehabilita-
tive programs in departments other than the Department of Rehabili-
tation have been enriched through Federal rehabilitation money. The
existing State and local expenditures in these programs have served
as the base for Federal rehabilitation matching money. If this trend
continues, other agencies will be competing for a larger share of re-
habilitation funds. This in turn will decrease the availability of funds
for clients not in the programs of these other agencies.
Approximately half of the total Rehabilitation budget for 1966-67
will be used in multi-service centers and cooperative agreements, nei-
ther of which are directly administered by the Department of Re-
habilitation. As laudable as these programs are, the important ques-
tion is, should they be financed at the expense of basic programs?
Because of this question, the Committee views the present coopera-
tive agreements as only pilot projects which must be reviewed by the
Legislature before they are reauthorized or expanded, so that measure-
ment or performance tests may be applied. The Legislature must
weigh the degree of success and financial effects that these programs
will have on the unmet needs of all the potentially employable disabled
in the State. The effect of rehabilitation funds on the total budget of
the agencies involved in contracts with the Department of Rehabili-
tation must also be evaluated. Recognizing the convenience of applying
Federal financing to existing programs, the Committee warns against
REHABILITATION POLICIES AND PROGRAMS 21
the possible danger of confining rehabilitation innovations to persons
in institutional settings, without expanding services to persons outside
these institutions. The emphasis of rehabilitation should be commu-
nity-based and should reduce, rather than provide an incentive to,
institutionalization in regard to the availability of services.
BUSINESS ENTERPRISE PROGRAM
The Business Enterprise Program, referred to in Section I, is con-
cerned with the training and placement of blind persons as operators
of vending stands, cafeterias, and snack bars. These facilities are lo-
cated in public buildings, Federal, State, or local. The program was
initiated by Congress in 1936 through the Randolph-Shepard Act.
In California, business enterprises are semi-independent operations.
The Division of Rehabilitation of the Blind offers training, selects lo-
cations, buys equipment, and installs the operators. After the oper-
ator has a location, he is essentially a private businessman, in that he
does his own planning, hiring, buying, and bookkeeping. However, he
is subject to the periodic supervision of the Division and to its rules
and regulations. He is encouraged to train other blind and handi-
capped workers in food service and to give them priority in hiring. In
addition, he must pay a fixed percentage of his gross receipts, not to
exceed 6%, into an operators' trust fund.
There are about 250 blind operators, with net earnings ranging
from less than $200 up to $2200 per month. (See previous description of
Business Enterprise Program in Section I.) The earnings depend upon
the size and character of the location, the type of food service
(cafeteria, snack bar or dry vending stand), and the initiative and
imagination of the individual. The Committee has been generally im-
pressed with the Business Enterprise Program in terms of its eco-
nomic success and the quality of the food service offered to custo-
mers.
The problems connected with the program arise primarily out of its
semi-independent character. The operators are not direct employees
of a sheltered program and do not have constant supervision or fixed
wages. Still, they remain at their locations on the Division's approval.
They have limited influence over the rules which may affect their live-
lihood. No provision is made for placing the successful operators in
competitive employment. The Business Enterprise Program offers eco-
nomic opportunities to selected individuals, but does not fall into the
classification of competitive employment.
The Committee recommends that specific steps be taken by the Divi-
sion to provide economic incentives to individuals to move out of the
program and into independent food service occupations. If turnover
were encouraged in this way, the Business Enterprise Program could
become a training ground for a larger number of blind persons, rather
than a protected place of permanent employment for a few. The Com-
mittee recognizes that there are certain risks involved in this approach,
since competitive businesses may fail. Risks may be involved, but
successes are more genuine. In addition, training followed by place-
ment in competitive employment is more consistent with the goals
of rehabilitation.
22 ASSEMBLY INTERIM COMMITTEE ON SOCIAL WELFARE
Another issue of special concern to the Committee is the amount
of discretion the Division has in the use of the operators' trust fund.
The fixed percentage of each month's gross income which goes into the
operators' trust fund is to be used for improvements to existing loca-
tions, such as the addition, maintenance, and replacement of equip-
ment.
In 1963, the Legislature authorized the Department to spend a por-
tion of these funds to establish new locations. Setting up entire new
locations is extremely expensive and use of the operators' trust fund
for expansion purposes necessarily limits the amount available for im-
provement to existing locations. Many marginal locations are in need
of substantial remodeling, which is often very costly. It is important
to keep a reserve in the trust fund and to prevent excessive expansion
to new locations at the expense of existing locations.
The Department already has a General Fund allocation as its major
source of money for expansion purposes. The operators should have
some legal guarantee that their trust fund will not be completely
depleted by new expansion activities. To this end, the Committee recom-
mends that a fixed percentage of the operators' trust fund be allocated
for expansion purposes and that the remainder be retained exclusively
for maintenance and improvements to existing operations.
ORIENTATION CENTER FOR THE BUND
The program of the Orientation Center for the Blind, presently
under the Department of Rehabilitation, is not primarily vocational
in character. Employment is not its essential goal and it does not
provide vocational training in marketable skills. Rather, the Orienta-
tion Center assists newly blinded persons to adjust to blindness.
If he is to function at all, every individual who becomes blind must
become oriented, whether the techniques of orientation are taught in
an intensive and formalized manner, or they are learned over a long
period of time by trial and error. In general, it is vital that the in-
dividual be started in the orientation process soon after blindness. If
he is not, he is likely to become defeated and dependent because of the
crushing weight of attitudes and opinions which equate blindness
with dependency and helplessness.
In general, those people entering the Orientation Center are new
in the experience of being blind and must concentrate on those prob-
lems raised by blindness; they do not have, nor is it reasonable to
expect them to have, a clear vocational objective. In addition, there
are many blind people who need orientation training and who will
never develop a vocational objective ; for example, mothers and home-
makers are an important group to whom this generalization would ap-
ply- Although orientation is a necessary prerequisite of vocational
training, it is not something uniquely of value to vocational rehabilita-
tion. Spokesmen for the Department of Rehabilitation agreed in public
testimony that the activities of the Orientation Center, though often
followed by employment, are prevocational in character.
Orientation in the techniques of daily living is much more a social
service than a rehabilitation function. It falls directly within the scope
of services for self-care and self -improvement.
REHABILITATION POLICIES AND PROGRAMS 23
If the Orientation Center were transferred to the Department of
Social Welfare, 75% reimbursement would probably be available under
the Social Service Amendments of 1962. The Committee is working
with officials of the Department of Health, Education, and Welfare to
clear up doubts raised in Committee hearings about such a transfer.
The funding aspect is especially important, since another Orientation
Center is projected for the Los Angeles area.
This new source of funding is important because California is al-
ready receiving maximum Federal matching under the Rehabilitation
Act, but there is no ceiling on social service matching. In addition, the
Orientation Center Program, when transferred to Social Welfare,
would not have to be limited to serving persons with specific vocational
goals. This high quality prevocational program could be continued and
expanded under the general provisions of the public assistance Social
Service Amendments. For many blind persons, orientation is a first
step which eventually leads them to vocational training. Under the
recommended reorganization, the orientation program would continue
to stimulate the client's self-confidence and motivation to seek a voca-
tional objective. The latter can be given greater attention by the De-
partment of Rehabilitation when it becomes exclusively concerned with
vocational matters.
It is recommended that the Orientation Center program be trans-
ferred to the Division for the Blind, already established in the State
Department of Social Welfare. The existence of this division would
seem in itself to be a contradiction of the functional principle enunci-
ated earlier. However, orientation is not now provided to any other
group even though persons suffering from other sudden and catastro-
phic disabilities would no doubt benefit from similar programs. There-
fore, until the orientation program is expanded to include physical
disabilities other than blindness, it would seem practical to place it
in the Division for the Blind of the Department of Social Welfare.
One generalized benefit resulting from a clientele orientation toward
the blind has been that the blind have been a pioneering and experi-
mental group. Many changes which were later extended to others were
originally tried on a pilot basis with the blind. But this does not
justify the indefinite perpetuation of services exclusively for the blind.
It is recommended that orientation programs be considered for other
disabled groups. When this is accomplished, orientation of the blind
would be provided within an administrative context of social services.
FIELD SERVICE COUNSELORS FOR THE BLIND
Many of the considerations applicable to the Orientation Center also
apply to the Field Service Counselors Program. This service is pres-
ently administered by the Department of Rehabilitation.
Field Service Counselors visit blind people in their homes. Clients
of this service range in age from the very young (16 years) to the
very old. Thus the requirements of the clients vary from the need for
stimulation and motivation to become self-sufficient, to palliative meas-
ures designed to make the individual's situation a little more comfort-
able at the close of life. The methods and techniques taught the blind
clients in their homes must, of course, be those appropriate to blind-
ness, but in addition, they must be adapted to the needs and prospects
24 ASSEMBLY INTERIM COMMITTEE ON SOCIAL WELFARE
of the individual. Some of the people served by the field service coun-
selor will become candidates for vocational rehabilitation services,
but others will not. Because some of the services are not vocationally
oriented, about half of the program is eligible for Federal matching
as a rehabilitation program. It might be possible to revamp the ac-
tivities and purposes of the service in a manner which would qualify
for full federal reimbursement within the Department of Rehabilita-
tion, but insofar as this is done, essential elements such as training
in self-care would be sacrificed.
According to testimony presented in hearings before the Committee,
almost the whole battery of Field Services would come under the So-
cial Service Amendments, including such services as protective serv-
ices; the enlistment of relatives, friends and other resources for plan-
ning ; the securing and maintenance of safe living conditions ; and per-
sonal, home and money management.
The proposal made here is to transfer the Home Teacher Counselor
Service to the Department of Social Welfare under the Social Service
Amendments, thus enabling this important program to continue un-
emasculated, and receive a higher share of Federal reimbursement than
is available under the provisions of the Vocational Rehabilitation Act.
It is likely that many aged and mentally retarded, as well as some
severely physically disabled, could benefit from a Home Teacher-Coun-
selor Service. During previous Legislative Sessions, proposals for a
similar service for retarded persons have been presented, but have not
been successful in being enacted. Future legislation should look to
expansion of the Home Teacher-Counselor Service to appropriate
groups. To avoid further fragmentation of service programs such as
this one, the Legislature should establish the responsibility in the De-
partment of Social Welfare before expansion to other groups takes
place.
SHELTERED WORKSHOPS
Another area of special interest to this Committee is sheltered work-
shops. Most sheltered workshops in California are privately operated
and employ persons with various mental or physical disabilities, and
sometimes the aged. There are also three State operated manufacturing
workshops for the blind (California Industries for the Blind — CIB)
and three Opportunity Work Centers for the Blind.
The State operated shops are supported financially by production
profits and State General Fund allocations. These shops are the direct
administrative responsibility of the Department of Rehabilitation.
Private workshops are financed by a combination of profits and dona-
tions. In addition, some retarded recipients of Aid to Totally Disabled
receive private workshop " training" paid for by the Department of
Social Welfare, even though the expectation of competitive employment
is minimal. The private workshops also receive referrals and adminis-
trative guidance from the Department of Rehabilitation. Rehabilitation
counselors use these workshops as a resource for their clients.
There has been much confusion about the purposes of workshops.
Some claim to be temporary training centers, yet they usually do not
teach marketable skills and many, even most, workers remain year
after year. Other workshops see their function as the provision of gain-
REHABILITATION POLICIES AND PROGRAMS 25
ful employment to severely disabled persons unable to compete in the
labor market. Yet, regular work, adequate wages, minimum working
conditions, and routine fringe benefits are not provided. Between HO
and 90% of CIB workers, for example, still must supplement their
wages with Blind Aid. Still other workshops claim to offer occupational
therapy and other services to help the client develop good working hab-
its, adequate relationships with others, activity, and a way to fill his
time.
Most workshops do not want to be stamped with the terminal em-
ployment or therapeutic labels. Instead, they try to combine these
functions with a rehabilitation function; the resulting danger is that
none of the three purposes, training, the provision of employment, or
therapy, may be adequately realized. The workshop becomes the " sin-
gle door" through which the client is offered solutions to all his prob-
lems. A Department of Rehabilitation fact sheet describes the "num-
ber one goal of California Industries for the Blind" in these multiple
terms: "Rehabilitation of the blind through dignified profitable em-
ployment by means of work evaluation, work adjustment, on-the-job
training, work experience and placement in private industry."
Even skills which depend on products now in a declining market
"offer opportunities for work evaluation, work adjustment, and work
experience." These "opportunities" are not the opportunities sought
by the employment-minded trainee.
The same departmental fact sheet goes on to describe how four
workers at the Los Angeles CIB facility achieved gainful, competitive
employment. Two found employment in skills learned at the workshop ;
one as a brush maker, the other in a drapery manufacturing company.
The other two rehabilitants found work in their former professions of
piano tuner and musician. In these latter cases, CIB takes the credit for
giving them the "confidence and encouragement . . . that led to suc-
cessful placement. ' '
If, as the Committee contends, the rehabilitation process is training
in marketable skills, and the measurement of success is gainful employ-
ment, then rehabilitation is a relatively minor function of workshops.
To the extent that workshops do not fulfill a rehabilitation function,
they should not be a primary economic training resource for the Depart-
ment of Rehabilitation.
Over the past three years, 41 persons have left CIB for other employ-
ment. Out of the current 254 employees, 184 have been in the work-
shop for at least one year and 105 have been there five or more years.
Twenty persons have been there 20 years or more.
As more positive and fruitful steps are taken to provide those services
leading to the reintegration of disabled persons into society and for
adequate public assistance where such reintegration is not feasible or
does not include earning a livelihood (as in the case of the very old),
the need and justification for the existence of sheltered workshops
is progressively lessened, or at least is changed. In any event, full
employment, full integration into society and a maximizing of the
capacity to earn a livelihood of each disabled person are the appropriate
goals to be sought, rather than a return to social isolation, the workshop,
and economic dependency.
26 ASSEMBLY INTERIM COMMITTEE ON SOCIAL WELFARE
Instead of relying on sheltered workshops, public or private, to pro-
vide training in marketable skills for disabled persons, other training
resources should be more fully utilized. The long experience of Califor-
nia Industries for the Blind has demonstrated the workshops' failure
as genuine training centers, even though they have enjoyed full State
support.
There are ongoing training programs, such as MDTA, which could
conceivably include some handicapped persons. Colleges and voca-
tional schools should be utilized more fully, perhaps by paying extra
fees for any additional effort involved in including a handicapped stu-
dent. Private vocational schools and private employers too should be
given guidance and reimbursement to stimulate their involvement in
training disabled persons. A disabled person who completes a training
program along with nonhandicapped students has a headstart in ob-
taining and adjusting to competitive employment.
The Department is reimbursing some employers for giving on-the-
job training to disabled clients. The Committee recommends a stronger
emphasis in this direction. Another hopeful sign on the horizon is the
Manpower Services Act, recently considered by Congress. This Act
would transform present Employment Service Offices into job clearance
centers which would give special attention to the disabled and disad-
vantaged. These directions would seem more fruitful than a segregated
workshop program, however well-developed. In addition, there is no
doubt that using existing training and placement facilities would be
more economical in the long run than creating a separate workshop
training program for the handicapped.
The majority of existing workshops, public and private, perform
essentially prevocational adjustment functions or at best provide non-
skilled extended employment for severely disabled, retarded, or aged
persons. If workshop programs are to continue to rely on public finan-
cial support, they would seem to be more appropriately a part of a
broadly based social service program rather than a function of a reha-
bilitation agency. If, as is contended here, the task of the Department
of Rehabilitation is placement in marketable skills, workshops have
not proven their contribution to this end. Funds allocated to work-
shops under the present setup have not produced commensurate re-
sults.
The funds which the Department of Rehabilitation is providing for
reimbursement and guidance to private workshops and the funds (in
excess of $400,000) expended by State-operated shops should properly
be transferred to the Department of Social Welfare. The worksnop
goals of self-respect, work activity, and social stimulation can be more
fully dealt with by that Department. Workshops which teach handi-
crafts, sewing, and other such tasks can supplement or, in some cases,
substitute for the types of activities now taught by Home Teacher-
Counselors. For persons able to leave their homes during the day, but
not able to benefit from formal orientation in a residential setting, a
community workshop program could offer not only handicraft instruc-
tion, but training in mobility, braille, lipreading, cooking, and other
appropriate skills. Such shops could continue to provide day-time
activities for aged, retarded, and disabled persons. These modified so-
cial service type workshops or centers should be geared to the needs
REHABILITATION POLICIES AND PROGRAMS 27
of individuals and not confined to economic rehabilitation goals. Each
client's potential for self -care and self -direction would be encouraged,
and where an employment potential was evidenced, a referral would
be made to the Department of Rehabilitation or to the Department of
Employment. There is little question that these multiple functions
would be reimbursable under the social service provisions, thus freeing
rehabilitation money for the undiluted task of vocational training and
placement.
There is a particular need for social service work activity programs
for the 9000 mentally retarded who comprise 11% of the Aid to Totally
Disabled caseload. As the Chief of the Disabled Services Bureau of the
Department of Social Welfare has stated: "For the mentally retarded
. . . , the most valuable service that can be provided for those who
are able to benefit is a work activity program. This helps to reduce
institutionalization and possible delinquency and provides a construc-
tive atmosphere and form of activity which is beneficial to the indi-
vidual and his family. In some instances, it results in the transition
to gainful employment.
"Since 1964, through an agreement between the State Department
of Social Welfare and the Department of Rehabilitation, work train-
ing center services have been provided for an average of 200 MR's
monthly in the State at a cost of a maximum of $50 a month per
recipient. There is almost universal agreement that this is a very con-
structive and desirable program and should be expanded because of
the increasing numbers of MR's in the caseload. The current program
is made available through a $30,000 Legislative grant matched by
$90,000 Federal money. The Legislative appropriation should be doubled
or tripled in order to take maximum advantage of existing protected
work placements. For many of the retarded, the work training cen-
ter is a long-term, indefinite placement which has positive values for
the individual, the family and the community. ' '
There may also be a limited role for rehabilitation workshops which
provide short-term, intensive work training for handicapped clients.
This training needs to be oriented toward competitive employment and
be established separately from the social service workshops. Such a
bona fide training program could be part of a rehabilitation program.
Spokesmen for the Department of Rehabilitation have warned
against classifying any workshop clients as ' ' terminal. ' ' They feel that
when workshops serve a variety of purposes, no one entirely loses
hope of employment. As the Deputy Director of the Department of
Rehabilitation stated to the Committee : " In the matter of commingling,
the question of whether you do better by keeping those with high vo-
cational potential separate from those with relatively low vocational
potential, it's my feeling and it's the feeling of many, many people
in the rehabilitation profession that it's unfortunate to place a stamp
of nonfeasible or hopeless on any individual, because this changes in
time. This changes with what is happening in the outside world, the
job market, pressures for one kind of material advantage and another,
with the response that an individual feels to the outside world. It
changes with the individual and development of maturity, shall we
say. We get a youngster into a workshop who has never had any work
experience before, doesn't even know what a job means and what it
28 ASSEMBLY INTERIM COMMITTEE ON SOCIAL WELFARE
entails, the 8-hour a day routine, the coffeebreak, the lunch hour,
etc., and when he comes in there, he may look to be completely hope-
less' because o fthe fact he has no pattern, no habits aiming toward
work. Give him three months. Give him one month. Give him X period
of time there, working with people who are molding themselves to-
ward an objective and toward a goal, a prospective goal, and a change
very often takes place. So that I, for one, would balk very seriously
and very definitely at saying that we should place a label of terminal
on any individual, that this terminal label is a relative thing and can
change at any point, and exposing the individual to experiences which
affect his motivation is one of the objectives of Rehab.''
While this philosophy is commendable, the Committee considers that
the placement of a potentially employable young handicapped person in
a sheltered shop, with workers who have been there for many years, may
well have the negative effect of discouraging rather than encouraging
him. At the same time, the Chairman pointed out that no one would
want to label any individual "nonfeasance."
"We'd have to agree with you maybe philosophically, and if it was
not a question of State expenditures. But our concern is that the func-
tion of Rehab should be to deal with people who can be rehabilitated for
gainful employment, can become self-supporting and be put back into
the economic arena. And the people who are going to need custodial
care should be under Social Welfare. The welfare worker in his func-
tion can begin to try to encourage these people who will develop and
may have a hidden potential, who can then be transferred over to Voca-
tional Rehabilitation. We're trying to have a more straight-line function
here."
SECTION IV
CONCLUSION
The ultimate aim of rehabilitation is the achievement of gainful em-
ployment. When he becomes competitively employed and self-support-
ing, a disabled individual enters the mainstream of society. But many
disabled persons are denied this opportunity because rehabilitation serv-
ices have been so limited. ' ' Hire the Handicapped " is a slogan heard one
week of the year, but is quickly forgotten and too often not translated
into reality. As an ultimate goal, rehabilitation enjoys universal accept-
ance. The Committee is concerned with transforming this ultimate, ab-
stract goal into something immediate and concrete.
The public has a great investment, both financial and humanitarian,
in disabled citizens. Considerable amounts are spent for special educa-
tion programs for handicapped children, and additional funds are ex-
pended on welfare payments and institutional care. The public cannot
afford to default on these investments in the disabled. A slightly greater
effort, which turns tax consumers into tax producers, will bring a higher
return on the total investment.
California has, up to now, had a low rate of return on its investment
in the disabled. In 1964-65, out of 54 states and territories, California
ranked 54th in the number of rehabilitants per 100,000 population. (See
Appendix 15.) In 1965-66, California again ranged 54th. In considering
these figures, it must, of course, be recalled that the Department of Re-
habilitation has a stated policy of concentrating on the relatively more
difficult cases. Even granting this, California has a poor record as the
Nation's largest and, presumably, most progressive state.
The Department of Rehabilitation has not questioned some of its
methods, such as the use of sheltered workshops, which have failed to
produce results. It also has not devoted sufficient attention to ' ' selling ' '
the capabilities of the handicapped to employers. The Legislature, for
its part, has failed to give policy direction and, because it has had no
clear formulation of rehabilitation goals, has been reluctant to authorize
additional State funds. As Appendix 15 shows, California is 37th in
per capita expenditures for rehabilitation purposes. It ranks 25th among
the states in the rate of increase in state rehabilitation expenditures over
the past 10 years. If the Legislature adopts the framework recommended
by this Committee, it can proceed more confidently in authorizing addi-
tional State expenditures in the rehabilitation field. The Committee re-
gards the improvement of California's rehabilitation record as one of
the greatest challenges confronting State Government. As has been
pointed out in the body of this report, the peripheral service functions
of the Department of Rehabilitation are of great importance to the per-
sons being served. The Committee recognizes this importance and would
like to see such functions transferred out of the Department, in order
that more people may be assisted. In transferring these peripheral func-
(29)
30 ASSEMBLY INTERIM COMMITTEE ON SOCIAL WELFARE
tions, the Department of Rehabilitation would be able to fully concen-
trate its efforts in the area of skilled training.
By having the Department of Rehabilitation responsible only for job
training and placement, measures of its success would be more valid.
Prevocational programs would be shifted to Social Welfare, the primary
social service agency, which would continue to work with the clients
toward increased independence. The Department of Rehabilitation
would concentrate on economic rehabilitation.
There are, of course, some difficulties with measuring the Department
of Rehabilitation's success in terms of number of placements, since this
may lead to rejection of difficult or long-term cases. As long as there
is a good rehabilitation potential, any person should be accepted for
service. Statistical measures of success could differentiate between per-
ns with initially more severe handicaps (from a physical, mental, and
educational standpoint) and persons with less severe handicaps.
The narrowing of the Department of Rehabilitation's goals to a focus
on training in marketable skills and employment placement will allow a
broadening in another way. Increased funds already authorized should
permit a more liberal interpretation of what constitutes an employment
disability, something the Department is already contemplating.
One of the most important trends is the liberalization of the definition
of employment disability by the Department of Rehabilitation which
should have the corresponding effect of decreasing the Department of
Social Welfare's responsibility for employment counseling, training,
and placement of the handicapped. Social Welfare has justified much
of its employment training efforts on the basis that welfare recipients
are so often rejected by both the Department of Employment and
the Department of Rehabilitation. The Department of Employment
frequently considers a recipient too disabled for placement, or too un-
skilled and uneducated. The Department of Rehabilitation may reject
a person on the grounds that he does not have a sufficient mental or
physical disability to constitute an employment handicap or, conversely,
that because he is so severely limited, the likelihood of placement is re-
mote.
If Rehabilitation expands its clientele to include those whose physi-
cal or mental disability itself is slight, but whose disability together
with a lack of skills produces a bona fide employment handicap, and
those severely disabled persons who have some chance of success with
long and intensive effort, then the Department of Social Welfare should
be relieved of much of the training responsibility it has assumed by
default. There would appear to be no necessity for having the De-
partment of Social Welfare establish duplicate rehabilitation pro-
grams. That Department already has a sufficient range and variety of
functions.
In speculating on the effect on Social Welfare of a redefinition of
the Department of Rehabilitation's aims, the Committee recognizes
that no agency operates in a vacuum. The Committee is well aware
that in the immediate future, it must devote equal study to the goals
and functions of the other social agencies and to the proper relation-
ship among those agencies.
REHABILITATION POLICIES AND PROGRAMS 31
Because this report is concerned principally with the Department of
Rehabilitation, it is like the completed portion of a puzzle whose other
components will be added later. The recommendations made here re-
garding the Department of Rehabilitation must be viewed in this light,
recognizing that the Committee is not unmindful of the broader effects
of its proposals on all social programs.
APPENDIXES
REHABILITATION POLICIES AND PROGRAMS
35
APPENDIX 1
FORM R-305
(June 1960)
All Rehabilitants
FORM APPROVED
BUDGET BUREAU NO. 83-R045
U. S. DEPARTMENT OF
HEALTH, EDUCATION, AND WELFARE
OFFICE OF VOCATIONAL REHABILITATION
OUTCOME OF REHABILITATION
Year ending June 30, 1965
Check type of agency :
Vocational rehabili-
tation agency, State of California
Agency for
General agency [x] the blind □
Part 1. — Number of rehabilitants, grouped by type of occupation at closure, with
the blind shown separately from other rehabilitants (Items 13a(l), 11,
15) a
(a)
(b)
(c)
(d)
Types of occupation
All
disability
groups
combined15
Blind
in
both eyes
Other
disability
groups
combined
(1) Total (Lines (2) + (11) + (12))
3,462
155
3,307
(2) Occupations (for pay or profit), except in sheltered workshops (lines
(3) through (10)) c
3,127
128
2,999
(3) Professional occupations (Codes 0-0 through 0-3)
147
18
129
(4) Semiprofessional, managerial, and official occupations (Codes 0-4
through 0-9)
300
35
265
(5) Clerical and sales occupations (Code 1)
823
23
800
(6) Service occupations (Code 2)
608
17
591
(7) Agricultural, fishery, forestry, and kindred occupations (Code 3)
74
3
71
(8) Skilled occupations (Codes 4, 5)
615
14
601
(9) Semiskilled occupations (Codes 6, 7)
406
14
392
(10) Unskilled occupations (Codes 8, 9)
154
4
150
(11) Work in sheltered workshops0 (Item 11, Code 2)
154
15
139
(12) Homemakers (own home) and other unpaid family workers (own
family) (Codes 000, XXX)
181
12
169
a Item numbers refer to Form R-300. Code numbers refer to the USES "Dictionary of Occupational Titles", Volume II,
major occupational groups and divisions; and OVR's "Vocational Rehabilitation Manual", Chapter 13, Section 2,
pages 13-2-69 through 13-2-87.
b Disability classification is on the basis of client's condition at time of acceptance. If, at acceptance, a rehabilitant was
blind in both eyes, he should be included in column (c). If, at acceptance, a rehabilitant was blind in only one eye or
had a visual defect less than blindness, he should be included in column (d) .
c Regardless of occupation, all rehabilitants working in sheltered workshops should be omitted from lines (3) through
(10) and included in line (11).
36
ASSEMBLY INTERIM COMMITTEE ON SOCIAL WELFARE
All Rehabilitants
APPENDIX 2
FORM R-305 (Jun« 1960)
Part 2. — Number of rehabilitants, grouped by total earnings in week before
closure (Item 16) d
(a)
(b)
Earnings group
Number of rehabilitants
(1) All rehabilitants (Lines (2) through (9))
3,462
Rehabilitants with earnings of:
xxxxxxxxxxxxxxxxxx
(2) Zero6
178
(3) More than zero but less than $10
15
(4) $10-19
56
(5) $20-39
306
(6) $40-59
624
(7) $60-79
873
(8) $80 and over
1,410
(9) Amount not reported (Code XX)
0
d Item number refers to Form R-300.
e This line should include homemakers (own family), unpaid family workers (own family), and farmers (if self-
employed) , but no one else.
REHABILITATION POLICIES AND PROGRAMS
All Rehabilitates
APPENDIX 3
FORM R-304 (July 1, 1963)
37
(a)
(b)
Time measured
Number of rehabilitants
Part 6. — Length of time from employment to closure (Item 4b(2) ) (Cont'd)
xxxxxxxxxxxxxxxxxx
(6) 7 months or more
735
(7) Time not reported (Code X)
0
Part 7. — Number of rehabilitants, grouped by source of case services ;
specified types of services received ; cost of those services (Item 18) d
(a)
(b)
(c)
(d)
(e)
Number of rehabilitants
Source and type of service
Total
With cost
toVR
agency
Without cost
toVR
agency
Cost to
VR agency
(dollars)
Case services provided:
1. By rehabilitation or adjustment centers
180
177
3
35,230
2. By workshops
197
189
8
50,058
3. By other sources: (Lines A through H) e
XXXXXXXX
XXXXXXXX
XXXXXXXX
2,371,928
A. Diagnostic procedures
3,420
3,293
127
180,500
B. Surgery and treatment
623
614
9
185,440
C. Prosthetic appliances
620
617
3
102,461
D. Hospitalization and convalescent care f
173
162
11
73,140
E. Training and training materials
2,446
2,329
117
988,760
F. Maintenance and transportation
1,837
1,837
0
714,253
G. Tools, equipment, and licenses
378
378
0
98,204
H. Other (Items 3-H, Form R-300) «
137
116
21
29,165
I. No services reported in Item 18, Form R-300
32
XXXXXXXX
XXXXXXXX
XXXXXXXX
d This item number and the letters at left margin refer to Form R-300.
e Line H does not include vocational guidance or placement.
1 Other than for diagnosis.
38
FORM R-303
(June 1960)
ASSEMBLY INTERIM COMMITTEE ON SOCIAL WELFARE
All Rehabilitants
APPENDIX 4
Form approved
Budget Bureau No. 83-R043.1
U. S. DEPARTMENT OF
HEALTH, EDUCATION, AND WELFARE
VOCATIONAL REHABILITATION ADMINISTRATION
DISABILITY OF REHABILITANTS
Year ending June 30, 1965
( 'heck type of agency :
Vocational rehabili-
tation agency, State of California
Agency for
General agency [x] the blind □
Part 1. — Number of rehabilitants, grouped by major disabling condition (Item
13a(l)) ; cost of specified types of services (Item 18) for each
disability group a
(a)
(b)
(c)
(d)
(e)
(f)
(g)
Disability group
Cost of
specified
services
(dollars)
b
(see
footnote)
Number of rehabilitants
Tele-
scoped
OVR
code
no.
Detailed
OVR
code
no.
Description
Total
Those
receiving
specified
services,
with cost
toV.R.
agency °
All
other
rehabili-
tants0
00-24,
29
-
All groups
2,371,928
3,462
3,433
29
Amputation or absence of upper extremities:
Group A
Group B
XXXXXX
xxxxxx
XXXXXX
XXXXXX
00
02,09
12
1
1
0
01
00,01,03-08
37,618
61
61
0
Amputation or absence of lower extremities:
Group A
Group B
XXXXXX
XXXXXX
XXXXXX
XXXXXX
02
12, 17
8,602
10
10
0
03
10,11,13-16
70,433
91
91
0
04
18, 19
Amputation or absence of upper and lower ex-
tremities
4,601
3
3
0
Orthopedic deformities or impairments (except
amputations) of upper extremities:
Group A
Group B
XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXX
xxxxxx
xxxxxx
05
?1, 26, 28,
33, 35, 40
7,109
11
11
0
06
20, 2?-25,
27, 29-32,
34, 36-39
98,421
159
159
0
Orthopedic deformities or imoairments (except
amputations) of lower extremities:
Group A
Group B
XXXXXX
XXXXXX
XXXXXX
XXXXXX
XXXXXX
xxxxxx
xxxxxx
xxxxxx
07
42, 45, 46,
48, 51, 53,
56
123,855
133
132
1
08
41, 43, 44,
47, 49, 50,
52, 54, 55
199,462
251
250
1
Orthopedic deformities or impairments (except
amputations) of upper and lower extremities
and trunk:
Group A
Group B
XXXXXX
xxxxxx
xxxxxx
XXXXXX
XXXXXX
XXXXXX
XXXXXX
xxxxxx
xxxxxx
xxxxxx
xxxxxx
xxxxxx
09
57-59, 61-63,
65-67, 69
504,007
749
747
2
10
60, 64, 68
6,889
7
7
0
FORM R-303 (July 1, 1963)
(a) (b)
REHABILITATION POLICIES AND PROGRAMS
All Rehabilitants
39
(c)
(d)
(e)
(0
((?)
Disability group
Cost of
specified
services
(dollars)
b
(see
footnote)
Number of rehabilitants
Tele-
scoped
OVR
code
no.
Detailed
OVR
code
no.
Description
Total
Those
receiving
specified
services,
with cost
to V.R.
agency0
All
other
rehabili-
tants0
Orthopedic deformities or impairments of other
parts of the body:
Group A
Group B
xxxxxx
xxxxxx
XXXXXX
xxxxxx
XXXXXX
xxxxxx
XXXXXX
xxxxxx
11
70-73, 77
13,510
21
21
0
12
74-76
31,924
39
39
0
13
78
Blind in both eyes
21,982
155
154
1
14
79-82
Other visual impairments
62,041
90
89
1
15
83
Deaf, unable to talk readily
83,232
140
138
2
16
84
Deaf, able to talk readily
53,289
56
56
0
17
85
Other impairments of hearing
69,177
125
125
0
18
87,88
Impaired speech
22,585
30
29
1
19
89,90
Psychosis and psychoneurosis
233,957
352
343
9
30
91
Personality, character, and behavior disorders
65,328
110
109
1
20
92
Mental retardation or deficiency
43,890
155
151
4
40
ASSEMBLY INTERIM COMMITTEE ON SOCIAL WELFARE
All Rehabilitants
APPENDIX 5
Vocational rehabili-
tation agency, State of California
Agency for
General agency [x] the blind □
Part 1. — Number of rehabilitants, grouped by major disabling condition ; cost
of specified types of services for each disability group (Continued)
FORM R-303 (July 1, 1963)
Year ending June 30, 1965
Check type of agency :
(a)
(b)
(c)
(d)
(e)
(0
(g)
Disability group
Cost of
specified
services
(dollars)
b
(see
footnote)
Number of rehabilitants
Tele-
scoped
OVR
code
no.
Detailed
OVR
code
no.
Description
Total
Those
receiving
specified
services,
with cost
toV.R.
agency
All
other
rehabili-
tants0
21
94
Cardiac diseases
136,309
200
196
4
22
96
Epilepsy
68,512
77
76
1
23
99
Tuberculosis, pulmonary
82,009
102
101
1
24
93, 95, 97,
98, YY
Disabling conditions NEC
223,174
334
334
0
29
-
Not reported
0
0
0
0
* Item number and telescoped OVR code numbers refer to Form R-300.
b The services are those covered by Form R-304, part 7, except lines 1 and 2 thereof.
c The distinction between "with cost" and "without cost" is based solely on the services covered by Form R-304,
part 7. The cost in column (d) of this table (Form R-303, part 1) was incurred for the rehabilitants in column (f) of
this table. Column (g) includes rehabilitants shown in Item 18, Form R-300, as receiving the foregoing services but
without cost to the VR agency; plus rehabilitants for whom Item 18 does not report any services.
Part 2. — Number of rehabilitants, grouped by mobility at acceptance and
at closure (Item 14) d
(a)
(b)
(c)
(d)
(e)
d Item number and code numbers refer to Form R-300.
e With or without help of device.
(f)
Number of rehabilitants
Total
(Columns (c)
through (f))
Housebound
(Code 1)
Capable of activity outside home e
Time
With help of
other person
(Code 2)
Without help of
other person
(Code 3)
Not
reported
(Code 9)
At acceptance
3,462
7
37
3,418
0
At closure
3,462
2
17
3.443
o
REHABILITATION POLICIES AND PROGRAMS
All Rehabllltants
41
FORM R-303 (June 1960)
Year ending June 30, 1965
Check type of agency :
APPENDIX 6
Vocational rehabili-
tation agency, State of California
Agency for
General agency [x] the blind fj
Part 3. — Number of rehabilitants, grouped by primary cause of major
disabling condition (Item 13a(2)) '
(a)
(b)
(c)
(d)
Primary cause
OVR
code no.
Description
WHO
code no.
Number of
rehabilitants
50-69
All primary causes
__
3,462
50
Poliomyelitis
080-081
106
51
Infective and parasitic diseases except poliomyelitis
001-074,
082-139
116
52
Cancer and related neoplasms except benign
140-205
21
53
Benign neoplasms and those of unspecified nature
210-239
9
54
Diabetes mellitus
260
35
55
Alcoholism
307, 322
8
56
Vascular lesions affecting central nervous system
330-334
2
57
Multiple sclerosis
345
7
58
Cerebral spastic infantile paralysis
351
41
59
Other cerebral paralysis
352
30
60
Refractive errors
380
6
61
Cataract
385
17
62
Glaucoma
387
13
63
Inflammatory diseases of ear and mastoid process
390-394
8
64
Other diseases, injuries, and congenital conditions of ear and
mastoid process
395-398
311
65
Arthritis and rheumatism, except rheumatic fever
720-727
146
66
Miscellaneous congenital malformations of nervous system
and sense organs
753
31
67
Other congenital malformations
750-752,
754-759
127
68
Diseases and injuries NEC
K
2,428
69
Not reported
9
9
f Item number and OVR code numbers refer to Form R-300.
« Among these are Codes 240-254, 270-306, 308-321, 323-326, 340-344, 350, 353-379, 381-384, 386, 388, 389, 400-
716, 730-749, 760-795, E919, N800-N848, N851-N869, N871, N886-N888, N896-N898, N920-N998.
42
ASSEMBLY INTERIM COMMITTEE ON SOCIAL WELFARE
Form approved
Budget Bureau No. 83-R042.1
All Rehabilitants
APPENDIX 7
rOBM R-302
(June 1960)
U. S. DEPARTMENT OF
HEALTH, EDUCATION, AND WELFARE
VOCATIONAL REHABILITATION ADMINISTRATION
ECONOMIC STATUS OF REHABILITANTS a
Vocational rehabili-
tation agency, State of California
Agency for
Check type of agency : General agency [x] the blind □
Part 1. — Number of rehabilitants, grouped by OASI disability insurance status
at acceptance (Item 3), crossed by age at acceptance (Item 5)
Year ending June 30, 1965
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
All
rehabili-
tants
(Columns
(3) t
through
(9))
No appli-
cation for
OASI
disability
insurance
(Code 3)
Application allowed
Application denied
Applica-
tion still
in process
(Code 8)
Age in
years, at
acceptance
(Item 5)
Worker
cases
(freeze
or cash)
(Code 4)
Childhood
disability
(Code 5)
Worker
cases
(freeze
or cash)
(Code 6)
Childhood
disability
(Code 7)
Applicant
status
unknown
(Code 9)
(a) All ages
3,462
3,060
148
18
163
5
55
13
(b) Under 45
2,664
2,421
88
14
88
5
36
12
(c) 45-49
365
310
17
3
28
0
7
0
(d) 50-64
425
324
40
1
47
0
12
1
(e) 65 and over
8
5
3
0
0
0
0
0
(0 Not reported
0
0
0
0
0
0
0
0
a Item numbers and code numbers refer to Form R-300.
REHABILITATION POLICIES AND PROGRAMS
43
APPENDIX 8
All Rehabllitants
FORM R-302
(June 1960)
Part 2. — Number of rehabilitants, grouped by primary source of
support at acceptance (Item 9)
(a) (b) (c)
Primary source of support
Number of rehabilitants
(1) Total (Lines (2) through (5) and (8) through (14) )
3,462
XXXXXXXXXXXX
(2) Current earnings, b interest, dividends, rent (Code 00)
260
xxxxxxxxxxxx
(3) Family and friends (Code 01)
1,378
xxxxxxxxxxxx
(4) Private relief agency (Code 02)
6
xxxxxxxxxxxx
(5) Public assistance (Lines (6) + (7) )
615
xxxxxxxxxxxx
(6) Public assistance, at least partly from Federal funds (Code 03) c
xxxxxxxxxxxx
539
(7) Public assistance, without Federal funds (Code 04) °
xxxxxxxxxxxx
76
(8) Public institution — tax supported (Code 05)
81
xxxxxxxxxxxx
(9) Workman's compensation (Code 06)
254
xxxxxxxxxxxx
(10) OASI disability benefits (Code 07)
84
xxxxxxxxxxxx
(11) Other disability, sickness, survivors', or age-retirement benefits
(except from private insurance) ; unemployment insurance benefits
(Code 08)
577
xxxxxxxxxxxx
xxxxxxxxxxxx
xxxxxxxxxxxx
(12) Annuity or other non-disability insurance benefits (private in-
surance) (Code 09)
3
xxxxxxxxxxxx
xxxxxxxxxxxx
(13) Disability or sickness benefits (private insurance); savings; other
sources (Code 10)
198
xxxxxxxxxxxx
xxxxxxxxxxxx
(14) Not reported (Code 99)
6
xxxxxxxxxxxx
b Current earnings include wages, salaries, and self-employment income.
° A client whose primary source of support at acceptance is public assistance belongs in Code 03 if all or some of his
public assistance came from a program or programs having Federal funds. He belongs in Code 04 if all of his public
assistance came from a program or programs having no Federal funds.
44
ASSEMBLY INTERIM COMMITTEE ON SOCIAL WELFARE
APPENDIX 9
All Rehabilitants
FORM R-302
(July 1, 1963)
Vocational rehabili-
tation agency, State of California
Agency for
General agency [x] the blind □
Part 3. — Number of rehabilitants, grouped by public assistance received at
acceptance, during rehabilitation, and at closure (Item 10)
Year ending June 30, 1965
Check type of agency :
(a)
(b)
(0
Public assistance status
Number of
rehabilitants
Total public
assistance
per month
(dollars)
(1) At acceptance (Lines (2) + (6) + (7) )
3,462
xxxxxxxxxxxx
(2) Clients receiving public assistance (Lines (3) + (4) -f (5) )
721
117,071
(3) From programs with Federal funds (Item 10a)
614
107,157
(4) From programs without Federal funds (Item 10b)
103
9,311
(5) From both kinds of program (Item 10) d
4
603
(6) Clients not receiving public assistance (Item 10)
2,741
XXXXXXXXXXXX
(7) Clients not reported as to whether receiving public assistance
(Item 10)
0
XXXXXXXXXXXX
xxxxxxxxxxxx
(8) During rehabilitation (Lines (9) + (13) + (14) )
3,462
XXXXXXXXXXXX
(9) Clients receiving public assistance (Lines (10) + (11) + (12) )
233
31,406
(10) From programs with Federal funds (Item 10a)
129
21,743
(11) From programs without Federal funds (Item 10b)
103
9,311
(12) From both kinds of program (Item 10) d
1
406
(13) Clients not receiving public assistance (Item 10)
3,229
XXXXXXXXXXXX
(14) Clients not reported as to whether receiving public assistance
(Item 10)
0
XXXXXXXXXXXX
XXXXXXXXXXXX
APPENDIX 10
All Rehabilitants
FORM R-302
(July 1, 1963)
Part 3. — Number of rehabilitants, grouped by public assistance received at
acceptance, during rehabilitation, and at closure (Item 10) — Continued
(a)
(b)
(c)
(15) At closure (Lines (16) + (20) + (21))
3,462
XXXXXXXXXXXX
(16) Clients receiving public assistance (Lines (17) + (18) + (19)).
185
24,725
(17) From programs with Federal funds (Item 10a)
163
22,096
(18) From programs without Federal funds (Item 10b)
21
2,359
(19) From both kinds of program (Item 10) d
1
270
(20) Clients not receiving public assistance (Item 10)
3.277
XXXXXXXXXXXX
(21) Clients not reported as to whether receiving public assistance
(Item 10)
0
XXXXXXXXXXXX
XXXXXXXXXXXX
d Each person included in this line received public assistance from at least one program having Federal funds and (at
the same time) from at least one program having no Federal funds. Such a person is excluded from the two preceding
lines.
REHABILITATION POLICIES AND PROGRAMS
45
APPENDIX 11
Part 4. — Number of rehabilitants, grouped by work status at acceptance
and at closure (Item 11)
(a)
(b)
(c)
Number of rehabilitants
Work status
At acceptance
At closure
(1) Total (Lines (2) through (9))
3,462
3,462
(2) Wage or salaried workers: competitive labor market (Code 1)
255
2,891
(3) Wage or salaried workers: sheltered workshop (Code 2)
31
154
(4) Self-employed (except BEP)e (Code 3)
16
207
(5) BEPe (Code 4)
0
33
(6) Homemakers (own home) and unpaid family workers (own family)
(Codes 5, 6)
129
177
(7) Not working: students (Code 7) - ._ .. .. . .
383
xxxxxxxxxxxx
(8) Not working: others (Code 8) . _
2,648
xxxxxxxxxxxx
(9) Work status not reported (Code 9) ....
0
xxxxxxxxxxxx
e "BEP" means a State-agency-managed Business Enterprise Program.
APPENDIX 12
All Rehabilitants
FORM R-302
(July 1, 1963)
Year ending June 30, 1965
Check type of agency :
Vocational rehabili-
tation agency, State of California
Agency for
General agency [x] the blind □
Part 5. — Number of rehabilitants, grouped by total earnings
in the week before acceptance (Item 12)
(a)
Earnings group f
(b)
Number of rehabilitants
(1) All rehabilitants (Lines (2) through (9))
3,462
Rehabilitants with earnings of:
XXXXXXXXXXXXXXXXXX
(2) Zeros
3,027
(3) More than zero but less than $10
38
(4) $10-19
61
(5) $20-39
112
(6) $40-59
77
(7) $60-79
72
(8) $80 and over
75
(9) Amount not reported (Code XXXX)
0
f As noted, this table covers earnings in the week before acceptance. Form R-305, part 2, shows earnings in the last
week before closure,
e Among the persons in this line are homemakers (own family), unpaid family workers (own family), and farmers.
46
ASSEMBLY INTERIM COMMITTEE ON SOCIAL WELFARE
All Rehabilitants
APPENDIX 13
FOKM R-301
(June 1960)
Form approved
Budget Bureau No. 83-R041.1
U. S. DEPARTMENT OF
HEALTH, EDUCATION, AND WELFARE
VOCATIONAL REHABILITATION ADMINISTRATION
CHARACTERISTICS OF REHABILITANTS
Year ending June 30, 1965
Check type of agency :
Vocational rehabili-
tation agency, State of California
Agency for
General agency [x] the blind □
(a)
Code'
(b)
Characteristic3
(c)
Number of
rehabilitants
__
Part 1. — Age in years, at acceptance (Item 5)
xxxxxxxxxxxx
--
Total
3,462
--
Less than 20
529
--
20-34
1,253
--
35-44
882
--
45-54
626
--
55-64
164
--
65 and over
8
XX
Not reported
0
--
Part 2. — Number of dependents, at acceptance (Item 6)
XXXXXXXXXXXX
--
Total
3,462
—
None
1,523
--
1-3
1,258
--
4 or more
681
X
Not reported
0
• Item numbers and code numbers refer to Form R-300.
FORM R-301
(July 1, 1963)
REHABILITATION POLICIES AND PROGRAMS
All Rehabilitants
47
(a)
Code*
(b)
Characteristic*
(c)
Number of
rehabilitants
__
Part 3.— Sex (Item 7)
XXXXXXXXXXXX
1 + 2
Total
3,462
1
Male
2,335
2
Female
1,127
--
Part 4. — Race (Item 8)
XXXXXXXXXXXX
1 through
4, and X
Total
3,462
1
White
3,080
2
Negro
332
3
Indian
9
4
Other
41
X
Not reported
0
--
Part 5. — Education: Years of schooling completed, prior to acceptance (Item 19)
XXXXXXXXXXXX
--
Total
3,462
--
None
11
--
1-4
74
--
5-6
105
--
7-8
453
--
9-10
669
--
11-12
1,704
--
13 and over
446
X
Not reported
0
TWO COPIES OF THE COMPLETED FORMS R-301 THROUGH R-305 ARE TO BE SUBMITTED DIRECTLY
TO THE DIVISION OF STATISTICS AND STUDIES, VOCATIONAL REHABILITATION ADMINISTRA-
TION, WASHINGTON 25, D.C., AND ONE TO THE REGIONAL OFFICE, EARLY ENOUGH TO REACH
THOSE DESTINATIONS ON OR BEFORE AUGUST 31 FOLLOWING THE FISCAL YEAR COVERED BY
THE REPORT.
Authorized signature Date:.
196.
48 ASSEMBLY INTERIM COMMITTEE ON SOCIAL WELFARE
APPENDIX 14
NUMBER OF REFERRALS AND CASES, BY AGENCY, FISCAL YEAR 1964
Agency1
Referrals
During fiscal year
Total
Accepted
for
services
Not
accepted
for
services2
Remain-
ing at
end of
year3
Cases
During fiscal year
Total
active
load (re-
ceiving
services)
Closed from active load
Rehabil-
itated
After
rehabil-
itation
plan in-
itiated4
Before
rehabil-
itation
plan in-
itiated5
United States,
total
513,371
179,132
171,735
162,504
399,852
119,708
15,131
20,062
Alabama
Alaska
Arizona:
General
Blind
Arkansas
California
Colorado
Connecticut:
General
Blind
Delaware:
General
Blind
District of Columbia.
Florida:
General -.
Blind
Georgia
Guam...
Hawaii:
General
Blind7
Idaho:
General
Blind
Illinois
Indiana:
General _.
Blind
Iowa:
General
Blind
Kansas:
General
Blind
Kentucky
Louisiana:
General
Blind
Maine:
General
Blind
Maryland
Massachusetts:
General
Blind.
Michigan:
General
Blind
Minnesota:
General
Blind
Mississippi:
General
Blind
Missouri:
General
Blind
Montana:
General
Blind
Nebraska:
General
Blind
9,157
527
2,350
119
9,038
40,024
4,958
2,747
182
1,435
56
4,548
25,409
3,476
26,806
115
1,979
2,105
28
13,727
4,009
165
6,272
215
2,736
357
12,927
4,939
706
2,036
274
7,205
12,672
312
10,060
376
7,603
1,166
3,920
1,139
8,880
855
2,040
235
1,986
439
4,864
208
880
57
3,937
9,025
2,103
1,348
85
729
47
1,739
8,153
409
8,452
35
595
42
471
16
6,695
2,123
49
1,920
79
87
4,974
3,245
250
549
108
2,918
3,299
173
4,104
208
2,176
269
2,006
410
2,840
252
815
22
823
133
1,563
115
639
19
2,541
25,035
1,291
477
51
454
5
1,836
10,512
1,629
5,884
34
798
23
878
11
3,864
922
49
1,717
48
749
76
4,585
100
623
64
2,304
5,132
32
1,965
80
3,233
490
764
3,566
325
637
179
425
162
2,730
204
831
43
2,560
5,964
1,564
922
46
252
4
973
6,744
1,438
12,470
46
586
21
756
1
3,168
964
67
2,635
999
194
3,368
886
347
864
102
1,983
4,241
107
3,991
2,194
407
1,150
243
2,474
278
588
34
738
144
10,884
422
1,603
192
7,004
20,171
4,632
3,928
226
1,402
74
3,468
16,105
1,231
15,830
76
1,460
103
1,129
52
14,632
5,024
168
4,636
252
2,642
279
7,259
8,792
823
1,204
238
6,670
7,100
469
10,523
538
6,075
709
4,179
987
6,079
524
2,219
77
2,658
267
3,537
480
24
3,000
3,044
1,323
971
4
562
21
1,201
5,172
238
6,803
18
325
12
404
15
3,750
1,533
21
1,444
59
757
80
2,975
2,128
130
367
57
1,974
2,212
85
3,181
97
1,538
157
1,535
325
2,566
165
530
26
639
73
351
22
71
13
245
1,246
313
222
16
20
6
230
1,066
65
434
0
175
27
2
564
82
11
227
14
150
18
124
250
15
49
6
374
246
21
383
45
346
31
116
33
242
23
29
3
75
19
688
27
25
6
134
3,503
159
177
70
3
188
1,032
33
483
2
47
5
14
2
1,249
128
10
162
11
238
10
178
328
12
90
17
408
397
7
219
44
285
42
144
25
179
11
81
2
165
2
Spr font.nntes n.t, pnd nf t.ahlp
REHABILITATION POLICIES AND PROGRAMS
49
NUMBER OF REFERRALS AND CASES, BY AGENCY,
FISCAL YEAR 1964— Continued
Referrals
( "uses
During fiscal year
Remain-
ing at
end of
year3
During fiscal year
Total
Accepted
for
services
Not
accepted
for
services2
Total
active
load (re-
ceiving
services)
Closed from active load
Agency1
Rehabil-
itated
After
rehabil-
itation
plan in-
itiated4
Before
rehabil-
itation
plan in-
itiated5
Remain-
ing at
end of
year6
Nevada:
959
36
641
109
11,420
905
1,889
231
31,752
1,689
13,346
1,475
2,064
7,882
741
9,914
6,624
263
47,304
4,235
12,775
5,502
138
15,996
364
1,448
517
10,472
1,120
17,089
1,256
1,930
1,614
39
18,084
930
150
6,461
343
19,258
10,894
161
955
194
19
344
37
4,542
216
587
64
11,359
805
7,643
617
467
3,676
336
3,543
1,624
51
16,799
921
2,712
2,310
98
5,108
168
403
49
3,791
341
6,012
429
998
336
15
5,449
199
44
1,504
119
6,129
4,037
104
214
581
10
167
23
3,199
296
780
58
10,525
263
3,910
572
504
1,975
169
2,942
2,934
111
13,982
1,446
1,860
1,155
12
6,040
114
330
167
3,089
327
5,998
458
522
310
14
7,683
267
5
2,322
102
5,248
3,954
25
106
184
7
130
49
3,679
393
522
109
9,868
621
1,793
286
1,093
2,231
236
3,429
2,066
101
16,523
1,868
8,203
2,037
28
4,848
82
715
301
3,592
452
5,079
369
410
968
10
4,952
464
101
2,635
122
7,881
2,903
32
635
387
48
878
101
8,720
593
1,001
142
26,658
1,752
16,816
1,506
1,457
8,731
1,159
10,284
3,274
160
36,325
1,708
7,031
4,753
280
11,083
435
1,077
148
8,357
782
13,156
906
2,668
910
40
10,838
380
93
4,017
301
15,326
9,870
263
423
113
14
215
19
2,890
170
319
41
7,641
462
6,214
523
374
2,642
193
2,258
721
34
11,103
478
1,530
1,501
65
3,263
118
294
32
2,861
309
4,268
320
704
186
10
4,175
163
40
1,045
54
3,875
2,627
57
83
51
3
136
1
247
19
57
5
1,113
35
338
17
27
354
56
268
143
10
1,907
46
87
285
12
223
6
31
7
261
14
366
23
151
50
4
232
11
0
178
14
134
160
13
8
25
2
32
8
370
30
39
4
1,675
67
287
77
57
672
97
512
270
3
1,441
101
215
21
29
331
18
7
1
229
29
315
30
21
29
1
557
5
0
221
16
1,136
117
19
0
198
Blind
29
New Hampshire:
495
Blind
73
New Jersey:
General .. —
Blind
5,213
374
New Mexico:
586
Blind
92
New York:
General
Blind
16,229
1,188
North Carolina:
General _
9,977
Blind
889
North Dakota.. . -
Ohio:
999
5,063
Blind.
813
Oklahoma .
7,246
Oregon:
General .
2,140
Blind
113
Pennsylvania:
General
21,874
Blind
1,083
Puerto Rico .. - -.
5,199
Rhode Island:
General
2,946
Blind
174
South Carolina:
General. .
Blind
South Dakota:
General .. . .
Blind
7,266
293
745
108
Tennessee:
General..
Blind
5,006
430
Texas:
General
Blind
8,207
533
Utah
1,792
Vermont:
General
Blind
645
25
Virginia:
General .
Blind
5,874
201
Virgin Islands-
Washington:
General -.
Blind
53
2,573
217
West Virginia . .. -
Wisconsin:
General
Blind.
10,181
6,966
174
Wyoming. .
332
1 In States with 2 agencies, the State division of vocational rehabilitation is designated as "general and the agency
under the State commission or other agency for the blind is designated as "blind."
2 Services declined, services not needed, individual not eligible, individual needing services other than vocational re-
habilitation, referred to other agencies, migratory shifting of the individual, etc.
3 Eligibility for rehabilitation not yet determined.
4 Closed after rehabilitation plan was initiated; received rehabilitation service but never reached the point ot employ-
ment because of personal factors, illness, aggravated disability, etc.
5 Closed prior to initiation of rehabilitation plan because of indifference of individual, increase in degree ot disability,
loss of contact, etc.
6 In process of rehabilitation on June 30, 1964. 7 Estimated.
50 ASSEMBLY INTERIM COMMITTEE ON SOCIAL WELFARE
APPENDIX 15
DEPARTMENT OF HEALTH, EDUCATION AND WELFARE
Vocational Rehabilitation Administration
Washington, D. C. 20201
November 12, 1965
ADMINISTRATIVE SERVICE SERIES No. 66-7
TO : State Boards of Vocational Education ;
Divisions of Vocational Rehabilitation ;
Commissions and Other Agencies for the Blind
SUBJECT : 1965 Per Capita Expenditure and Rehabilitants per 100,000
The attached table shows the per capita expenditure of funds for vocational re-
habilitation for each State for 1965. Ranked highest are those States which spent
the most funds for vocational rehabilitation per person in the State. Alongside
Iter capita expenditures we show rehabilitants per 100,000 population in 1965, and
the rank for each State, again with those rehabilitating the most persons per 100,-
000 population ranked highest. This is an interesting and useful comparison of a
measure of financial support for vocational rehabilitation and a measure of pro-
duction.
The usual analysis based on the financial reports will follow later.
Joseph Hunt
Assistant Commissioner
Attachment
Copy enclosed for REDISTRIBUTION
to State Accountant
REHABILITATION POLICIES AND PROGRAMS
51
DEPARTMENT OF HEALTH, EDUCATION, AND WELFARE
Vocational Rehabilitation Administration
Washington, D. C. 20201
1965 PER CAPITA EXPENDITURES FOR VOCATIONAL REHABILITATION
AND REHABILITANTS PER 100,000 POPULATION
Per Capita Expenditures1
Rehabilitates
Total
Federal
and State
State Funds
per 100,000
population
State or Territory
Amount
Rank
Number
Rank
Total
$ .79
.35
.66
.60
.36
1.02
1.14
1.02
.54
.76
1.15
1.33
.72
.61
1.15
.89
.73
2.10*
2.06
1.80
.91
1.96
1.07
1.36
.86
.61
.31
.46
.44
.80
.69
.51
.80
.64
.50
.86
1.09
2.16
.85
.60
1.21
.49
1.26
.64
.83
.72
1.35
1.05
1.15
.52
1.34
1.09
.83
.87
.78
1 .31
.18
.22
.27
.13
.40
.38
.52
.26
.38
.47
.67
.22
.26
.35
.27
.24
.63*
.62
.54
.32
.59
.32
.41
.26
.29
.12
.19
.18
.31
.26
.19
.30
.26
.19
.26
.35
.65
.26
.20
.40
.17
.53
.21
.30
.25
.55
.51
.42
.26
.40
.45
.42
.35
.33
51
43
31
53
16
19
9
36
20
11
1
44
33
22
32
42
3
4
7
25
5
26
15
34
30
54
49
50
27
38
48
28
39
47
35
23
2
40
46
18
52
8
45
29
41
6
10
13
37
17
12
14
21
24
70
39
47
46
30
173
50
127
52
51
112
178
131
70
176
65
94
88
218
110
108
168
79
146
89
57
36
54
29
80
47
41
52
68
54
52
48
163
68
46
98
47
81
58
82
68
46
40
41
19
29
56
27
53
42
48
39
Massachusetts
41
50
Rhode Island -
4
Vermont .
36
II Delaware. -
9
New Jersey
34
New York
35
Pennsylvania .
10
III District of Columbia
2
Kentucky ._
8
Maryland - -
21
North Carolina ._
3
Puerto Rico
25
14
16
1
IV Alabama .
11
Florida .
12
Georgia .. _ -
5
Mississippi .
20
South Carolina ..
7
Tennessee. .
15
V Illinois
27
Indiana ...
49
Michigan
29
Ohio
52
Wisconsin
19
VI Iowa
38
Kansas
46
Minnesota -
32
Missouri
23
Nebraska
30
North Dakota
33
South Dakota
37
VII Arkansas
6
Louisiana
24
New Mexico _ - -
43
Oklahoma
13
40
VIII Colorado
18
Idaho _ -
26
Montana __ .
17
Utah
22
Wyoming . ...
42
IX Alaska . .
47
Arizona -_
45
California .
54
Guam . --..
51
Hawaii- .. .
28
Nevada .
53
Oregon .. . ...
Washington
31
44
1 Under Section 2 of the Vocational Rehabilitation Act.
* Data estimated.
Prepared by:
State Fiscal Operations Branch
November 9, 1965
52 ASSEMBLY INTERIM COMMITTEE ON SOCIAL WELFARE
APPENDIX 16
CHART 1 -REHABILITATION BY YEARS
100,00c
- 80,00C
60,00c
-40,00C
- 20,00C
REI
HABIUTATK
BY YEARS
DNS
Publi
Law
c
)
Bare
- LaFo
Ai
len-
lette
:t ▲
OOO
\
)
1
1
;
1925 1930 1935 1940 1945 1950 1955 1960 1964
REHABILITATION POLICIES AND PROGRAMS
APPENDIX 17
CHART 2-PRINCIPAL CAUSES OF DISABILITY AMONG 1964 REHABILITANTS
AMONG 1964 REHABILITANTS
53
All
Others 19%
Tuberculosis
5%
Cardiac
Defects 5%
Mental
Retardation 6%
Mental Illness 10%
Hearing and Speech 6%
Muscular,
Skeletal
Amputations
37%
Blindness 4%
Visual Impairment 6%
Deafness 2%
54 ASSEMBLY INTERIM COMMITTEE ON SOCIAL WELFARE
APPENDIX 18
CHART 3-MAJOR OCCUPATIONS OF PERSONS REHABILITATED IN 1964
1964
Family 15%
Agriculture 7%
Professional,
managerial
8%
Service 20%
Sheltered workshops 3%
Skilled and
semiskilled
24%
Unskilled 7%
Clerical and Sales
16%
printed in California office of state printing
L-1682 — 100 11-66 150
ASSEMBLY INTERIM COMMITTEE REPORT
1965-67
Volume 21 Number 15
California Legislature
ASSEMBLY INTERIM COMMITTEE ON WAYS AND MEANS
REPORT OF THE SUBCOMMITTEE ON
FAIRS AND CONCESSIONS
on the
PROPOSED CALIFORNIA WORLDS FAIR
AT CORONA IN 1969
MEMBERS OF THE COMMITTEE
ROBERT W. CROWN, Chairman
BURT HENSON, Vice Chairman
Hale Ashcraft
Anthony Beilenson
Frank Belotti
Carl Britschgi
John L. E. Collier
Charles Conrad
Pauline Davis
Leroy Greene
Joseph Kennick
Frank Lanterman
Charles Meyers
James Mills
Don Mulford
Nicholas C. Petris
COMMITTEE STAFF
Carley Porter
Howard Thelin
Jerome Waldie
(Resigned)
John Williamson
Gordon Winton, Jr.
George Zenovich
LOUIS J. ANGELO, Committee Coordinator
WILLIAM BARNABY, Legislative Consultant
JOHN SIMONS, Committee Assistant
KEITH AXTELL, Legislative Intern
GAIL VESSELS, Committee Secretary
MARIA HUSUM, Secretary
Published by the
ASSEMBLY OF THE STATE OF CALIFORNIA
JESSE M. UNRUH
Speaker
GEORGE ZENOVICH
Majority Floor Leader
CARLOS BEE
Speaker pro Tempore
ROBERT MONAGAN
Minority Floor Leader
JAMES D. DRISCOLL
Chief Clerk of the Assembly
LETTER OF TRANSMITTAL
January 24, 1967
Hon. Robert W. Crown
Chairman, Assembly Interim Committee on
Ways and Means
Dear Chairman Crown :
In accordance with House Resolution 710 (v), 1965 General Session,
the Subcommittee on Fairs and Concessions herewith submits its report
on the proposed California World's Fair at Corona.
The resolution requesting interim study of this subject matter was
H.R. 488 (Biddle), 1966 First Extraordinary Session.
The subcommittee is grateful to all who participated in the public
hearings as well as those who communicated with the subcommittee and
its staff.
Respectfully submitted,
Frank Belotti
Robert W. Crown
Leroy F. Greene
Hale Ashcraft, Chairman
Joseph M. Kennick
James R. Mills
John Williamson
George Zenovich
(3)
LETTER OF TRANSMITTAL
Assembly Interim Committee on Ways and Means
California Legislature
January 30, 1967
To the Speaker and Members op the Assembly
Dear Mr. Speaker and Members :
Your Interim Committee on Ways and Means, in accordance with
House Resolution 710 (v), 1965 General Session, herewith respectfully
submits the final report of the Subcommittee on Fairs and Concessions
on the subject of a proposed California World's Fair at Corona in 1969.
The report was adopted unanimously by the eight-member subcom-
mittee and we, the undersigned, concur in their findings and recom-
mendations.
The chairman is appreciative of the intelligent and energetic leader-
ship provided by Subcommittee Chairman Hale Ashcraft as well as
for the diligent application of the subcommittee members and its staff.
Respectfully submitted.
Hale Ashcraft
Anthony Beilenson
Frank Belotti
Carl Britschgi
John L. E. Collier
Pauline Davis
Leroy F. Greene
Joseph M. Kennick
Frank Lanterman
Robert W. Crown, Chairman
Charles W. Meyers
James R. Mills
Don Mulf ord
Nicholas C. Petris
Carley V. Porter
Howard Thelin
John Williamson
Gordon Winton
George Zenovich
(4)
ASSEMBLY INTERIM COMMITTEE ON WAYS AND MEANS
Robert W. Crown, Chairman
Report of the
SUBCOMMITTEE ON FAIRS AND CONCESSIONS
on the
PROPOSED CALIFORNIA WORLD'S FAIR
AT CORONA, 1969-70
MEMBERS OF THE SUBCOMMITTEE
Hale Ashcraft, Chairman
Frank Belotti James R. Mills
Robert W. Crown John Williamson
Leroy F. Greene George Zenovich
Joseph M. Kennick
STAFF
Louis J. Angelo, Coordinator
Gail Vessels, Committee Secretary
Maria Husum, Secretary
(5)
INTRODUCTION
The Assembly Interim Committee on Ways and Means was referred
the subject matter of House Resolution 488 introduced by Assembly-
man Craig Biddle, 1966 First Extraordinary Session, which requested
a study of the proposed California World's Fair at Corona, Riverside
County, scheduled for 1969-70.
The requested study had among its major objectives ascertaining to
what extent the state would be called upon to participate, financially
or otherwise, in the proposed fair and exploring the possible need for
legislation.
The Ways and Means Committee chairman referred the subject
matter to the Subcommittee on Fairs and Concessions, which conducted
two public hearings : the first, on September 1, 1966, at Riverside ; the
second, on December 7, 1966, at Sacramento. The report that follows
represents the findings and recommendations resulting from those two
hearings as well as from supplemental staff research.
It should be pointed out that the proposed California World's Fair
at Corona does not represent the first such effort to establish a world's
fair in southern California.
A similar subcommittee was appointed during the 1963-65 interim
to investigate and submit a report to the Legislature on the then pro-
posed world's fair at Long Beach. (See Assembly Interim Committee
reports, Volume 21, No. 9, pp. 36-37, March 15, 1965.)
Following the unsuccessful Long Beach effort, at least two additional
attempts were made to locate a world's fair elsewhere in southern
California prior to the current effort at Corona.
In submitting its report to the 1965 Legislature on the proposed
Long Beach World's Fair, the Ways and Means Subcommittee on Fairs
and Expositions concluded, in part:
i ' In considering any future authorization of state participation
in a similar venture, the committee recommends extremely
close scrutiny of the promotional organization and its financial
support structure."
The subcommittee was particularly mindful of this suggestion in
arriving at its finding and recommendations which follow:
I. FINDINGS
A. During the course of two public hearings conducted on the subject
of a proposed world's fair at Corona, there was inadequate justification
presented in the testimony that would cause the committee to recom-
mend either official endorsement or participation, financial or other-
wise, by the State of California.
B. Conflicting testimony concerning the fair's promotional organiza-
tion and evidence of an inadequate financial support structure lead
the subcommittee to question the ability of California World's Fair,
Inc., as presently constituted, to succeed in the Corona World's Fair
effort.
(6)
REPORT OF COMMITTEE ON FAIRS AND CONCESSIONS 7
C. Lawsuits 'filed against the president and management of Cali-
fornia World's Fair, Inc., combined with legal steps taken by the
principal landowners of the proposed Corona fair site to invalidate
land leasing arrangements, add further to the uncertainty of the
current fair's promotional effort.
D. At least one expert on the feasibility of major fairs and exposi-
tions x has questioned the ability of the Riverside-Corona area to
"sustain a major world's fair at this time."
E. The question of the state's "official endorsement" as contrasted
with its "unofficial blessing" was the subject of controversy at both
public hearings held by the subcommittee. Literature circulated and
statements made by the fair's promotional staff added to the general
confusion.
II. RECOMMENDATIONS
A. The committee recommends that the state withhold official endorse-
ment of the proposed California World 's Fair at Corona and that there
be no participation by the state, financial or otherwise, in the fair as
presently constituted.
B. We recommend that the Legislature seriously explore the enact-
ment of legislation to regulate the promotion of future world's fairs or
expositions in California.
C. In considering such legislation, the committee recommends that
particular attention be given to the conditions and the manner in which
the name of the state may be used, the establishment of minimum
standards for determining the professional qualifications of a world's
fair promotional organization, and the advisability of requiring the
posting of a performance bond by the fair's board of directors.
D. To preclude the possibility of confusion over the question of
official state endorsement of such fairs, the committee recommends con-
sideration of any or all of the following alternatives:
1. Clear definition of the steps to be taken before a promotional
organization may use the name of the state or any of its official
representatives.2
2. Requirement of legislative approval of the use of the state's
name in connection with any future world's fair or exposition.
3. The appointment by the Governor of a commission or committee
on world's fairs and expositions, with legislative representation,
to grant permission, based upon standards established by the
Legislature, to use the state 's name in the promotion of a world 's
fair or exposition.
E. The committee recommends continued close scrutiny of the organ-
izational and financial support structure of any future effort to promote
a world 's fair or exposition in this state.
1 Harrison A. Price, president, Economic Research Associates, letter to Sanford I.
Collins, president, California World's Fair, Inc., April 14, 1966.
2 The State of California has a "Commissioner General" appointed by the Governor
to act as official spokesman for the state in connection with any fair or exposi-
tion endorsed by the Bureau of International Expositions in Paris. California
World's Fair, Inc., did not seek or obtain the Paris bureau's endorsement for the
Corona Fair. The president and executive manager of California World's Fair,
Inc., however, did claim the support of the Commissioner General for the Corona
Fair. This claim was made on the tenuous basis of the Commissioner General's
previous activities in behalf of the proposed Long Beach World's Fair.
8 CALIFORNIA LEGISLATURE
III. COMMENT
The September 1 hearing at Riverside and the December 7 hearing
at Sacramento constitute the basis for the findings and recommenda-
tions contained herein. However, the following important points merit
attention here:
1. Mr. Sanford I. Collins, president and executive manager of Cali-
fornia "World 's Fair, Inc. :
a. Testified that he had no previous experience promoting world's
fairs or expositions. (To the best knowledge of the committee,
no one else on Mr. Collins' staff had prior experience.)
b. Revealed that he used some of the basic assumptions prepared
by Economic Research Associates for the proposed Long Beach
World's Fair to justify the feasibility of the proposed world's
fair at Corona. (A spokesman for the E.R.A. told Collins that
those assumptions did not apply to the Riverside- Corona area.)
c. Presented conflicting reports as to the manner, terms and condi-
tions under which a state host pavilion would be constructed.
2. A " financial statement" dated November 1966 by Harris, Kerr,
Forster & Company, with the notation, "Prepared from the records
without audit," in the committee's view revealed an inadequate finan-
cial support structure for a world 's fair that proposed to open its gates
in March of 1969.
3. As indicated previously, lawsuits were filed against Mr. Collins
and California World's Fair, Inc. As of the writing of this report the
committee is aware of three such lawsuits having been filed in the
Superior Court of Los Angeles.3 It is significant that one of these was
filed by Business Direction, Inc., a Beverly Hills consulting firm, in the
amount of $43 million for alleged breach of contract. Business Direc-
tion, Inc., according to its President, Mr. Al Grace, had an exclusive
contract with California World's Fair, Inc., to solicit concessionaires
for the proposed fair.
4. The committee has learned that, subsequent to the December 7
hearing at Sacramento, Mr. Sanford Collins has resigned as president
and general manager of California World's Fair, Inc. On the basis
of this information, the committee recommends careful scrutiny by the
Legislature, the administration, and the Attorney General of the dis-
solution of California World's Fair, Inc., and the liquidation of its
assets or of any reorganized effort to continue promotion of a world's
fair at Corona.
5. Finally, the committee 's findings and recommendations relative to
the proposed world's fair at Corona are not to be construed as opposi-
tion to the concept of a world's fair in California. We seek only to
safeguard the good name and the financial interests of the State of
California.
3 Case Nos. 896578, 896579 and 896580.
printed in California office of state printing
L2242— 100 1-67 1M
Volume 21
ASSEMBLY INTERIM COAAMITTEE REPORT
1965-67
CALIFORNIA LEGISLATURE
ASSEMBLY INTERIM COMMITTEE ON
WAYS AND MEANS
REPORT OF THE SUBCOMMITTEE ON
ECONOMIC DEVELOPMENT
on
THE CALIFORNIA
BUY AMERICAN ACT
ISSUES AND ALTERNATIVES
MEMBERS OF THE COMMITTEE
Number 16
HALE ASHCRAFT
ANTHONY BEILENSON
FRANK BELOTTI
CARL BRITSCHGI
JOHN L. E. COLLIER
CHARLES CONRAD
PAULINE DAVIS
ROBERT W. CROWN, Chairman
BURT HENSON, Vice Chairman
LEROY F. GREENE
JOSEPH KENNICK
FRANK LANTERMAN
CHARLES MEYERS
JAMES MILLS
DON MULFORD
NICHOLAS C. PETRIS
CARLEY PORTER
HOWARD THELIN
JEROME WALDIE (Resigned)
JOHN WILLIAMSON
GORDON WINTON, JR.
GEORGE ZENOVICH
COMM/77EE STAFF
LOUIS J. ANGELO, Coordinator JOHN SIMONS, Consultant
WILLIAM BARNABY, Consultant KEITH AXTELL, Legislative Intern
GAIL VESSELS, Committee Secretary
MARIA HUSUM, Secretary
Published by the
ASSEMBLY
OF THE STATE OF CALIFORNIA
JESSE M. UNRUH
Speaker
GEORGE ZENOVICH
Majority Floor Leader
JAMES D. DRISCOLL
Chief Clerk of the Assembly
CARLOS BEE
Speaker pro Tempore
ROBERT MONAGAN
Minority Floor Leader
LETTER OF TRANSMITTAL
Assembly Interim Committee on Ways and Means
February 6, 1967
To the Speaker and Members of the Assembly
Dear Mr. Speaker and Members :
Your Interim Committee on Ways and Means, in accordance with
House Resolution 710 (v), 1965 General Session, herewith respectfully
submits the final report of the Subcommittee on Economic Development
on the subject of the California Buy American Act.
We, the undersigned, concur with the findings and recommendations
contained herein.
Respectfully submitted,
Robert W. Crown, Chan-man
Hale Ashcraft*
Anthony Beilenson
Frank Belotti
Leroy F. Greene
Joseph Kennick
Frank Lanterman f
Charles Meyers
James Mills *
Nicholas C. Petris
* With reservations
t Dissenting letter filed (see addendum)
Howard Thelin
John Williamson
Gordon Winton, Jiv
George Zenovich
2— L-2641
(8)
ASSEMBLY INTERIM COMMITTEE ON WAYS AND MEANS
ROBERT W. CROWN, Chairman
Subcommittee on Economic Development
Report on
THE CALIFORNIA BUY AMERICAN ACT,
ISSUES AND ALTERNATIVES
Subcommittee Members
ROBERT W. CROWN, Chairman
HALE ASHCRAFT BURT HENSON
FRANK BELOTTI DON MULFORD
ANTHONY BEILENSON JAMES R. MILLS
JOHN L E. COLLIER CARLEY V. PORTER
LEROY F. GREENE JOHN C. WILLIAMSON
Staff
LOUIS J. ANGELO, Coordinator
DR. FREDERICK BREIER, Contract Consultant
GAIL VESSELS, Secretary
MARIA HUSUM, Secretary
(5)
January 26, 1967
Members, Assembly Interim
Committee on Ways and Means
Gentlemen :
In accordance with H.R. 710 (v) 1965 General Session, the Subcom-
mittee on Economic Development herewith submits its report on the
California Buy American Act.
The subcommittee is grateful to the many individuals and organiza-
tions that assisted Dr. Breier and the committee staff in the prepara-
tion of this report.
Respectfully submitted,
Robert W. Crown, Chairman
Subcommittee on Economic Development
Hale Ashcraft * James Mills *
Frank Belotti John Williamson
Anthony Beilenson George Zenovich
Leroy F. Greene
* With reservations
(6)
CHANGES IN THE
CALIFORNIA BUY AMERICAN ACT,
ISSUES AND ALTERNATIVES
Report of the
Subcommittee on Economic Development
ROBERT W. CROWN, Chairman
By
DR. F. A. BREIER
Contract Consultant to the Assembly Ways and Means Committee
December 1966
TABLE OF CONTENTS
Page
Summary of Findings 9
Summary of Recommendations 9
I. The Issues 10
Repeal or Reform Efforts 10
Criticisms of the Act 10
Out-of-State Protection 10
International Implications 11
Legal Aspects 11
Purchasing Problems 11
Obstacles to Repeal 12
A Revised Buy American Act 12
II. The Alternatives 13
Percentage Preference vs. Repeal 13
The U.S. Buy American Act 13
The 25-percent Formula 14
Progressive Steps 14
Lessons from the Federal Experience 15
A 10-percent Margin 15
The Gradual Approach 15
Initial Margin of Preference 16
Adjustment Steps 16
Models for Adjustments 17
Conclusion 17
Addendum 18
(8)
CALIFORNIA BUY AMERICA ACT
SUMMARY OF FINDINGS
1. Many purchases by the state and local governments are excessively
expensive because of the total elimination of foreign competition.
Modification of the California Buy American Act could lead to sub-
stantial savings in both levels of government.
2. In essence, the act does not protect California economic interests
but is of primary benefit to other states.
3. California is an important market for foreign products, and the
exclusion created by the Buy American Act has been noted with
increasing disfavor by our important trading partners.
4. The legal status of the act is unclear, and considerable litigation
has resulted from this lack of clarity.
5. Short-run losses to some economic groups are possible in the event
the act is repealed.
6. The federal Buy American Act, while enacted in the same year as
California's act and for essentially the same reasons, does not pro-
vide for an absolute prohibition on foreign purchases. California
could profit from the federal experience.
SUMMARY OF RECOMMENDATIONS
1. The California Buy American Act should be revised to eliminate
existing legal uncertainties.
2. The act should be liberalized to achieve the many advantages out-
lined herein, but transitional adversities must be minimized to allow
smooth conversion to a more effective employment of resources in
California.
3. Outright repeal of the Buy American Act is not practicable. A
gradual approach to the removal of trade restrictions should miti-
gate the damages forecast by protectionists.
4. A graduated domestic percentage preference, beginning with 20-
25 percent and ending with an ultimate 10 percent over a five-year
period, should replace the existing mandatory and total preference.
10 SUBCOMMITTEE REPORT ON ECONOMIC DEVELOPMENT
I. THE ISSUES
The Act
The California Buy American Act was passed in 1933 and provides
that public officials charged with the letting of contracts "shall let
such contracts only to persons who agree to use or supply such un-
manufactured material as have been produced in the United States,
and only such manufactured materials as have been manufactured in
the United States, substantially or from materials produced in the
United States." (Government Code, Sections 4303-4305.)
Repeal or Reform Efforts
Efforts at repeal or substantial reform began soon after passage of
the act. Following World War II, movement for repeal or reform of
the measure gained momentum and a citizens' group to this end was
founded in the California Council for International Trade. Under the
guidance of former Assemblymen Thomas Rees and Nicholas Petris
and Assemblyman Robert Crown, the California Legislature has care-
fully examined the domestic and international implications of the Cali-
fornia Buy American Act.1 However, the measure still remains on the
statute books without substantial change.
Criticisms of the Act
There appears general agreement that the present measure is out-
dated. Even those who are supoorting retention of the California Buy
American Act have admitted that it no longer optimally serves the
purposes of maximizing employment, economic activity, and economic
welfare of the State of California, the objectives for which it was orig-
inally passed.
The criticisms raised against the California Buy American Act are
of three general types: The first set emphasizes the high cost of state
and local purchases, affected by the measure, due to the total and
arbitrary elimination of foreign competition. The ban on foreign sup-
pliers has in some instances created near-monopoly conditions and a
notable lack of vigorous price competition among domestic bidders.
The repeal or reform of the California Buy American Act would pro-
duce substantial savings for both the state and local governmental
units and would thus reduce need for either additional burdensome
taxes and/or excessive and unnecessary deficit financing. In the search
for a solution of the often very serious fiscal problems, this reduction
in cost of government purchases must not be ignored.
Out-of-state Protection
At the present time, the California Buy American Act does not re-
quire the bidder to show that the materials offered have been produced,
even partially, in the State of California. While detailed quantitative
estimates of the "California content" of the materials involved in
1 The California Buy American Act, a background paper prepared for the Economic
Development Subcommittee, Assembly Interim Committee on Ways and Means,
by Dr. Frederick A. Breier, for the hearings in San Francisco November 9-1 0,
1964, in future referred to as background paper.
CALIFORNIA BUY AMERICA ACT 11
public purchasing in the state are not available, we have gathered evi-
dence to show beyond any doubt that the California "Buy American"
measure largely protects the production and high prices realized in
other states of the Union. Defenders of the present measure have failed
to show that it protects essentially California economic interests.
International Implications
The second set of criticisms of the California Buy American Act
involve its international implications. California today leads all other
states of this country in employment, exports and imports. If it were
a nation, rather than a state, it would rank fourth among the member
countries of the O.E.C.D. as measured by "personal income." Repre-
senting a most important market for foreign products, California's
arbitrary and total exclusion created by the California Buy American
Act has been noted with increasing disfavor by our important trading
partners. The measure was singled out for criticism in the "Kennedy
Round" at Geneva; the Japanese government, partly with the Cali-
fornia measure in mind, now has the legal authority to discriminate
against foreign goods in its governmental purchases, a right which up
to now it has not used.
In 1965, California waterborne exports amounted to $2.07 billion
while its waterborne imports trailed only slightly with $1.95 billion. A
substantial share of California's exports are represented by agricul-
tural commodities, notably more affected by governmental intervention
than industrial commodities in international trade. Continued foreign
displeasure over the California Buy American Act in its present form
could well lead to open retaliation or hidden chicanery against these
California agricultural exports.
Legal Aspects
The last set of criticisms of the California Buy American Act con-
cern its legal status. Litigation in the courts centers on such questions
as to whether the act is compatible with sections of the Constitution of
the United States and whether the State of California has the right
to discriminate against foreign commodities in its public purchases if
"commercial resale" is involved. Decisions of the court and opinions
of the Attorney General of the State of California have not clarified
the complex situation and indeed, in some respects, only created addi-
tional confusion.
Purchasing Problems
A survey of public purchasing agents undertaken in the summer of
1966 brought out the legal uncertainties in which the typical Califor-
nia purchasing agent finds himself with regard to foreign bids. About
half of the units queried do not enertain foreign bids although many
of them fear that this constitutes a violation of their duty to buy
at the cheapest price. Moreover, if it were ruled that the California
Buy American Act does not apply to a given purchase, they might be
guilty of having paid more than necessary.
Among the other units that do purchase foreign materials, the legal
defenses for doing so were found to be different in each case. Some
12 SUBCOMMITTEE REPORT ON ECONOMIC DEVELOPMENT
used the GATT2 provision relating to "commercial resale." Others de-
fended their purchases on the grounds that domestic materials were
not available; still others used such special legal defenses as "home
rule."
In many cases, foreign purchases have brought about legal action on
the pari of domestic bidders who charged violation of the California
code. Litigation in this field appears to be costly and slow and it is
unlikely that many of the legal doubts discussed above will be resolved
in the near future. The California Legislature has a clear duty to re-
form the measure and to help remove from the state and its subdivi-
sions the legal existing uncertainties.
Obstacles to Repeal
During the past 33 years, certain California economic interests have
become accustomed to the protection afforded by the absolute ban on
foreign bids in public purchases. As is often the case, economic ar-
rangements grow up behind artificial protective barriers and become
part of the fabric. Against the benefits that would be gained from an
outright repeal of the California Buy American Act, a number of in-
dustry and labor groups have claimed great losses in production, em-
ployment and wage levels that would result from the admission of
Foreign materials into public purchasing. Some of the damages claimed
by these groups are purely imaginary or not related to the act ; compe-
tition for California labor in many of these instances comes from other
American states rather than from foreign countries, a competition
which the California Buy American Act does not relieve.
However weak the protectionist arguments for the retention of the
measure in the long run may be, short-run losses to some economic in-
terest groups from its repeal are not unlikely.
A Revised Buy American Act
A revised Buy American Act should aim to maximize a combination
of the following two objectives :
a, Obtain the long-term advantages of liberalization outlined
above.
b. Minimize the transitional adversities to allow a smooth trans-
fer into a more effective and more profitable employment of
California resources.
The following paragraphs outline some of the alternatives in which
these objectives could be achieved.
2 General Agreement on Tariffs and Trade.
CALIFORNIA BUY AMERICA ACT 13
II. THE ALTERNATIVES
Percentage Preference vs. Repeal
The elimination of a hard and absolute ban on foreign purchases
in the procurement of the State of California and its subdivisions as
contained in the present California Buy American Act poses two dis-
tinct logical problems :
a. What should be the ultimate margin of preference for domes-
tic as compared to foreign products? A margin of preference
of 0 percent would be tantamount to a repeal of the present
California Buy American Act. The abandonment of a com-
plete ban on foreign purchases implies that the margin of
preference would have to be less than infinite. Under Execu-
tive Order 10582 of 1954, the Buy American Act of the
United States government provides substantially for a do-
mestic preference of 6 percent.
b. Once the ultimate margin of preference has been established,
there is a choice as to whether it should be achieved immedi-
ately or after a delay in time ; also, whether the ultimate
margin of preference should be reached in one step or in
several.
The U.S. Buy American Act
On the problem of determining the ultimate preference, experience
with tfye United States Buy American Act might be valuable in guiding
the California Legislature in the modernization of the present Califor-
nia measure.
The Buy American Act of the federal government 3 was enacted on
March 3, 1933, about the same time as the California measure and for
similar reasons. Under it, United States government agencies are re-
quired to procure only domestic materials unless :
a. The head of the procuring agency determines their purchase
would be inconsistent with public interest ;
b. He determines their cost would be unreasonable ; or
c. They are not produced in the United States in sufficient and
reasonably available commercial quantities of satisfactory
quality.4
The major difference between the California and the United States
Buy American measures is contained under b ; the California measure
provides for an infinite preference of domestic over foreign products
or, to put it differently, an absolute ban of foreign materials in public
purchases. The United States measure instructs the purchasing agent to
buy foreign materials if the cost of the competitive domestic merchan-
dise ' ' would be unreasonable. ' '
3 41 U.S. Code 10-a-d.
i Bureau of the Budget, Staff Study on the Foreign Procurement of the United States
Government, 1963, p. 4.
14 SUBCOMMITTEE REPORT ON ECONOMIC DEVELOPMENT
The 25-percent Formula
While the act itself contained no criteria to define when domestic
cost was to be considered "unreasonable," the Treasury Department's
General Procurement Bureau ruled in 1934 that a domestic bid or
cost was not to be considered "unreasonable" unless it exceeded the
corresponding foreign bid by 25 percent.5 The protection actually
afforded the domestic supplier is greater than this apparent differential
because the foreign bid price on which the differential is based com-
monly includes the amount paid for United States import duties.
This "25-percent formula" remained in effect until 1951 when the
Department of Interior became dissatisfied with the level of prices
resulting from bids by "the small, powerful and closely knit groups
of domestic power equipment manufacturers that constituted its only
source of supply. " 6 It modified its procurement regulations authorizing
the secretary to determine the domestic cost was unreasonable if a
foreign bid afforded a total saving greater than $50,000, even though
the differential was less than 25 percent.7
Progressive Steps
The greatest progress in this field came during the administration
of President Eisenhower when in 1954 he issued an order which among
other things determined that a domestic bid price was unreasonable
and that purchase at that price was inconsistent with the public in-
terest if the domestic price exceeded the foreign price by 6 percent.8
Under the order, procurement agencies, however, did accept a do-
mestic bid even if it exceeded the 6-percent differential under the fol-
lowing five conditions :
a. Reasons of national interest.9
b. If the domestic bid w7as tendered by a small business firm,
then additional 6-percent differential for a total of 12 percent
was now permissible.10
c. If the domestic supplier produced the materials in an area
of "substantial unemployment" as determined by the Secre-
tary of Labor.11
d. Protection of essential national security interests.12
e. Whenever the head of an agency considers the domestic price
"reasonable," or domestic production "in the public inter-
ests."13 Under this section the TVA, for example, has ac-
corded domestic manufacturers a 20-percent preference justi-
fying the additional allowance on the ground that the
agency would incur excessive design and inspection cost
whenever it purchased foreign materials.
5 Laurence A. Knapp, "The Buy American Act ; a review and Assessment," Columbia
Law Review, Vol. 61, March 1961, p. 431.
8 Knapp, op. cit., p. 432.
7 Department of Interior, Order No. 2289, Amendment No. 1, September 26, 1951.
8 Executive Order No. 10582, paragraph 2, 19 Federal Register 8723 (1954).
9 Executive Order No. 10582, paragraph 3a, 19 Federal Register 8723 (1954).
10 Executive Order No. 10582, paragraph 3b, 19 Federal Register 8723 (1954) and
Bureau of the Budget Staff Study, op. cit., p. 5
" Executive Order No. 10582, paragraph 3c, 19 Federal Register 8723 (1954).
w Executive Order No. 10582, paragraph 3d, 19 Federal Register 8725 (1954).
"Executive Order No. 10582, paragraph 5, 19 Federal Register 8725 (1954).
CALIFORNIA BUY AMERICA ACT 15
Lessons From the Federal Experience
The lessons to be learned from federal experience toward reform of
the California Buy American Act are summarized :
a. If an ultimate level of preference of domestic over foreign
materials in public purchases has to be adopted, the range of
from 5 to 10 percent might prove acceptable to various eco-
nomic interests of this state.
b. A permanent margin of preference higher than 10 percent
may well produce a level of animosity equal to that shown
against the absolute prohibition contained in the current
measure.14
c. The 25-percent margin of preference maintained by the fed-
eral government between 1933 and 1954 was attacked with
great vigor by our allies and trading partners in the Mutual
Security Program and the North Atlantic Treaty Organiza-
tion. It is partly due to this pressure that the Executive Or-
der of 1954 came about with the reduced margin of prefer-
ence of 6 percent.15
Although the maintenance of a 6-percent preference is not likely
to prove popular with our major trading partners, it seems to have
become accepted as a "necessary evil of American protectionism."
Foreign powers and certain economic interest groups in California
might feel that this is a margin of preference they can live with and
abandon costly judicial litigation.
A 10-percent Margin
A margin of 10 percent, somewhat above the United States Buy
American preference, might be advisable in view of the fact that major
competition to domestic bidding in California public purchases comes
from Japan, often considered more capable than any other of the in-
dustrialized trading partners of underbidding important sectors of
United States industry. Japan's industrial structure, her unquestioned
lower wage level and her geographical location in relation to California
would appear to justify this higher protective margin.
The Gradual Approach
In view of what has been said above about the short-run impact on
California industries, it does not appear practicable to move at once
for outright repeal of the Buy American Act. Recent economic history
has shown that in the lowering of tariffs and removal of nontarirf
restrictions between countries seeking common markets and trade blocs,
the gradual approach has indeed mitigated the damages often gloomily
forecast by the protectionists. In the case of the European Economic
Community, the removal of "inner" tariffs and the adjustment of the
"national" to the new average "outer" tariff was achieved smoothly
in five stages of about two years each. The EFTA 16 has had similarly
14 See above, paragraph 5.
15 Knapp, op. cit., pp. 432 ff.
16 European Free Trade Association.
16 SUBCOMMITTEE REPORT ON ECONOMIC DEVELOPMENT
fortunate experiences with a five-step removal of "inner" tariffs, over
a somewhat shorter period.17
Initial Margin of Preference
Another problem is presented by the choice of the initial margin of
preference for domestic versus foreign commodities under a modified
Buy American Act. Here too, lessons might be applicable from the for-
mation of common markets and trade blocs. In the initial stage a high
margin of protection is retained, allowing domestic producers time for
adjustment, but putting them on notice that they will lose this pro-
tection over a scheduled number of stages. Unless the difference between
domestic and foreign bid prices in California procurement were to
widen considerably, an initial margin of 20-25 percent would afford
for most commodities virtually the same degree of protection as the
]) resent complete ban. This is derived from a sample of "bid sheets"
of public purchasing agents 18 submitted for the past three years and
from estimates made by the State Purchasing Agent in late 1963 19
for the year 1962. For 38 commodities, significant in state purchases,
foreign prices were lower than domestic prices by the following per-
centages :
0%- 5% cheaper 6 items
6%-10% cheaper 17 items
11%-15% cheaper 3 items
lG%-20% cheaper 6 items
21%-25% cheaper 1 item
2(i%-30% cheaper 5 items
Total: 38 items
No differentials above 30 percent were reported.
Applied to the above estimates, an initial margin of preference of
25 percent would have affected five of 38 items ; a margin of preference
of 20 percent, six. This assumes that domestic bidders would not have
responded to the change in bidding climate by lowering their prices.
Adjustment Steps
Once the initial margin and the ultimate margin have been set the
remaining problem is the number of adjustment steps between them
and the length of time each such adjustment allowed to take. From an
administrative point of view, the steps should be fairly steep and as
few as possible avoiding the need to adjust the margins frequently and
by small amounts. Also, they should not be permitted to last long enough
to allow for new economic arrangments to grow up behind the declining
walls. The}^ should be sufficient to allow domestic industry to adjust
prices and production of commodities affected by the change of pref-
erence margin. In the case of the European Economic Community and
the EFTA, steps of five years were found to be unnecessarily long and
the adjustment periods were shortened to about two years by unani-
17 Don D. Humphrey, The United States and the Common Market, Ch. 2, and the Sev-
enth, Eighth and Ninth General Report on the Activities of the European Eco-
nomic Community, Brussels, 1964-66.
18 D< tails of these differentials will be supplied in a later, more complete report.
'•Statement from P>. R. Cheyney to Assembly Committee on Ways and Means,
October 14, 1963, pp. 1-4.
CALIFORNIA BUY AMERICA ACT 17
mous consent of the member countries involved.20 A similar period
might be desirable in the adjustments of a modified California Buy
American Act.
Models for Adjustments
Assuming- that the act was adopted by the California Legislature in
1967 and the arrangements outlined above could become effective in
January of 1968, the following "models" could emerge :
Model I
Initial margin of preference (Step I) 25% applicable Jan. 1968-Dec. 1969
Step II preference 20% applicable Jan. 1970-Dec. 1971
Step III preference 15% applicable Jan. 1972-Dec. 1973
Step IV preference (ultimate) 10% from January 1974 on
Model II
Initial margin of preference (Step I) 20% applicable Jan. 1968-Dec. 1970
Step II preference 15% applicable Jan. 1971-Dec. 1973
Step III (ultimate preference) 10% applicable from Jan. 1974 on
Conclusion
It is believed that the adoption of this course of action would elimi-
nate the objectionable legal uncertainties of the present California
Buy American Act; it would reduce the cost of government of the
State of California by a substantial amount and help to enhance the
real economic welfare of the state. At the same time it would provide
sufficient time for adjustment and allow affected firms more productive
and profitable reemployment of resources.
20 Sidney Dell, Trade Blocs and Common Markets, pp. 37 ff., see also General Reports
of the European Economic Community.
ADDENDUM
WCUIWTO ADORSSS
■ TATB CAPITOL
SACAANINTO CALIP. •■•14
district oppics
10* a South loa Rg»'-»a
PAUMNA CALIFORNIA
committees
revenue and taxatios
Transportation and
commerce
WATER
WAYS AND MBANS
FRANK LANTERMAN
MEMBER Or ASSEMBLY. FORTY. SEVENTH DISTRICT
February 15, 1967
Honorable Robert W. Crown, Chairman
Assembly Ways and Means Committee
Room 2140
State Capitol
Dear Bob:
My position in support of the California "Buy American"
Act remains as firm as it was two years ago when I signed a
minority report objecting to any attempts to modify or repeal
this essential Act.
At that time I stressed that the Act does not increase the
cost of government because a governmental purchase of domestic
material generates 36% of the dollar amount of the purchase in
taxes .
I also pointed out that foreign practices, such as trade
cartels, government subsidation, dumping, price fixing and arti-
ficially low shipping rates were certainly unfair competition
to domestic producers operating under the free enterprise system.
The crisis concerning the United States in its imbalance
of international gold payments is still critical. In fact, it
worsened slightly in 1966 over 1965.
We must do everything possible to end this drain in order
to retain confidence and stability in the dollar. Any modifica-
tion or repeal of the "Buy American" Act would only aggravate
this drain.
I view the proposal by the Subcommittee on Economic Develop-
ment as merely another attempt to do away with this Act. The
end result of the new percentage proposal would be to expose our
domestic producers to the same unfair competition that they would
face under outright repeal of the Act.
Very
FL: fmm
F]
VI &E -CHAIRMAN
WAYS AND MEANS COMMITTEE
printed in California office of state printing
L 2641— 100 2-67 1M
Volume 21
Number 17
ASSEMBLY INTERIM COMMITTEE REPORT
1965-67
CALIFORNIA LEGISLATURE
ASSEMBLY INTERIM COMMITTEE ON
WAYS AND MEANS
REPORT OF THE SUBCOMMITTEE ON
FAIRS AND CONCESSIONS
on
LEASING OF THE DEL MAR
RACE TRACK
HALE ASHCRAFT
ANTHONY BEILENSON
FRANK RELOTTI
CARL BRITSCHGI
JOHN L. E. COLLIER
CHARLES CONRAD
PAULINE DAVIS
MEMBERS OF THE COMMITTEE
ROBERT W. CROWN, Chairman
BURT HENSON, Vice Chairman
LEROY GREENE
JOSEPH KENNICK
FRANK LANTERMAN
CHARLES MEYERS
JAMES MILLS
DON MULFORD
NICHOLAS C. PETRIS
CARLEY PORTER
HOWARD THELIN
JEROME WALDIE designee/;
JOHN WILLIAMSON
GORDON WINTON, JR.
GEORGE ZENOVICH
COMMITTEE STAFF
LOUIS J. ANGELO, Committee Coordinator JOHN SIMONS, Consultant
WILLIAM BARNABY, Consultant KEITH AXTELL, Legislative Intern
GAIL VESSELS, Committee Secretary
MARIA HUSUM, Secretary
Published by the
ASSEMBLY
OF THE STATE OF CALIFORNIA
JESSE M. UNRUH
Speaker
GEORGE ZENOVICH
Majority Floor Leader
JAMES D. DRISCOLL
Chief Clerk of the Assembly
CARLOS BEE
Speaker pro Tempore
ROBERT MONAGAN
Minority Floor Leader
LETTER OF TRANSMITTAL
Assembly Interim Committee on Ways and Means
February 3, 1967
To the Speaker and Members of the Assembly
Dear Mr. Speaker and Members :
Yonr interim Committee on Ways and Means, in accordance with
House Resolution 427, First Extraordinary Session of 1966, herewith
respectfully submits the final Subcommittee on Fairs and Concessions
report on the leasing of the Del Mar Race Track.
The chairman is appreciative of the outstanding efforts of the Sub-
committee, especially Chairman Hale Ashcraft and the Consultant,
William Barnaby, in this difficult and complex matter.
Respectfully submitted,
Robert W. Crown, Chairman
Hale Ashcraft
Anthony Beilenson
Frank Belotti
Carl Britschgi
John L. E. Collier
Charles Conrad
Pauline Davis
Leroy Greene
Joseph Kennick
Frank Lanterman
Charles Meyers
James Mills
Don Mulford
Nicholas C. Petris
Carley Porter
Howard Thelin
Jerome Waldie ( Resigned )
John Williamson
Gordon Winton, Jr.
George Zenovich
Hon. Robert W. Crown
Chairman, Assembly Interim
Committee on Ways and Means
Dear Mr. Chairman :
Transmitted herewith is the report of your Subcommittee on Fairs
and Concessions regarding the leasing of the Del Mar Race Track.
The valuable assistance of the Subcommittee members and other per-
sons cooperating in the study is greatly appreciated.
Sincerely,
Frank Belotti
Robert W. Crown
Leroy F. Greene
Hale Ashcraft, Chairman
Joseph Kennick
James R. Mills
John O. Williamson
(3)
ASSEMBLY INTERIM COMMITTEE ON
WAYS AND MEANS
Hon. Robert W. Crown, Chairman
Subcommittee on Fairs and Concessions
Report on
LEASING OF THE DEL MAR RACE TRACK
SUBCOMMITTEE MEMBERS
HALE R. ASHCRAFT, Chairman
FRANK BELOTTI JOSEPH KENNICK
ROBERT W. CROWN JAMES R. MILLS
LEROY F. GREENE JOHN C. WILLIAMSON
Staff
WILLIAM BARNABY, Consultant
GAIL VESSELS, Committee Secretary
MARIA HUSUM, Secretary
(5)
TABLE OF CONTENTS
Page
Introduction 1
Findings 10
Recommendations 11
Background 12
Preparation of New Master Lease 14
Information Withheld 16
Anticipated Bidders 17
Timing of Bid Award 19
Disapproval 22
Criticized Lease Provisions 23
Financial Issues 25
Appendix
Table I Eevenue Summary, 1965-66 28
22nd District Agricultural Association
Table II Expenditures Summary, 1965-66 29
22nd District Agricultural Association
Table III Net Financial Summary 30
22nd District Agricultural Association
Table IV Del Mar Attendance and Pari-mutuel History 31
(7)
INTRODUCTION
The Del Mar Race Track, located on the San Diego County Fair-
grounds, has been in operation since 1937. The track is owned by the
22nd District Agricultural Association, a state agency, which has leased
the facility to several different organizations over the years.
The initial lease, executed on December 8, 1936, has been extended
and amended several times and will expire on December 31, 1969. Leg-
islation enacted in 1963 set the stage for the first complete revision of
the lease and its award through competitive bidding procedures.
Preparation of a new master lease aroused great interest and strong
feelings in the San Diego area. An important economic factor in the
community, it held out prospects of substantial public revenues and
private profits. In this context, House Resolution 427 (Ashcraft) was
adopted during the 1966 first extraordinary session.
The legislation called for a study of ' ' Del Mar Race Track leases, and
matters related thereto, including, but not limited to, lease changes,
persons and parties, and terms and conditions, with specific emphasis
on the regulation and use of the Del Mar Track in the best interests of
the public." H.R. 427 was referred to the Interim Committee on Ways
and Means where, in turn, it was assigned to the Subcommittee on Fairs
and Concessions.
The Subcommittee held public hearings on this subject in San Diego
on August 17 and 18, 1966. Additional information was developed
through staff investigation and numerous interviews with personnel
connected with the many governmental agencies and private organiza-
tions involved.
(9)
FINDINGS
1. Undue secrecy surrounded the preparation of the new Del Mar
master lease and the conduct of bidding procedures. Expert advice was
not sought as is customary when government agencies undertake a
task for which they have little experience. While the leasing of a pub-
licly owned facility certainly is a matter of public business, the public
was systematically excluded from all deliberations prior to the adver-
tising for bids, as well as from how the bid process was proceeding once
underway. In this case, with high community interest and strong feel-
ings in clear evidence, the exclusion of the public from timely infor-
mation served to help stimulate rumors and undermine confidence in
the bidding process.
2. Unless Del Mar's crowd capacity is increased, neither the State
Treasury nor the 22nd District Agricultural Association will realize
maximum benefits from the track. The proposed new master lease does
not provide adequate safeguards that the necessary expansion will oc-
cur. The public interest certainly would not be served if the present
facility is returned in 1990, at the lease's expiration, in its existing size.
Safeguards against this eventuality are absent from the lease.
3. The failure of the new lease to assign responsibility either to the
lessor or to the new lessee for future capital outlay expenditures led to
an unclear bidding situation in which the two highest bids were based
on varying financial considerations.
4. District Agricultural Associations were established to operate and
conduct local fairs. Because of its unique ownership of a race track,
the 22nd District became engaged in affairs far greater in importance
than the normal business of conducting fairs. Policy decisions of the
22nd District Board of Directors can encourage or lessen the prospects
of earning increased millions for the State Treasury from racing at Del
Mar.
These decisions affect taxpayers throughout the State while the
22nd District, as all district agricultural associations, is entirely local
in composition. In this case, a more active role in making key policy
decisions by higher State agencies could well have proved helpful.
5. The planned execution of the new master lease prior to the 1967
session would have precluded the Legislature from considering rele-
vant proposals. No essential purpose was served by this arbitrary
deadline and, moreover, is proved impossible to meet.
6. Annual budgets of district agricultural associations escape the nor-
mal item-by-item review by the Legislature. A thorough review is
needed to determine whether tighter controls are feasible within the
limitations of the current financial support structure.
(10)
RECOMMENDATIONS
1. Existing laws and procedures governing the leasing of state prop-
erty, the awarding of franchises and concessions, be reviewed with
the aim of strengthening the availability of timely information. Trans-
actions involving millions of dollars in state revenues and private
profits must be unscrupulously open and fair.
2. Consideration be given to placing increased responsibility for
transacting the Del Mar lease with top level state agencies such as the
Department of Finance or General Services. The needs and interests
of the 22nd District certainly must be protected, but increased emphasis
is needed concerning the track 's capacity to earn revenues for the State
Treasury.
3. Consideration be given to enacting more specific guidelines to
which any lease beyond 1970 must conform. Capital improvements or
expansion, the lease term, possessory period, and maintenance are some
of the more important areas which warrant re-examination and more
precise provisions. Study should be given to alternative methods of
financing the track's expansion, including the issuance of revenue
bonds. At a minimum, the new lease should clearly indicate whether
the State or the new tenant will be expected to finance any expansion
projects.
( 11)
BACKGROUND
Exceptional as one of the very few publicly-owned "major league"
horse race tracks in the nation, Del Mar has had a colorful and, in
recent years, a controversial history.
The track grew out of a Works Project Administration project to
construct the San Diego County fairgrounds. When the WPA funds
for the project ran out, a group headed by singer Bing Crosby ad-
vanced the 22nd District Agricultural Association $600,000 to include
a horse racing track and complete the facility.
The loan, interest free, was to be repaid out of the Del Mar Turf
Club's rental for the track — 12^ percent of the track's share of the pari-
mutuel wagering handle.
Racing began at the track in 1937 and through 1941 the annual
meets steadily increased in attendance and amounts wagered. The fa-
cility was devoted to wartime uses from 1942 until racing was resumed
in 1945. Since then, the steady growth has continued with 1966 show-
ing almost $47 million bet during 42 racing dates, with more than
$3.4 million being paid to the State in parimutuel taxes and $466,525
in rent paid to the 22nd District.
Over the years, the master lease changed hands several times. In
1946, after recouping his investment, Crosby disposed of his interests.
Several sets of owners gained control for short periods until 1954 when
Texans Clint Murchison and Sid Richardson took over the master lease
in the name of Boys, Incorporated, a non-profit charitable organization.
When Boys, Inc., gained control, the master lease was renewed for
a 15-year period to expire December 31, 1969. Under a contractual ar-
rangement, operation of the track was turned over to the Del Mar
Turf Club with 90% of the net profit going to Boys, Inc., and the
other 10 percent to the Turf Club.
Legislative inquiries regarding the track in recent years have pro-
duced considerable controversy. In 1960, the Senate Fact Finding Com-
mittee on Governmental Administration issued a report * charging
many irregularities in management of the track including that the State
was not receiving its due benefits. A legal analysis 2 by the Committee's
Special Counsel, Albert B. Sheets, held that the initial 1936 lease of
the track was invalid, that there was no legislative way to validate
the agreement, and suggested that the 22nd District initiate "proceed-
ings for damages and trespass against the various unauthorized occu-
piers of the fairground site." Del Mar Turf Club President Donald
B. Smith filed a point-by-point rebuttal with the Committee.
To clear the air, a meeting subsequently was held in San Diego at-
tended by Attorney General Stanley Mosk, Director of Finance John
Carr, and representatives of the 22nd District, the Del Mar Turf Club
and Boys, Inc. Attorney General Mosk reportedly expressed his view
1 Examination of the 22nd District Agricultural Association, Senate Fact Finding
Committee in Governmental Administration, March 1960.
2 Supplement to the Examination of the 22nd District Agricultural Association. See
Note 1.
(12)
LEASING DEL MAR RACE TRACK 13
that the lease was valid and would remain in effect. To serve the State's
best interests, the parties to the lease were urged to resolve various
operating problems and to discontinue their disputes which had pro-
duced much unfavorable publicity.
Sound, cooperative and businesslike relationships between the 22nd
District and the Turf Club were not to be realized, however, and fric-
tion continued to exist practically up to the present time. There is
little usefulness in trying to place the blame for the friction but there
seems little doubt that it was not conducive to the best operation of
the track. For the record, Turf Club President Smith filed copies of
correspondence beginning in 1961 concerning various operating prob-
lems and the need for repairs and improvements.
Legislation authored by Assemblyman James R. Mills was enacted
in 1963 with the general aim of permitting competitive bidding on
a new master lease once the existing agreement expired. Section 87
of the Agricultural Code, as amended by the 1963 legislation, estab-
lished three requirements for a new lease. First, its terms must be more
favorable to the District and, secondly, it must be approved by the
California Horse Racing Board. Finally, any new lease "is not to be-
come effective until at least three years after it is signed. ' '
PREPARATION OF THE NEW MASTER LEASE
The 22nd District Board of Directors set up an executive com-
mittee, which began its work in the summer of 1965, to formulate terms
for the new lease. At the District's request for legal counsel, Deputy
Attorneys General Conrad Klein and Jay Shavelson were assigned to
assist in drafting the new agreement. Klein was then also serving as
counsel for the California Horse Racing Board and Shavelson had ac-
tively participated in drafting the State's tidelands oil leases. Klein
resigned from State service in November 1965 and Deputy Attorney
General Sanford Gruskin took over the major legal duties in the mat-
ter.
At no time during the many months of drafting and rewriting the
lease were the views sought of persons connected with horse racing
regarding the particular problems of that industry and how a lease
might take them into account. Deputy Attorney General Klein's work
for the Horse Racing Board represented the greatest source of expe-
rience and expertise in this area during the limited time he participated
in drafting the lease.
It is not uncommon governmental practice to seek expert advice in
matters outside of normal governmental functions or in areas not cov-
ered by established procedures. Unquestionably, the preparation of a
new lease for Del Mar was a unique endeavor for which virtually no
experience or expertise existed within the State agencies having statu-
tory responsibilities for carrying out this task. The failure to seek ex-
pert advice in this case, as candidly admitted in testimony to the* Sub-
committee, represents a major defect in the procedures used.
In addition to the 22nd District and its counsel furnished by the
Attorney General's Office, other agencies represented in the drafting
process were those having statutory responsibilities in this regard.
The District's parent agency, the Department of Agriculture, was rep-
resented by its counsel and officials of the Division of Fairs and Expo-
sitions. Legal staff of the Department of General Services, with whom
final approving authority rests, also were active participants in formu-
lating the new lease.
Since the original lease was executed on December 8, 1936, it had
been extended and amended by several sub-franchise agreements, the
last being a 15-year extension ending December 31, 1969. Drawing a
new master lease provided a singular opportunity to review the expe-
rience under the original lease and its extensions and to remedy past
defects.
This novel chance to redefine basic lease policy for Del Mar and the
widespread interest in the new agreement, not only among persons con-
nected with the horse racing industry but among the Southern Cali-
fornia public as well, combined to present a situation calling for an
open and free exchange of information on progress of the drafting
process. Instead, the several state agencies involved released practically
no information until the terms of the lease were announced in their
final, unalterable form.
(14)
LEASING DEL MAR RACE TRACK 15
While the new lease was a matter of great public interest, and while
it certainly was public business, the public and outside experts were
systematically excluded. In this context, it is not surprising that ru-
mors and unfounded charges were plentiful.
On June 13, 1966, the completed 40-page proposed lease was made
available by the District for a $5 fee along with an invitation for bids,
which explained the conditions under which bids would be considered,
and a questionnaire requesting financial, business, and biographical
background information on participating bidders.
Bidding on the 20-year lease was limited to a single factor — the an-
nual rental, computed as a percentage of each year's gross receipts.
Each bid proposal was required to be accompanied by a $195 process-
ing fee and a $250,000 performance bond in the form of a cashier's
check payable to the 22nd District. The deposit was to be returned to
unsuccessful bidders, and, in the case of the new master lease holder,
applied to the first year 's rental.
The bid invitation notice indicated that the State's financial return
would not be the sole criteria under which the District 's selection would
be made. Also to be considered were :
i c
a. Ability of proposer to undertake and fulfill the Lessee's ob-
ligations under the racing facilities lease agreement.
b. Ability of proposer to produce the highest possible financial
return to the State and to operate the leased facilities in the public
interest.
c. Financial responsibility of proposer.
d. Business and race track operating experience of proposer.
e. Character, morality, integrity, and reputation or proposer."
INFORMATION WITHHELD
111 response to inquiries, the 22nd District Board of Directors adopted
a policy not to disclose the names of persons or organizations who ac-
quired the bidding documents. The non-disclosure policy was justified
to the Subcommittee as a safeguard against collusion between bidders
should they know each others' identities. It was also seen as a device
to protect prospective bidders from the entreaties of a non-profit cul-
tural fund raising organization, COMBO, formally Combined Arts of
San Diego.
Although not challenged by the District's parent agency, the De-
partment of Agriculture, the policy was brought into question by a
Legislative Counsel's opinion which cited Section 84.2 of the Agricul-
tural Code :
"84.2. All records of the board, except entries in events sched-
uled for judging and for overnight entries in races on which there
is parimutuel wagering prior to such events, judging times, or
races, shall be open to inspection by the public during regular
office hours. ' '
Much discussion focused on this point during the August 17-18 hear-
ing but the policy remained unchanged until September 12, the sched-
uled bid-opening date.
As it turned out, all but one of the proposals came from expected
bidders although the group which submitted the high bid had orga-
nized very quietly and took practically everyone connected by surprise.
(16)
ANTICIPATED BIDDERS
Up to the time of bid-opening, several groups had expressed an in-
terest in the new master league. They included :
. . . Del Mar Associates, a group of about 50 San Diegans, whose
leadership generally was attributed to Mr. John S. Alessio, a promi-
nent local business and operator of the Caliente Race Track in Tijuana
for the Mexican Government for many years.
. . . Hollywood Turf Club, the organization which currently oper-
ates Hollywood Park in Inglewood. At one point in early 1966, the
Hollywood Turf Club submitted an offer to Boys, Inc. to take over the
remaining four racing seasons of the existing lease period. A vote to
accept this offer reportedly carried at a meeting of the Boys, Inc. Board
of Directors but, for some never disclosed reason, the matter was not
pursued further. Late in 1966, racing news media reported efforts by
the Hollywood Turf Club to gain control of the Golden Gate and Tan-
foran racing meets in northern California.
. . . Combined Arts of San Diego, popularly known as COMBO.
Following a very successful cultural fund drive, COMBO became in-
terested in channeling some of Del Mar's profits into local non-profit
activities. It promptly ran into a legal snarl. Subsequent to Boys, Inc.
gaining control of Del Mar, state law1 was amended in 1959 to pro-
hibit involvement of non-profit organizations in race track operations.
At that time, Boys, Inc. was "grandfathered" in. When the Attorney
General ruled that COMBO was ineligible to bid on Del Mar's new
lease, a court fight was threatened but has yet to materialize.
. . . Del Mar Race Track, Inc., a group which filed its incorpora-
tion papers only August 9, 1966. Shortly thereafter, plans to issue
$10 million of stock were announced. This group also was locally based.
The chief surprise of the bid opening ceremony was the authorship
of the high bid — 18.21 percent — by a quietly organized group of pro-
fessional people calling themselves the San Diego County Turf Club.
Under the escalator feature of the new lease, the base percentage
would constitute the rental share of the first $1,000,000 in gross re-
ceipts, increasing to 120 percent of the base percentage on the next
$1 million. On all gross receipts over $2 million, the escalator feature
would boost the rental to 150 percent of the base figure or 27.22 percent
under the San Diego Turf Club proposal.
The second highest bid was submitted by Del Mar Associates at a
base percentage of 11.42. The Hollywood Turf Club proposed 10.25
percent and the final bid accepted came from Del Mar Race Track Inc.
at 8.26 percent.
Boys, Inc. had informed the Subcommittee at the August 18 hearing
that it did not plan to participate in bidding on the new master lease.
A change occurred, however, and by letter to the District of Septem-
ber 7, Boys, Inc. expressed a desire to renew its lease for 20 years be-
1 Section 19482, California Business and Professions Code.
(17)
18 ASSEMBLY INTERIM COMMITTEE ON WAYS AND MEANS
ginning January 1, 1967. The Texas based non-profit group offered to
negotiate an annual rental with $600,000 as a guaranteed minimum,
and promised to begin expansion of the track facilities in the first year
of the new lease term. The 22nd District Board of Directors rejected
the Boys, Inc. proposal, holding that it did not follow bid form require-
ments and was not accompanied by a $250,000 performance bond.
Following opening of the bids at the San Diego County Fairgrounds
Administration Building, Conrad Klein, Counsel for the Hollywood
Turf Club, asked to inspect the financial statements and background
materials submitted by other bidders. Deputy Attorney General Grus-
kin, present at the meeting, thereupon ruled the information was con-
fidential until action was taken to award the lease.
Shortly after receipt of the bids, the lowest bidding organization,
the Del Mar Race Track Inc., requested that its bid be rejected in
order to permit return of its $250,000 performance bond. This request
was granted. Checks for similar amounts from the remaining three bid-
ders were endorsed by the District and deposited in the State Special
Deposit Fund. By this method, the interest on $750,000 accrued to the
State General Fund.
TIMING OF THE BID AWARD
The announced bid processing plan was timed to permit execution
of the lease by December 31, 1966. With the three-year statutory delay
prior to the lease's taking effect, the January 1, 1970 commencement
would provide an uninterrupted transition following expiration of the
current lease on the last day of 1969.
However, testimony before the Subcommittee clearly indicated that
execution of the lease could be held off well into 1967 and still produce
a lease to take effect before the 1970 racing season. While the differ-
ence of a few months in executing the lease would cause no financial
harm to the 22nd District or to the track's operators, it would greatly
affect the authority of the Legislature to deal with the situation.
Had the lease been executed prior to the convening of the 1967 leg-
islative session, Constitutional x safeguards against impairment of con-
tract by legislation would have stopped further action. However, since
execution has been delayed, legislation can be enacted to provide addi-
tional guidelines or conditions which the lease must meet.
Despite many requests to afford the Legislature an opportunity to
act further in this matter, the agencies concerned disclosed no inten-
tion to deviate from planned execution of the agreement before the
end of 1966. Events overtook the artificial deadline, however, and it
proved impossible to meet.
In the weeks immediately after the bid opening ceremony, very little
information was released as to how the bid processing was proceeding.
At a hearing on the lease by the Joint Legislative Committee on Fairs
and Allocations in San Diego on October 25, Arthur Martin, counsel
for the San Diego County Turf Club, indicated that the high-bidding
group had been requested to furnish additional data on its cost analy-
sis and projections. This information was being supplied, Martin as-
sured, but he said he knew of no similar requests of the other bidders.
On November 28, a special meeting of the 22nd District Board of
Directors was called for the purpose of receiving a report from the
Board's Executive Committee. At the outset of the meeting, Board
President R. R. Richardson stated that because of the special nature
of the meeting, no one would be allowed to participate other than
Board members.
The Executive Committee report found that the "proposed opera-
tions of the high bidder leave sufficient doubt as to the ability of the
high bidder to satisfy its obligations pursuant to its proposal" and
recommended award of the new lease to the second highest bidder, the
Del Mar Associates. Directors Richardson, Lipton and McCormick
signed the report.
A minority report was filed by Director Robert 0. Curran, who
stated that "under our American system a person is permitted to risk
his capital if he so desires". Curran went on to note that a greater
return to the District would be realized from the high bid and con-
1 State Constitution Art. I Sec. 16
U.S. Constitution Art. I Sec. 10
(19)
20 ASSEMBLY INTERIM COMMITTEE ON WAYS AND MEANS
eluded, "I see no reason why the high bidder should not be given the
opportunity to show that it can produce the results which it antici-
pates."
After the reports were read, Director Sugarman moved adoption ot
the Executive Committee report and was seconded by Director Moeser.
The roll call vote on the motion was 8 to 1 in favor, with only Director
Currau dissenting.
A similar roll call vote authorized Board President Richardson and
District General Manager Welch to sign the new lease.
During the course of the 40-minute meeting, representatives of the
Hollywood Turf Club and the San Diego County Turf Club attempted
to be heard. Board President Richardson denied these requests because
of the special nature of the meeting.
Press accounts of the meeting said that both remaining unsuccessful
bidders, the Hollywood and San Diego County Turf Clubs, indicated
they intended to pursue the matter further through the courts.
The District's action in approving the proposal of Del Mar Asso-
ciates, and by-passing a bid roughly 60 percent higher, kept the con-
troversy over the new lease very much alive. The Del Mar situation
became a daily news item as events followed rapidly.
Assemblyman Charles Chapel asked the Attorney General's Office to
investigate the District's action. A thorough review was promised.
General Services Director Harkness said that material the District
had disclosed to him the previous week "was not sufficient to throw
out the highest bid. ' ' But he noted the possibility of later information
which he had yet to see.
Governor-elect Ronald Reagan expressed concern over the lease at a
November 30 press conference. William Clark, Jr., soon to take office
as cabinet secretary, was assigned the task of gathering relevant data
and advising the new chief executive.
On December 1, the Los Angeles Times editorially called for sus-
pension of all action on the lease until a "thorough investigation" of
the matter could be completed.
The next day, a long-time member of the 22nd District Board of Di-
rectors, Harry B. Sugarman, issued a press release defending the
Board's action. "On the basis of projections developed from figures ob-
tained from other leading California tracks", the release stated, "it
was obvious . . . that not only was the extremely high bid of the San
Diego County Turf Club unrealistic, but it also precluded the possi-
bility of survival. ' ' Sugarman cited an analysis made by District Gen-
eral Manager Roy Welch which concluded that the SDCTC would be
a bankrupt tenant within a few years.
Sugarman 's charges were promptly denied by SDCTC Chairman
Paul Carter, who pointed out that his group had filed partnership
statements approaching $20 million in net worth.
^ Meanwhile, plans for a $30 million construction program in connec-
tion with the track were revealed by Del Mar Associates leader John
S. Alessio. Rebuilding of the grandstand and clubhouse at a cost of
$6 million was planned to increase the number of seats from 6,900 to
12,612. Using the normal rule of thumb for measuring race track crowd
capacity — the number of seats times three — the new facility would ac-
LEASING DEL MAR RACE TRACK 21
commodate crowds up to 36,000. Other parts of the construction plans
included the dredging of a marina, building a high rise hotel, and an
oceanfront development consisting of a complex of motels and condo-
minium apartments. Alessio termed his ambitious project the "Riviera
of the West."
At the same time, the required review by the Departments of Gen-
eral Services and Agriculture was proceeding. The development of com-
parative financial projections for each of the three remaining active
bids was undertaken by General Services.
DISAPPROVAL
At the suggestion of General Services Director Harkness, all inter-
ested administrative agencies met in San Diego during the last week
of December to discuss General Services' analysis of the proposed lease.
Two days of closed meetings were held. At the conclusion, Harkness
announced that he could not approve "the suggested lease with the
second bidder," thus leaving the lease unsigned as the December 31
deadline came and went.
The General Services' analysis found the high bid of the San Diego
County Turf Club as "apparently economically feasible" in contrast
to the 22nd District 's unfavorable view.
In making the announcement, Harkness was also critical of the lack
of provisions in the lease for capital improvements. This point had
been the subject of considerable disagreement between subcommittee
members and administrative officials involved in preparing the lease.
The comments of Harkness appeared to reflect an important change in
thinking regarding a major provision of the lease.
Surprise was expressed at Harkness' decision by 22nd District Presi-
dent R. R. Richardson. A meeting of the District Board of Directors
on January 3 decided to give further study to the remaining alter-
natives :
1. Reject all bids and call for new ones.
2. Award the lease to the high bidder, the San Diego County Turf
Club. Harkness' disapproval of the Del Mar Associates bid for not pro-
viding an adequate financial return to the State would also seem to rule
out awarding the lease to a lower bidder, the Hollywood Turf Club.
3. Extend the present lease to Boys, Inc., as that organization had
proposed to the District.
4. Negotiate a new lease, presumably with one of the bidders, on a
non-competitive basis.
The direction taken by the District should be closely examined by the
Legislature. So far, the way in which the new lease has been handled
has not been in manner to add to the stature of State Government.
The enactment of more specific guidelines by the Legislature could help
greatly in completing arrangements for a new lease in a more open and
timely fashion.
(22)
CRITICIZED LEASE PROVISIONS
Many of the provisions of the new master lease came under heavy
fire from prospective bidders, horse racing and breeding interests and
track operators.
Most frequently assailed was the absence of provisions for capital out-
lay improvements or expansion of the track. Constructed some 30 years
ago, Del Mar's facilities will be more than 50 years old at the expiration
of the new master lease. Some safeguards are needed, critics felt, that
the track not be returned in 1990 in virtually its present condition,
only older.
At the same time, there was general agreement that expansion of the
track's crowd capacity is necessary if the full benefits of the facility
are going to be realized.
The lease 's silence on this point was defended on the grounds that it
would leave the District free to work out a mutually satisfactory arrange-
ment with the new tenant. Additionally, officials who assisted the draft-
ing process argued that requiring a new lease to finance a major track
expansion would have "chilled the bidding" or seriously discouraged
participation.
Testimony to the Subcommittee on this point cited the probable diffi-
culty in obtaining substantial state funds for a Del Mar expansion proj-
ect, but the high-bidding group, within a few weeks after bid-opening,
disclosed to the press that its bid was based to some extent on the as-
sumption that the state would spend at least $8 million in expanding
the track.
In contrast on this same point, Del Mar Associates announced plans
for a $30 million capital outlay program including construction of a
new grandstand and turf club. Private financing was planned for much
of this development, but the group seemed to look to the State for the
capital to build a new grandstand. The bidding process would have been
helped, and the State 's best interests better protected, it was contended,
had a more precise commitment or statement of future plans been in-
cluded in the lease.
The 20-year period of the lease was criticized as too long and use of
a shorter term with options was one alternative raised.
Until the present, the Del Mar Turf Club has been using executive
offices and equipment shops on the premises. Continued use of these
facilities was not provided in the new master lease and this also drew
some criticism.
In testimony before the Subcommittee, representatives of the current
track operator emphasized the need for year-round maintenance of
the racing strip and pointed out that the new lease provided for pos-
session of the premises only 10 days before and 15 days after the annual
racing meet.
The new lease was also cited as precluding the annual yearling sale
which the current operators conduct and which has become recognized
(23)
24 ASSEMBLY INTERIM COMMITTEE ON WAYS AND MEANS
as a major Southern California Social event, much to the enhancement
of the track 's reputation.
Another provision drawing criticism was Article XIV which would
allow termination of the lease if the District finds that operation of the
track is bringing " discredit' ' and "disrepute" to horse racing in Cali-
fornia. No action is required by the Horse Racing Board in this connec-
tion, a factor which led critics to question why the District should in-
volve itself in the regulation of horse racing, a function specifically
assigned to the Horse Racing Board.
Lengthy discussion at the Subcommittee hearing centered on the
possibility of amending or modifying the new lease after it has been
awarded. Testimony by the District's representatives was somewhat
unclear. Operating problems stemming from some of the lease's terms
could be resolved through negotiations, according to 22nd District
President R. R. Richardson, but no major changes were contemplated or
felt proper subsequent to lease execution. At the same time, Deputy
Attorney General Gruskin advised that technically almost any provision
of the lease could be modified subject to agreement by the parties to
the lease and approval by the agencies whose consent is required by
law.
The failure of the new lease to waive the rent on the three charity
days each racing season was contrasted in testimony before the Subcom-
mittee with provisions of leases involving Hollywood Park and Golden
Gate Fields.
The lease was also faulted for failing to establish some mechanism for
rapidly dealing with the many operational problems that will arise and
to coordinate necessary planning.
This listing does not exhaust the criticisms of the lease presented in
testimony to the Subcommittee and in statements reported in the press.
But is an indication of the type and extent of critical comment that the
proposed agreement prompted.
FINANCIAL ISSUES
Two separate sources of revenues are generated by horse racing at
Del Mar, the track rental collected by the 22nd District and the pari-
mutuel tax which goes into the State General Fund and the Fair and
Exposition Fund.
The rental fees collected by the District are deposited directly to that
agency's bank accounts. Expenditure of these funds may be made only
for purposes authorized in the District's approved annual budget. The
1966 rental, $466,565, was up 3.9 percent over the previous year. Of
the District's revenues in recent years, the track rental has accounted
for more than 40 percent of the total. See Table I in the Appendix
for a more detailed revenue statement.
Existing law 1 delegates to the Department of Finance the final ap-
proving authority for agricultural associations' budgets. In practice,
officials of the Fairs and Expositions Division (within the Department
of Agriculture) technically serve as Finance personnel for the purpose
of reviewing these budgets. After receiving the budget requests, Fairs
and Expositions Division staff frequently meet with fair managers to
examine supporting information in detail. The decisions reached
through this process usually constitute the final budget action.
The usual item-by-item budget review by the Legislature is avoided
by district agricultural associations mainly because of the nature of
their financial support. Their own revenues provide the primary operat-
ing funds. In addition, Section 19627 of the Business and Professions
Code provides a continuing annual appropriation, on a basis of need,
of up to $65,000 to each district association. Because of its substantial
revenue earnings, the 22nd District is one of the two agencies of its
kind that does not receive an allocation of Section 19627 funds.
District revenues from the track are certain to increase substantially
under the new master lease. The annual rental will be based on gross
receipts, with a $600,000 minimum, rather than on the betting handle
as under the existing lease. In this manner, the District will gain new
sources of revenue from items such as parking and concessions.
Plans for spending this increased revenue have never been made
clear by the District. At the August 17 hearing of the Subcommittee,
District representatives advised that master planning for the future
awaited the acquisition of an additional 48.8 acres. The additional land,
being acquired through condemnation, is to be financed by a 5-year
$250,000 General Fund loan made under item 396 of the 1966 Budget
Act. The loan is repayable at 4f percent interest.
More detailed statements of operating expenditures and financial
condition of the 22nd District may be found on Tables II and III in
the Appendix.
According to audit reports examined by the Subcommittee, profits
under the existing lease have not been unusually large either for the
Del Mar Turf or Boys, Inc. For 1965, the last year for which complete
1 Section 92, Agriculture Code
(25)
26 ASSEMBLY INTERIM COMMITTEE ON WAYS AND MEANS
financial information exists, the main figures for the Del Mar Turf
Club were as follows :
Parimutuel Handle $45,113,303
Parimutuel tax 3,302,837
Rent to 22nd District 440,012
Returned to bettors 28,218,338
Total earnings 4,602,108
Total expenses 4,564,853
Payment to Boys, Inc. 364,817
Federal admission tax* 148,716
Local admission tax 60,322
Net after federal income taxes 25,755
The other, and more substantial, form of revenue produced at Del
Mar consists of the pari-mutuel tax. From all tracks, the State col-
lected $48.7 million in fiscal 1965-66 of which $3.3 million was derived
from Del Mar. Most horse racing revenues find their way into the Gen-
eral Fund ($40.3 million in 1965-66) with lesser amounts going to
the Fairs and Exposition Fund ($7.7 million in 1965-66) to aid in the
support and capital outlay expenditures of district and county fairs.
Also, a fixed annual amount of $750,000 is deposited in the Wildlife
Restoration Fund.
State parimutuel taxes come from two sources :
1. A 14 percent "take out" on the total amount bet at a racing
meet distributed thusly :
State share Tract share
First $10 million 5% 9%
$10 million to $20 million 6 8
$20 million to $75 million 7 7
$75 million to $125 million 7.5 6.5
$125 million and over 8 6
2. Half of the "breakage" on the first $24 million bet and all of
the breakage over that amount. Winning bets are paid off in
multiples of 10^, the excess cents becoming "breakage". Exam-
ple— $2 win bets that mathematically should pay $3.80 with 7
cents breakage on each $2 bet.
The "take out" and "breakage" average 15.3 percent of the total
amount wagered.
Expansion of Del Mar's current 19,000-20,000 crowd capacity is the
key to increasing revenue both for the State General Fund and for the
22nd District. Escalator features both of pari-mutuel tax rates and the
rental formula contained in the new lease would produce substantially
increased revenues as crowd capacity and betting expands at Del Mar.
^ While none of the State agencies involved in preparation of the lease
disputes the importance of track expansion, there is no assurance in
the lease that such expansion will take place. The failure to require
a capital outlay program led to an uncertain bidding situation.
* Federal admission tax discontinued in 1965.
LEASING DEL MAR RACE TRACK 27
District Agricultural Associations were created essentially to operate
and conduct local fairs. Over the years, a few of these agencies have
become engaged in other enterprises. The ownership of a "major
league ' ' race track provides the 22nd District with a unique and highly
valuable source of revenue. It also gives the District a major voice
in policy matters affecting the prospects of earning increased millions
for the State Treasury from pari-mutuel taxes.
In this framework, it would appear that higher State agencies, more
removed and disinterested, might well have taken a stronger role in
determining basic policies incorporated into the lease. By their very
nature, agricultural associations are entirely local in composition.
Instead of providing leadership and direction in this matter, the
major State agencies involved — The Departments of Justice, General
Services and Agriculture limited their activity to "servicing a client".
In this instance, millions of tax dollars are at stake while tax revenue
sources are almost desperately sought. The diligent attention and active
efforts of top level state officials are warranted to help insure that
the maximum public benefit is derived.
28
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LEASING DEL MAR RACE TRACK
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30
ASSEMBLY INTERIM COMMITTEE ON WATS AND MEANS
NET FINANCIAL SUMMARY
22ND DISTRICT AGRICULTURAL ASSOCIATION
Total
operating
expenditures
Total
operating
revenues
Net
operating
revenues
Capital
outlay
expenditures
1965
$973,446
877,695
922,935
796,429
802,248
727,047
626,710
582,513
528,554
517,577
$1,068,476
1,015,917
1,029,816
973,854
951,500
844,360
810,701
783,272
726,508
674,501
$95,030
138,222
106,881
177,425
149,072
117,313
183,991
200,758
197,954
156,924
$62,728
1964
249,422
1963 -
313,179
1962.
87,005
1961 .
61,093
I960.
162,980
1959.
63,839
1958
267,363
1957. .
78,039
1956.
103,197
Source : Annual Report on Operations, California Fairs, Audits Division, Dept. of
Finance.
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A
L 2642— 100 2-67 1M
printed in California office of state printing
ASSEMBLY INTERIM COMMITTEE REPORT
1965-67
Volume 21 Number 18
CALIFORNIA LEGISLATURE
ASSEMBLY INTERIM COMMITTEE ON WAYS AND MEANS
REPORT OF THE SUBCOMMITTEE ON HEALTH,
EDUCATION AND WELFARE SERVICES
on
DRUG PRICES
HALE ASHCRAFT
ANTHONY BEILENSON
FRANK BELOTTI
CARL BRITSCHGI
JOHN L. E. COLLIER
CHARLES CONRAD
PAULINE DAVIS
MEMBERS OF THE COMMITTEE
ROBERT W. CROWN, Chairman
BURT HENSON, Vice Chairman
LEROY GREENE
JOSEPH KENNICK
FRANK LANTERMAN
CHARLES MEYERS
JAMES MILLS
DON MULFORD
NICHOLAS C. PETRIS
CARLEY PORTER
HOWARD THELIN
JEROME WALDIE (Resigned)
JOHN WILLIAMSON
GORDON WINTON, JR.
GEORGE ZENOVICH
COMMITTEE STAFF
LOUIS J. ANGELO, Commiffee Coordinator JOHN SIMONS, Consultant
WILLIAM BARNABY, Consultant KEITH AXTELL, Legislative Intern
GAIL VESSELS, Committee Secretary
MARIA HUSUM, Secretary
Published by the
ASSEMBLY
OF THE STATE OF CALIFORNIA
JESSE M. UNRUH
Speaker
GEORGE ZENOVICH
Majority Floor Leader
CARLOS BEE
Speaker pro Tempore
ROBERT MONAGAN
Minority Floor Leader
JAMES D. DRISCOLL
Chief Clerk of the Assembly
LETTER OF TRANSMITTAL
Assembly Interim Committee on Ways and Means
California Legislature
February 3, 1967
To the Speaker and Members of the Assembly
Dear Mr. Speaker and Members :
Your Interim Committee on Ways and Means, in accordance with
House Resolution 710 (v), 1965 General Session, herewith respectfully
submits the final report of the Subcommittee on Health, Education,
and Welfare Services on the subject of drug prices.
The report was adopted by 9 of the 10-member subcommittee
and we, the undersigned, concur in their finding^and recommendations.
The chairman is appreciative of the skillful leadership provided by
Subcommittee Chairman Nicholas C. Petris and the diligent application
of the subcommittee members and its staff.
Respectfully submitted,
Anthony Beilenson
Frank Belotti
Carl Britschgi
Charles J. Conrad
Leroy F. Greene
Burt M. Henson
Joseph M. Kennick
Charles W. Meyers
Robert W. Crown, Chairman
James R. Mills *
Nicholas C. Petris
Carley V. Porter
Howard Thelin
John Williamson
Gordon Winton
George Zenovich
* With reservations
(3)
ASSEMBLY INTERIM COMMITTEE ON WAYS AND MEANS
ROBERT W. CROWN, Chairman
Report of the Subcommittee on Health, Education,
and Welfare Services
NICHOLAS C. PETRIS, Chairman
on
DRUG PRICES
Members of the Subcommittee
ANTHONY BEILENSON CHARLES MEYERS
FRANK BELOTTI DON MULFORD
CHARLES CONRAD HOWARD THELIN
LEROY GREENE GORDON WINTON
JOSEPH KENNICK
Staff
JOHN H. SIMONS, Consultant
GAIL VESSELS, Committee Secretary
MARIA HUSUM, Secretary
( •> )
2— L-2643
LETTER OF TRANSMITTAL
Hon. Robert W. Crown, Chairman
Assembly Interim Committee
on Ways and Means
Dear Chairman Crown :
In accordance with House Resolution 710 (v), 1965 General Session,
the Subcommittee on Health, Education, and Welfare Services here-
with submits its report on drug prices.
The resolution requesting interim study of this subject was HR 559
(Mills), 1965 General Session.
The subcommittee is grateful to all who participated in the public
hearing as well as those who communicated with the subcommittee and
its able consultant, Mr. John Simons.
Respectfully submitted,
Nicholas C. Petris, Chairman
Anthony Beilenson
Frank P. Belotti
Charles J. Conrad
Leroy F. Greene
Joseph Kennick
Charles W. Meyers
Howard J. Thelin
Gordon Winton
( 6 )
TABLE OF CONTENTS
Page
Summary of Recommendations 9
Introduction 10
Recommendations and Findings
The Professional Fee 11
Level of Professional Fee 1
Table I 13
Table II 15
Table III 16
Determination of Drug Cost 18
Trade Name and Generic Drugs 19
Multiple Pricing Practices 20
Quality of Drugs 20
Administrative Reforms 21
State Board of Pharmacy 22
Conclusion 23
(7 )
SUMMARY OF RECOMMENDATIONS
/. THE PROFESSIONAL FEE
The subcommittee recommends that the Health and Welfare Agency change
the method of reimbursing pharmacists under the Medi-Cal Program from the
present "cost plus 50 percent plus $1.15" formula to a "cost plus fixed pro-
fessional fee" per prescription filled as one method of reducing total pharma-
ceutical expenditures without reducing incomes of pharmacists.
//. LEVEL OF PROFESSIONAL FEE
The subcommittee recommends that in converting to the professional fee,
average service charges by pharmacists under the present formula ($2.05)
should not be reduced, nor should pharmacists7 service charges be increased,
without an extensive study by the Health and Welfare Agency in conjunction
with the Department of Finance as to what constitutes a reasonable rate of
reimbursement for pharmacists.
III. DETERMINATION OF DRUG COST
The subcommittee recommends that in determining the reimbursement to
pharmacists for the cost of the pharmaceutical product dispensed, the Health
and Welfare Agency should consider the feasibility of reimbursing upon a
fixed wholesale cost basis, rather than the present variable acquisition cost
system.
IV. TRADE NAME AND GENERIC DRUGS
The subcommittee recommends that the present Medi-Cal regulation allow-
ing physicians to authorize or prohibit the dispensing by pharmacists of less
expensive generic equivalent drugs be continued as another means of effect-
ing economies consistent with the professional judgments of physicians and
pharmacists.
V. MULTIPLE PRICING PRACTICES
The subcommittee recommends that the Legislature consider ways of elim-
inating the alleged multiple pricing practices of certain drug manufacturers,
which inflates the wholesale costs of drugs to community pharmacies through
which the vast majority of state pharmaceutical expenditures are channeled.
VI. QUALITY OF DRUGS
The subcommittee recommends that the Legislature explore means of pro-
viding the public greater safeguards against the manufacture and distribution
of drug products of questionable quality and efficacy.
VII. ADMINISTRATIVE REFORMS
The subcommittee recommends that the Health and Welfare Agency, work-
ing with the fiscal intermediary (California Physicians Service) and others,
should institute improved administrative procedures to alleviate certain unde-
sirable practices affecting the pharmaceutical aspects of the Medi-Cal Program.
VIII. STATE BOARD OF PHARMACY
The subcommittee recommends that the State Board of Pharmacy should
establish a subcommittee to consider the equity of existing regulations relating
to the operation of hospital pharmacies, so that interested parties, such as
the California Hospital Association, hospital pharmacists, and others, together
with the state board, might consider problems of mutual concern on an on-
going basis.
(9)
INTRODUCTION
House Resolution 559 (Mills, 1965), calling for a study of drug
prices, was assigned to the Assembly Interim Committee on Ways and
Means. The Subcommittee on Health, Education and Welfare Services
conducted an investigation, including one public hearing on November
22, 1966. The subcommittee wishes to extend its appreciation to the
many individuals and organizations that provided assistance during
the study.
The subcommittee focused on the pharmaceutical aspects of the Medi-
Cal program (the state medical assistance program for welfare re-
cipients). Total Medi-Cal pharmaceutical expenditures during fiscal
1966-67 are estimated at $40 million, which represents about 90 percent
of total state expenditures for drugs. While actual Medi-Cal expendi-
tures to date suggest that the amount budgeted for pharmaceuticals
will not be exceeded at the end of fiscal year 1966-67, Medi-Cal's total
health care expenditures are expected to exceed the Medi-Cal budget by
$30-$60 million. Seen in light of these developments the importance of
controlling all medical expenditures, including that sizeable portion for
drugs and pharmacists ' services, is paramount.
It is important to distinguish initially between costs of drugs and
costs of services rendered by pharmacists in dispensing these drugs.
Of the average total Medi-Cal prescription charge paid by the state
($3.90), $1.85 is estimated to be the average cost of the drugs dispensed,
while $2.05 is the average service charge by pharmacists (based on a
50-percent of cost markup plus a $1.15 filling fee). These two elements
of total Medi-Cal pharmaceutical expenditures are analyzed in greater
detail below.
(10)
RECOMMENDATIONS AND FINDINGS
I. THE PROFESSIONAL FEE
The subcommittee recommends that the Health and Welfare Agency change
the method of reimbursing pharmacists under the Medi-Cal program from the
present "cost plus 50 percent plus $1.15" formula to a "cost plus fixed pro-
fessional fee" per prescription filled as one method of reducing total pharma-
ceutical expenditures without reducing incomes of pharmacists.
The professional fee system of reimbursing pharmacists has two
attractive features. First, it enhances the professional status of pharma-
cists by emphasizing that it is a professional service which the pharma-
cist renders to the public, just as the physician and dentist are reim-
bursed for their professional services and that this professional service
is the same for every prescription filled regardless of the cost of the
drug product dispensed. Second, it can be a source of significant sav-
ings to the purchaser of pharmaceuticals in that it removes the economic
incentive to stock and dispense only higher priced drug products.
Under the present combination mark-up and filling fee formula, the
pharmacist's return is clearly greater when a higher priced drug is
dispensed. Often a prescribed drug is produced by more than one manu-
facturer, and the resulting wholesale cost may vary considerably. For
example, one manufacturer's drug may cost the pharmacist $1 ; the
price of a second manufacturer's equivalent product may be $3. Using
a 50-percent markup plus a $1.15 filling fee, the resulting prices to the
purchaser are $2.65 (a margin of $1.65), and $5.65 (a margin of $2.65).
The pharmacist clearly has an economic incentive to stock and dispense
the higher priced product producing for him the greater margin.
The professional fee, however, removes this incentive. For the same
drugs illustrated above, when a fixed professional fee of, say, $2 per
prescription is used, the cost to the purchaser is $3 and $5 respectively,
but the pharmacist's margin is the same in both cases ($2). Gone is the
financial incentive to dispense the higher priced product, and the pur-
chaser has saved $2.
It would appear, then, that the State of California could save con-
siderable money by converting to the professional fee system. Recalling
the earlier distinction between cost of the drug product and cost of the
services of pharmacists, the professional fee would likely lead to the
dispensing of more lower priced drug products of acceptable quality to
pharmacists, and hence reduce state expenditures for drugs alone, with-
out reducing incomes of pharmacists.
The savings to be effected by use of the professional fee system con-
stitute the major reason for its growing support by the federal govern-
ment, including the prestigious General Accounting Office. It is note-
worthy too that the American Pharmaceutical Association supports
vigorously the professional fee concept.
While it is difficult to estimate the amount of money which the pro-
fessional fee would save the state, one pharmacist, Mr. Morris Boynoff,
representing the Alameda and Contra Costa County Pharmaceutical
(11)
[2 WAYS AND MEANS COMMITTEE REPORT
Associations, reported to the subcommittee that since his conversion to
the professional fee concept for his predominantly private clientele,
ho has " doubled or tripled" the number of less expensive drug prod-
ucts of acceptable quality now stocked and dir^ensed regularly in his
pharmacy, and that his clients (and their prescribing physicians)
seemed "well satisfied7' by the economies achieved.
In his testimony before the subcommittee, Mr. Boynoff explained
the effect of the professional fee on relationships between pharmacists
and drug manufacturers :
The separation of earnings from wholesale cost causes an impor-
tant shift in the pharmacist's relation to the drug manufacturer.
Pharmaceuticals lose all the attributes of merchantable commodi-
ties and become merely supplies requisite to one's practice. The
manufacturer is no longer an important "teammate," and is rele-
gated to what appears to me to be his proper position, that of
supplier. No longer is the fee-pharmacist little brother to an in-
dustry, a link in its distributive chain. His fortunes are not tied
to the vicissitudes faced by the large corporations engaged in drug
manufacturing, and he acquires the economic independence from
his suppliers which encourages adoption of a critically objective
view of their products and of their behavior. The cumulative effect
of this alone can contribute significantly to lowered drug costs.
The possibility of reimbursing pharmacists according to "their usual
and customary" charges has been suggested to the subcommittee, it is
significant, however, that AB 5 (Casey, 1965) does not direct the Health
and Welfare Agency to use this method of reimbursement. It does state
that in determining reimbursement rates of physicians "there shall be
taken into consideration the customary charge for similar services gen-
erally made by the physician, as well as the prevailing charges in the
locality for similar services" (Article 3, 14104c). "Payment for services
to hospitals and other facilities and professional services shall be predi-
cated on the basis of reimbursement for reasonable cost based on stand-
ards, determined by the director with the advice of the Medical Ad-
visory Committee" (Article 3, 14104b). In short, AB 5 may permit
the Health and Welfare Agency to use the usual and customary fee
method for pharmacists, but it does not direct the agency to do so.
The subcommittee doubts whether use of the usual and customary fee
method of reimbursement for pharmacists at this time would be either
practical or sound public policy. It would have none of the advantages
of the professional fee concept, and it would make difficult the control
of expenditures under the program, largely because of the wide dis-
parity in pricing practices by pharmacists for identical prescrip-
tions. Table I documents the tremendous range in retail prices prevail-
ing in the San Francisco Bay area for identical prescriptions, all of
which are for drugs manufactured by only one manufacturer. For ex-
ample, 50 Donnatal tablets can be purchased for $1.29 at one pharmacy
and $3.40 at another ; and the price of 12 Empirin with codeine tablets
varies from $.94 to $3.50. Moreover, there is a great variation of prices
within the ranges cited. As an example, the 45 prescriptions for Phener-
gan expectorant with codeine include 22 different prices, and the 24
Donnatal prescriptions include 13 different prices.
HEALTH, EDUCATION, AND WELFARE SERVH ES
13
II. LEVEL OF PROFESSIONAL FEE
The subcommittee recommends that in converting to the professional fee,
average service charges by pharmacists under the present formula ($2.05)
should not be reduced, nor should pharmacists' service charges be increased,
without an extensive study by the Health and Welfare Agency in conjunction
with the Department of Finance as to what constitutes a reasonable rate of
reimbursement for pharmacists.
The present formula (cost plus 50 percent phis $1.15) was set in
1957, and has remained unchanged for nearly a decade. On the aver-
age Medi-Cal prescription filled, it provides the pharmacist a gross re-
turn of 110 percent on the average cost of the drug dispensed (or
$2.05 when converted to a straight fee). The California Pharmaceutical
Association has suggested that increases in the cost of living and in
pharmacists' salaries since 1957 are valid reasons for increasing the
Medi-Cal allowance by at least $0.40 per prescription. Such an increase
would raise the present average gross margin of pharmacists per Medi-
Cal prescription filled from 110 percent to 133 percent (or to a profes-
sional fee of $2.45). It would increase total Medi-Cal expenditures for
pharmaceutical goods and services from $40 million annually to over
$44 million at a time when the total Medi-Cal program is expected to
incur a sizeable deficit. For fiscal reasons alone, the request of the Cali-
fornia Pharmaceutical Association should be analyzed very carefully
before any increase is granted.
While the subcommittee believes there is a need for a study of pric-
ing practices of pharmacists in order to determine a just compensation
level for pharmacists, it also believes on the basis of the limited data
now available that the present Medi-Cal allowance may well be reason-
ably adequate for a large percentage of the pharmacies in California.
TABLE I
RETAIL DRUG PRICE RANGES
SAN FRANCISCO BAY AREA
(August 1, 1964-July 37, 7966;
Qt.
Drug
Total range
No. Rx's
30_.
50_.
12-.
36_.
60_.
100.
12_.
30_.
50_.
100_
4 oz
Diuril (.5 gm.)
Donnatal Tabs
Empirin with codeine (}4 gr-)
Gantrisin (.5)
Gantrisin (.5)
Gantrisin (.5)
Nembutal (ij^ gr.)
Nembutal (\y2 gr.)
Orinase (.5 gm. tablet)
Orinase ( . 5 gm. tablet)
Phenergan expectorant with codeine.
Total
^3 . 30-
1.29-
.94-
3.25-
3.06-
4.00-
.95-
1.20-
5.00-
9.50-
1.33-
$5.05
3.40
3.50
4.40
4.50
6.45
2.85
3.25
6.75
12.80
4.00
66
24
49
10
16
30
43
59
45
358
Source : Joint Council 7, Dairy Industry Trust Fund, Oakland, California. See the
discussion relating to Table III for a description of the drug insurance pro-
gram and of the method of obtaining these figures.
14 WAYS AND MEANS COMMITTEE REPORT
The Bureau of Vendor Investigation, Health and Welfare Agency,
conducted a study during September 1966, of private prescription
prices of 253 pharmacies throughout California. The bureau compared
these retail prices for 13 prescription drugs with the maximum Medi-
Cal allowance for these same prescriptions. Before discussing the find-
ings, it is necessary to stress that the 253 pharmacies surveyed were not
systematically selected and thus may not constitute an accurate cross-
section of either all pharmacies in California or those pharmacies which
serve a high proportion of welfare recipients. Recognizing this limita-
tion, the data obtained still provide an indication of how the state
allowance compares to retail drug prices. The findings, summarized in
Table II, reveal that 35 percent of the retail prices surveyed were equal
to or less than the maximum state allowance. On the other hand, 65
percent of the prices surveyed were above the state allowance, but by
how much was not reported. A more revealing finding was that if the
pharmacies in question had used the Medi-Cal pricing formula for all
of the drugs surveyed, they would have received 92.5 percent of what
they would normally receive using their regular private prices (See
Table Il-a).
Another recent study conducted by the Assembly Ways and Means
Committee staff surveyed retail drug prices for eight commonly pre-
scribed drugs for the San Francisco Bay area during the period Au-
gust 1, 1964-July 31, 1966. The pharmacies surveyed were those pa-
tronized by union members of the Joint Council 7, Dairy Industry
Trust Fund, whose self-insured drug insurance program allowed their
beneficiaries a free choice of pharmacy. Again, the pharmacies patron-
ized may or may not be an accurate cross section of all pharmacies lo-
cated in the geographic region bounded by Santa Rosa on the northeast,
Salinas on the southeast, and the Pacific Ocean on the west. But the
prices obtained are an indication of prevailing pricing practices in this
area. The trust fund has received over 20,000 prescription claims, and
of these, every claim for certain quantities and strengths of specified
drugs was selected for analysis. The results, summarized in Table III,
show that more than 25 percent of the prescriptions were less than or
equal to the usual Medi-Cal allowance, while nearly 75 percent were
above the state allowance. Perhaps a more significant finding is that
for all the prescriptions surveyed the Medi-Cal allowance was approxi-
mately 86.4 percent of the total private prices surveyed ; that is, using
the Medi-Cal allowance for the 415 prescriptions analyzed, pharma-
cists would have received $1,515.20 rather than the $1,752.94 actually
charged private customers. This survey suggests, then, that the Medi-
Cal allowance is reasonably adequate, even if slightly below all private
retail prices.
Aggregate data from the total experience of the drug insurance pro-
gram of the Joint Council 7, Dairy Industry Trust Fund, also suggests
that the Medi-Cal allowance is reasonable. Of the more than 20,000
claims filed during a two-year period, the trust fund allowed nearly 92
percent of pharmacist's retail charges, using a reimbursement formula
that parallels the Medi-Cal formula. After purchasing prescribed drugs
at pharmacies of their choice, trust fund beneficiaries are reimbursed
for their pharmaceutical expenses, and there is no interference with
HEALTH, EDUCATION, AND WELFARE SERVICES
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HEALTH, EDUCATION, AND WELFARE SERVICES 17
the fee charging practices of pharmacists. The beneficiaries simply bill
the trust fund, which reimburses them according to the following for-
mula:
For drugs with a cost of 75 cents or less (according to Blue
Book or Red Book, which is the drug manufacturers' wholesale
listing), reimbursement of up to $1.50 is allowed; for drugs with
a cost of $0.75 to $5, an amount of up to twice the cost is allowed ;
for drugs with a cost of $5 to $5.99, $10 is allowed ; for drugs with
a cost of $6 or more, the allowance is cost plus 50 percent plus
$1.15.
For drugs costing the pharmacist up to $2.25, the Medi-Cal allow-
ance is greater than the fund allowance. For drugs costing the pharma-
cist $2.26 to just under $6, the fund allowance is greater than the
state allowance. For drugs costing more than $6, the union and Medi-
Cal allowances are identical. However, one difference in the two for-
mulas is that the state requires pharmacies to use their acquisition
cost of drugs when billing the state. Often, pharmacists purchase drugs
at lower than listed wholesale costs, but the fund allows for the higher
listed cost. Even so, when nearly 92 percent of the total charges by
pharmacists are met by a formula which approximates the Medi-Cal
formula, there is ample reason to believe that the Medi-Cal formula is
reasonably adequate.
Moreover, even granting that some pharmacies have price schedules
somewhat higher than the Medi-Cal allowance, it is also true that the
state, by financing prescription costs for welfare recipients since 1957,
has increased significantly the demand for prescription drugs from
retail pharmacies. The indigent population without governmental as-
sistance in the financing of their health care undoubtedly could not
purchase the amount of pharmaceuticals that are now provided them
under the Medi-Cal program. Legislative Analyst A. Alan Post stated
this point strongly in his testimony before the subcommittee :
While the propriety of a policy of paying less for the same serv-
ice and merchandise when a welfare recipient is the customer can
be questioned, it can also be defended on the basis that the total
volume of drugs dispensed is undoubtedly increased by the avail-
ability of public funds in the program in excess of the amounts
which would otherwise be sold and the merchant therefore can
reasonably be expected to accept a smaller margin of profit on
these added sales.
There are two important questions left unanswered by the data
presented. First, how does the Medi-Cal allowance for pharmacists com-
pare to the retail prescription prices of those pharmacies whose clientele
includes a high percentage of welfare recipients ? Because neither study
determined the percentage of Medi-Cal prescriptions dispensed by the
pharmacies surveyed, it is not possible to obtain an answer. But it
may well be that pharmacies doing the bulk of the Medi-Cal prescrip-
tion business find the state allowance quite adequate, and probably
more adequate than do certain pharmacies located in affluent residential
areas who dispense only an occasional Medi-Cal prescription. In eval-
uating Medi-Cal reimbursement policies for pharmacists, the Health
18 WAYS AND MEANS COMMITTEE REPORT
and Welfare Agency might properly seek an answer to the question
posed. -ii
A second question in need of an answer relates to the varying levels
of efficiency of retail pharmaceutical operations, including varying
profit levels. It is well known that some pharmacies fill relatively few
prescriptions, while others fill many more. Some pharmacies employ only
one pharmacist who may spend part of his time selling perfume, while
others have four or five pharmacists who work full time as pharma-
cists. Some low-volume pharmacies have little purchasing power ; other
high-volume pharmacies have substantial purchasing power. The point
is that for some pharmacies, which perhaps operate more efficiently
than others, the present state allowance is adequate, as Tables II and
III suggest, while for other less efficient pharmacies, a higher margin
per prescription is desired. Thus one practical effect of an increased
state allowance for pharmacies might well be the subsidy of less efficient
pharmacies. Whether this is in the public interest is certainly question-
able, and the subcommittee recommends that the Health and Welfare
Agency and the Department of Finance give adequate consideration
to this issue when evaluating the present formula.
The adequacy of the present formula can also be considered in terms
of formulas used by other states in their medical assistance programs.
California leads the nation with the highest allowable margin for phar-
macists filling welfare prescriptions. California's formula amounts to
a 110-percent markup (or $2.05 professional fee) in contrast to Con-
necticut's 66f percent, Illinois' 30 percent plus $1, Massachusetts' 50
percent, New Jersey's professional fee of $1.50, New York's 60 percent,
Ohio's 50 percent, Pennsylvania's 50 percent, and Washington's 66f
percent,1 Even granting that the costs of operating a pharmacy in Cali-
fornia may be somewhat greater than in other states, still the present
average return to California's pharmacies per prescription filled ap-
pears to be quite generous when compared to reimbursement rates used
in other states for their medical assistance programs.
In summary, the evidence presented to the subcommittee suggests
that in converting to the professional fee, the state ought to maintain
the present rate of reimbursement to pharmacists which on the average
amounts to a margin of 110 percent, or when converted to a straight
professional fee, a sum of $2.05 per prescription filled. Any departure
from this amount ought to be preceded by an extensive study by the
Health and Welfare Agency and the Department of Finance, that takes
into consideration some of the issues raised herein.
III. DETERMINATION OF DRUG COST
The subcommittee recommends that in determining the reimbursement to
pharmacists for the cost of the pharmaceutical product dispensed, the Health
and Welfare Agency should consider the feasibility of reimbursing upon a
fixed wholesale cost basis, rather than the present variable acquisition cost
system.
When the medical assistance program began in 1957, pharmacies
were reimbursed on the basis of standard wholesale cost. Several years
later, the requirement was imposed of reimbursement for acquisition
1 These figures were supplied by the Pharmaceutical Manufacturers Association, based
on an analysis of H.E.W. data.
HEALTH, EDUCATION, AND WELFARE SERVICES 19
cost, the theory being that if pharmacies obtain drugs at an acquisition
cost that is cheaper than standard wholesale cost, the state should only
pay for the lower price. The desire of the state to realize these savings
is commendable, but the policy has two undesirable ramifications. First,
it penalizes those pharmacies that operate more efficiently by purchas-
ing in sufficiently large quantities to obtain discounts from standard
wholesale prices. Such pharmacies are willing to invest more money to
buy a larger inventory but are then penalized for the savings effected
when the state insists on paying acquisition cost. Under the acquisi-
tion cost system the less efficient pharmacy buying in smaller quantities
and paying a higher wholesale price has some incentive to remain less
efficient.
A second problem of using acquisiton cost is that of enforcement.
It is difficult for the state to discover whether a given pharmacy ac-
tually is purchasing drugs at standard wholesale prices, or at some
lower rate. Nor are efforts to enforce the acquisition cost policy produc-
tive of harmonious relations between the state and pharmacies.
While converting to a system of pricing based on standard wholesale
cost may inflate slightly total pharmaceutical expenditures under the
Medi-Cal program, the slightly higher expenditures probably will be
offset by conversion to the professional fee (see recommendations 1
and 2), and may be justified in light of the undesirable consequences
of pricing based on acquisition cost.
In his testimony before the subcommittee, Dr. Morris Wolfred, rep-
resenting the California Pharmaceutical Association, pointed out:
Three major drug wholesalers in California have offered to pro-
vide electronic data processing printouts of wholesale prices for
every drug in the formulary and they would be willing to furnish
price changes on a monthly basis. These prices could be pro-
grammed into E.D.P. machines, which would eliminate the necessity
of auditing for price. This, in turn, would greatly reduce auditing
costs. The pharmacist would be reimbursed on the basis of whole-
sale cost plus a professional fee for each claim submitted.
The subcommittee believes that Dr. Wolfred 's recommendation war-
rants serious consideration by the Health and Welfare Agency.
IV. TRADE NAME AND GENERIC DRUGS
The subcommittee recommends that the present Medi-Cal regulation allow-
ing physicians to authorize or prohibit the dispensing by pharmacists of less
expensive generic equivalent drugs be continued as another means of effect-
ing economies consistent with the professional judgments of physicians and
pharmacists.
The underlying issue is that for certain drugs now on the Medi-Cal
formulary there are more than one manufacturer, each of which pro-
duces drugs that are chemically or generically equivalent. Often drugs
dispensed under the generic designation are substantially cheaper in
price than their brand or trade name counterparts. The Medi-Cal pre-
scription form contains a clause, which, unless crossed out by the pre-
scribing physician, authorizes the dispensing pharmacist to use a ge-
neric equivalent product if the pharmacist stocks one. In some cases, the
20 WAYS AND MEANS COMMITTEE REPORT
program lias set maximum allowable wholesale prices in order to take
advantage of the lower prices of certain generic equivalent products.
The economies stemming from this requirement warrant attention.
For example, the wholesale price of reserpine 0.25 mg. purchased under
its generic designation is about $0.65 per 1,000 tablets, while the most
popular brand mime of reserpine (Serpasil) sells for $38.50 per 1,000
0.25-mg. tablets.2 Use of the professional fee for pharmacists (Recom-
mendation 1 ) should facilitate the use of more generic equivalent prod-
ucts insofar as it removes the economic incentive to stock and dispense
only higher priced drugs and insofar as there are cheaper generic equiv-
alent drug products available of acceptable quality.
V. MULTIPLE PRICING PRACTICES
The subcommittee recommends that the Legislature consider ways of elim-
inating the alleged multiple pricing practices of certain drug manufacturers,
which inflates the wholesale costs of drugs to community pharmacies through
which the vast majority of state pharmaceutical expenditures are channeled.
It lias been brought to the subcommittee's attention that certain drug
manufacturers have one price schedule for hospitals and clinics, and a
higher price for community pharmacies. The practice of linking price
differentials to quantity purchased appears to be not unusual, nor un-
fair, provided all buyers have an equal opportunity to obtain discounts
based on large quantity purchasing. But it has been reported to the sub-
committee that certain drug manufacturers charge hospitals and clinics
a lower price regardless of quantity purchased than they charge com-
munity pharmacies.3
Aside from wanting to redress any economic inequities imposed on
community pharmacies, the state has an important financial interest in
the multiple-pricing problem because it is through community pharma-
cies that Medi-Cal funds are channeled. To the extent that such pharma-
cies are forced to pay higher prices for the products they later supply
to Medi-Cal recipients, state pharmaceutical expenditures are thereby
inflated.
Because the state is such a large-scale purchaser of drugs, it is in
a powerful bargaining position to bring about more uniform pricing
practices of drug manufacturers. On grounds of both equity and eco-
nomics, therefore, the subcommittee believes that the Legislature should
consider ways to eliminate this practice.
VI. QUALITY OF DRUGS
The subcommittee recommends that the Legislature explore means of pro-
viding the public greater safeguards against the manufacture and distribution
of drug products of questionable quality and efficacy.
While this investigation focused on drug prices, the subcommittee
also received important testimony to the effect that there are drugs
of questionable quality and efficacy now being distributed. Dr. Lester
Breslow, Director, State Department of Public Health, stated:
2 These prices were supplied the subcommittee by Frederick H. Meyers, M.D., Profes-
sor of Pharmacology, University of California Medical Center, San Francisco,
November 22, 1966.
3 Testimony of Morris Wolfred, Ph.D., California Pharmaceutical Association, Novem-
ber 22, 1966.
HEALTH, EDUCATION, AND WELFARE SERVICES 21
The State Department of Public Health recently conducted a
survey of the California drug industry. One hundred sixty-five firms
out of a total of 538 registered with the Federal Food and Drug
Administration were randomly sampled. Our findings indicated
that 25 percent of those sampled were operating under conditions
which are in violation of the "good manufacturing practice" re-
quirements.
Dr. Breslow recommended an augmented state inspection program
as one means of providing the public greater safeguards against the
dangers of poor quality drugs.
Dr. Jere Goyan, associate dean, School of Pharmacy, University of
California Medical Center, San Francisco, cited examples of ineffica-
cious drug products and contended that "the prescribing of generic
equivalents without some knowledge of therapeutic equivalency can
result in situations not in the interest of best patient care. ' ' Dr. Goyan
pointed out that the "large manufacturer is also occasionally guilty of
inefficacious products," and he recommended the establishment of an
industry-financed "impartial central testing facility . . . for purposes
of determining which products are acceptable." Concluding, Dr. Goyan
stated : " To require each manufacturer to clear his products through
such a central agency before they could be sold in this state would not
be unreasonable. ' '
The subcommittee believes that a legislative consideration of ways
to provide the public greater safeguards against the dangers of ineffica-
cious drug products is in order.
VII. ADMINISTRATIVE REFORMS
The subcommittee recommends that the Health and Welfare Agency, work-
ing with the fiscal intermediary (California Physicians Service) and others,
should institute improved administrative procedures to alleviate certain undesir-
able practices affecting the pharmaceutical aspects of the Medi-Cal program.
The subcommittee has uncovered several disturbing findings. In one
instance, a pharmacist in Fresno had $19,291.71 in back claims owed
to him by the State of California dating from March 1, 1966, through
November 1966, for Medi-Cal prescriptions filled at this one pharmacy.4
Such administrative delays in payment pose a heavy burden for a Medi-
Cal vendor to shoulder. In the subcommittee's opinion, steps to elimi-
nate such practices should be implemented immediately.
In a second instance, a pharmacist in Baldwin Park received on No-
vember 21, 1966, 62 checks for 62 Medi-Cal prescriptions mailed in 62
different envelopes.5 As the pharmacist in question pointed out to the
subcommittee, "The postage alone amounted to $3.10 for the 62 letters.
This represents over 1 percent of the remittance in addition to the fan-
tastic cost of issuance of each check." Again, the subcommittee feels
that it is a waste of public funds to operate in this inefficient manner,
and appropriate administrative steps to rectify the situation clearly
are in order.
Third, it was learned that the fiscal intermediary, California Physi-
cians Service, audits by hand (and human eye) each of the 10,000,000
4 Rudy's Elm Pharmacy, 2102 Elm Avenue, Fresno.
BK & W Pharmacy, Inc., 4299 N. Maine Street, Baldwin Park.
22 WAYS AND MEANS COMMITTEE REPORT
pharmaceutical claims expected to be processed during 1966-67. Given
today's electronic data processing technology, it would appear that the
auditing of so many claims could more efficiently be handled by the
use of computerized equipment.
A fourth problem reported to the subcommittee is that of eligibility
determination. In order to become eligible for Medi-Cal benefits, an
eligibility determination is necessary. Such determinations are made
by county welfare departments, reported to the State Department of
Social Wo laic in Sacramento, and subsequently transmitted to the
fiscal intermediaries before payment can be made to the Medi-Cal
vendors that provide services to the recipient. Delays and errors in
this process are believed to account in part for delays in paying ven-
dors. It is apparent that confusion and unnecessary delays result due
to the inefficient data transmission system. The subcommittee believes
1 hat the bottlenecks created need corrective action.
VIII. STATE BOARD OF PHARMACY
The subcommittee recommends that the State Board of Pharmacy should
establish a subcommittee to consider the equity of existing regulations relat-
ing to the operation of hospital pharmacies, so that interested parties, such as
the California Hospital Association, hospital pharmacists, and others, together
with the state board, might consider problems of mutual concern on an on-
going basis.
The California Hospital Association presented to the subcommittee
testimony on problems regarding hospital pharmacy licensure require-
ments, hospital pharmacy construction requirements, and utilization of
hospital pharmacy services. After considering testimony presented by
the State Board of Pharmacy, the subcommittee believes that it would
be appropriate for the interested parties to meet periodically and to
consider problems of mutual concern. The subcommittee notes that the
present composition of the State Board of Pharmacy does not include
any representatives of hospitals, and for this reason periodic discus-
sions between the board and hospital representatives might well be
productive.
CONCLUSION
On the basis of its investigation and testimony received, the subcom-
mittee has made eight specific recommendations. The first two recom-
mendations, dealing with ways of reimbursing pharmacies for the pro-
fessional services rendered to Medi-Cal recipients, endorse the use of
a reasonable fixed professional fee per prescription filled rather than
the present markup and filling fee formula. The third recommendation,
dealing with the method of reimbursing pharmacies for the cost of the
pharmaceutical products dispensed, suggests that the standard whole-
sale cost rather than the acquisition cost to pharmacies is a more prac-
tical method of reimbursement.
The fourth and fifth recommendations deal with costs of the pharma-
ceutical product itself. The present flexible Medi-Cal policy regarding
the use of trade name and generic equivalent drug products is sup-
ported, and the need for legislative consideration of the multiple-pric-
ing practices of certain drug manufacturers is cited, as such practices
increase drug costs to the State of California by forcing pharmacies
to pay inflated prices.
The sixth recommendation, dealing with the quality and efficacy of
drug products sold in California, urges the Legislature to consider
ways of providing the public greater safeguards against the dangers
of poor quality drugs. The solution to this problem appears to involve
greater state inspection of drug manufacturing firms based in Califor-
nia and in the development of an independent drug testing program.
The seventh recommendation, dealing with the administrative aspects
of the Medi-Cal program, urges the implementation of badly needed re-
forms to correct poor management practices on the part of state agen-
cies and the Medi-Cal fiscal intermediary.
The eighth recommendation urges the State Board of Pharmacy to
meet periodically with representatives of hospitals to discuss problems
relating to the operation of hospital pharmacies.
The subcommittee believes that appropriate action on these matters
will be in the public interest.
printed in California office of state printing
L-2643— 100 2-67 1M
ASSEMBLY INTERIM COMMITTEE REPORT
1965-67
Volume 21 Number 19
California Legislature
ASSEMBLY INTERIM COMMITTEE ON
WAYS AND MEANS
REPORT OF THE
SUBCOMMITTEE ON HEALTH, EDUCATION
AND WELFARE SERVICES
on
SERVICES FOR HANDICAPPED CHILDREN
MEMBERS OF THE COMMITTEE
ROBERT W. CROWN, Chairman
BURT HENSON, Vice Chairman
Hale Ashcraft Leroy Greene Nicholas C. Petris
Anthony Beilenson Joseph Kennick Carley Porter
Frank Belotti Frank Lanterman Howard Thelin
Carl Britschgi Charles Meyers Jerome Waldie (Resigned)
John L. E. Collier James Mills John Williamson
Charles Conrad Don Mulford Gordon Winton, Jr.
Pauline Davis George Zenovich
COMMITTEE STAFF
Louis J. Angelo, Committee Coordinator John H. Simons, Consultant
William Barnaby, Consultant Keith Axtell, Legislative Intern
Gail Vessels, Committee Secretary
Maria H us urn, Secretary
Published by the
ASSEMBLY
OF THE STATE OF CALIFORNIA
JESSE M. UNRUH CARLOS BEE
Speaker Speaker pro Tempore
GEORGE ZENOVICH ROBERT MONAGAN
Majority Floor Leader Minority Floor Leader
JAMES D. DRISCOLL
Chief Clerk of the Assembly
ASSEMBLY INTERIM COMMITTEE
ON WAYS AND MEANS
ROBERT W. CROWN, Chairman
Report of the
SUBCOMMITTEE ON HEALTH, EDUCATION
AND WELFARE SERVICES
NICHOLAS C. PETRIS, Chairman
on
SERVICES FOR HANDICAPPED CHILDREN
Members of the Subcommittee
Anthony Beilenson Charles Meyers
Frank Belotti Don Mulford
Charles Conrad Howard Thelin
Leroy Greene Gordon Winton
Staff
John H. Simons, Consulfant
Gail Vessels, Secretary
(3)
2 — L-3027
LETTER OF TRANSMITTAL
Assembly Interim Committee on Ways and Means
January 30, 1967
To the Speaker and Members of the Assembly
Dear Mr. Speaker and Members:
Your Interim Committee on Ways and Means, in accordance with
House Resolution 710 (v), 1965 General Session, herewith respectfully
submits the final report of the Subcommittee on Health, Education
and Welfare Services on the subject of services for handicapped
children.
The report was adopted by 9 of the 10-member subcommittee and
we, the undersigned, concur in their findings and recommendations.
The chairman is appreciative of the intelligent and energetic leader-
ship provided by Subcommittee Chairman Nicholas C. Petris as
well as for the diligent application of the subcommittee members and
its staff.
Respectfully submitted,
Anthony Beilenson
Frank Belotti
Carl Britschgi
Charles J. Conrad*
Leroy F. Greene
Burt H. Henson
Joseph M. Kennick
* With reservations.
Robert W. Crown, Chairman
Frank Lanterman*
Charles W. Meyers
Nicholas C. Petris
Carley V. Porter
Howard Thelin
Gordon Winton*
George Zenovich
(4)
LETTER OF TRANSMITTAL
January 12, 1967
Hon. Robert W. Crown
Chairman, Assembly Interim Committee on Ways and Means
Dear Chairman Crown:
In accordance with House Resolution 710 (v), 1965 General Session,
the Subcommittee on Health, Education, and Welfare Services herewith
submits its report on services for handicapped children.
The resolution requesting interim study of this subject was H.R. 180
(Unruh-Waldie), 1965 General Session.
The subcommittee is grateful to all who participated in the public
hearing as well as those who communicated with the subcommittee
and its staff.
Respectfully submitted,
Nicholas C. Petris, Chairman
Anthony Beilenson Joseph Kennick
Frank Belotti Charles Meyers
Charles Conrad* Howard Thelin
Leroy Greene Gordon Winton, Jr.*
• With reservations.
( 5 )
TABLE OF CONTENTS
Page
Summary of Recommendations 9
The Problem 9
Licensing of Institutions 11
Child Development Centers for Physically and Mentally
Handicapped Minors 15
Coordinating Council on Programs for Handicapped Children 16
The Mental Retardation Regional Diagnostic Center Program 17
Addendum — Letter From Assemblyman Conrad 19
(7)
SERVICES FOR HANDICAPPED CHILDREN 9
House Resolution 180 (TJnruh-Waldie, 1965) calling for a study of
health, education and welfare services for children, was assigned to the
Assembly Interim Committee on ^Yays and Means. The Subcommittee
of Health, Education and Welfare Services conducted an investigation,
including one public hearing on September 15, 1966. The subcommittee
wishes to extend its appreciation to the many individuals and organ-
izations that provided assistance during the study.
SUMMARY OF RECOMMENDATIONS
The subcommittee recommends :
1. That present state institutional licensing functions be consolidated
and that the Legislature consider creating a unified state licensing
service linked with the responsibility for setting rates ;
2. That additional development centers for severely handicapped
minors be established and that basic changes in the method of
financing these centers be implemented, including:
a. Elimination of the parental surcharge ;
b. An increased transportation allowance ;
c. Provision of state building aid ;
d. Conversion to the special education method of financing the
centers with provision for a, b, and c above ;
3. That the Coordinating Council on Programs for Handicapped
Children be phased out of existence with an expanded Mental Re-
tardation Program and Standards Advisory Board assuming the
council's responsibility ;
4. That the Mental Retardation Regional Diagnostic Center Program
be expanded during the next two fiscal years, creating a regional
network of eight centers by 1969; and that initial planning be
started by the Mental Retardation Coordinator and Program and
Standards Advisory Board concerning the broadening of services
under the program so as to serve people with handicapping
conditions other than mental retardation; and
5. That a master plan for handicapped children be developed.
THE PROBLEM
The problem is twofold: (1) gaps and deficiencies in existing services
for handicapped children and (2) poor coordination of these services.
In the first category, examples abound : inadequate community services
for both emotionally disturbed and neurologically handicapped chil-
dren, and the general paucity of programs for children having multiple
handicaps. In the second equally important category, there are many,
often more difficult, problems, most of which involve fragmentation of
services and poor coordination of total program efforts. Again examples
are easy to cite: Six state departments operate programs for handi-
capped children, and many more county and municipal agencies do
likewise. In the voluntary sector, there are a multitude of organizations
— most representing children having a particular disability — and often
10 ASSEMBLY INTERIM COMMITTEE ON WAYS AND MEANS
these compete with one another for public support and resources. Some
results of this fragmentation are : multiple-licensure activities by three
different state agencies leading to occasional duplication of efforts and
the implementation of varying standards; research-planning functions
are performed by different agencies leading to needless duplication of
effort and occasional efforts in opposite directions. Both the deficiencies
in existing services and their poor coordination are the rationale behind
H.R. 180.
H.R. 180 also envisaged the possibility of establishing a Children's
Bureau in California to cope with the problems already mentioned in
a more systematic fashion. Support for this proposal came from the
parent of a handicapped youngster, Mr. Niall E. Tabor, in the form of
an important document entitled A Proposal for a Responsive Program
for Handicapped Children in California (1964). Among other things,
Tabor's document advocated a major reorganization of present state
services for handicapped youngsters, including the establishment of
a Director of Handicapped Children's Services (with fiscal control and
policy direction for handicapped children's programs). This proposal
strikes at the heart of existing state departmental organization, because
the state executive branch is organized more by broad subject matter
function (e.g., education, social welfare, rehabilitation, public health,
etc.) than on a client-need basis (e.g., children services, the aged, etc.).
One result of the present organizational scheme is that those state offi-
cials responsible for programs dealing with handicapped children are
fragmented into six different state departments (Education, Social
Welfare, Public Health, Mental Hygiene, Rehabilitation and Youth
Authority) with little centralized planning, evaluation, or coordination
taking place.1 Instead, California's more than one-half million handi-
capped children are all too often viewed as though they have only
educational needs, or only social needs, or only economic needs or only
health needs, instead of being perceived as total human beings with a
multitude of interrelated needs.
Because of these problems, the subcommittee had hoped to obtain a
federal research grant from the Department of Health, Education, and
Welfare to study in a systematic fashion the totality of services for
handicapped children in California, with the view in mind of develop-
ing remedial legislation to rationalize the organization of existing pro-
grams and to develop new programs to fill unmet needs. Unfortunately,
the research application was denied, and the subcommittee 's efforts had
to be restricted. Nevertheless, the subcommittee did study selected prob-
lems brought to its attention by more than 40 officials from public and
private agencies vitally concerned with handicapped youngsters. A
discussion of these issues, with the subcommittee's recommendations,
follows.
1 Recent changes in the organization of services for the mentally retarded are an
important exception to this statement.
LICENSING OF INSTITUTIONS
The subcommittee notes that there are three basic problems asso-
ciated with the licensing of institutions providing various types of
services to individuals.
I. There are certain institutions for which there are no state licens-
ing provisions whatsoever. For example, handicapped persons age
16-65 who reside in various types of institutions are not assured that
the institutions meet any kind of licensing requirements. Moreover, li-
censing codes do not apply to such institutions as day care centers and
workshops that serve the handicapped population. Although the sub-
committee investigation did not explore the full extent of the gaps in
licensing of institutions in California, the subcommittee does believe
that the gaps cited need corrective action, including remedial legisla-
tion where necessary. The subcommittee recommends that the Health
and Welfare Agency, which is currently analyzing state licensing ac-
tivities, submit to the Legislature in 1967 a report of proposed changes
in the licensing codes to fill the gaps in existing licensing legislation.
II. The responsibility of licensing institutions is fragmented into
three different state departments. (See Table I.)
TABLE I
STATE DEPARTMENTAL LICENSING RESPONSIBILITIES
Department of Mental Hygiene
(P) Psychiatric hospital (short term)
(D) Day treatment hospital (psychiatric) (day care only)
(L) Long-term facility (skilled nursing)
(H) Family home (mentally ill) (6 beds or less)
(E) Children's treatment center
(emotionally disturbed) (7 beds or more)
(C) Day center (emotionally disturbed) (children ; day only)
(A) Alcoholism hospital (short term)
(X) Facilities for admission of drug addicts
Mental Retardation group
(S) Resident school (MR) (educable and trainable MR)
(R) Resident facility (MR) (7 beds or more)
(F) Family home (MR) (6 beds or less)
(M) Day center (MR) (day only)
(N) Nursery (MR) (crib)
Department of Public Health
General hospital
Specialized hospital
Maternity hospital
Tuberculosis hospital
Nursing and convalescent home (divided into 6 size categories
with differing staff require-
ments: 1-6, 7-10, 11-25,
26-59, 60-99, and 100+)
Maternity home
TB nursing home
Infirmary
Clinic
Establishment for handicapped persons (EHP)
( 11 )
12 ASSEMBLY INTERIM COMMITTEE ON WAYS AND MEANS
Home health agency
Laboratory
Radiological laboratory
Department of Social Welfare
Private institutions for aged persons (16 beds or more)
Boarding homes for aged (BHA)
Foster family home — aged persons (1 to 4 beds)
Small group care home — aged persons (5 to 15 beds)
Institutions for children (16 or more beds)
Boarding homes for children (BHC)
Foster family home for children (1 to 6 beds)
Special boarding home for children (7 to 15 beds)
Parent-child facilities
Parent-child boarding home (1 to 4 family units)
Parent-child institution (5 or more family units)
Day nurseries (more than 10 children)
Maternity home (girls under 16)
Child placing agencies
County
Private
Source : Health and Welfare Agency, State of California.
There are many problems attendant to this tripartite division of li-
censing responsibility.
(a) The institutions licensed do not necessarily fit into only one of
the previous categories so that sometimes more than one department
may license a given institution.
(b) Licensing standards and administrative procedures often vary
by licensing department or by type of institution licensed (sometimes
justifiably and sometimes questionably), so that unnecessary problems
from the standpoint of vendors and users often result.
(c) It is questionable whether existing licensing staff personnel are
being utilized as effectively as possible.
(d) The present fragmentation of licensing responsibility inhibits
the development of more uniform standards and procedures insofar as
such standardization does not conflict with different program objec-
tives. It is significant that these criticisms of the present licensing
system have emerged during past legislative inquiries and by self-crit-
icisms by department heads themselves.2
Assembly Bill 2280, added to the Health and Safety Code in 1965,
authorizes the department heads of Social Welfare, Mental Hygiene,
Rehabilitation and Public Health to "enter into an agreement under
the provisions of Chapter 5 of Division 7 of Title 1 of the Government
Code, whereunder any such department may administer all or any por-
tion of the licensing function of any or all of the other departments. ' '
In light of testimony presented to the subcommittee, it is disturbing
to learn that no reorganization of licensing responsibility in the direc-
tion of unification has yet been effected by the departments involved.
^ Mr. Bela L. Clark, vice president of the Northern California Asso-
ciation of Residences for the Retarded, emphasized to the subcommittee
that facilities serving the retarded should have to deal with only one
licensing department or agency.
2 Hearing of the Subcommittee on Institutions, Assembly Committee on Ways and
Means, October 5, 1964 ; and "Statement of Purpose, Objectives, and Responsi-
bilities of the Joint Licensing Service," Departments of Mental Hygiene, Public
Health and Social Welfare, and the Health and Welfare Agency (February
1964).
SERVICES FOR HANDICAPPED CHILDREN 13
Mrs. Esther E. Smith, executive director, Easter Seal Society, stated
to the subcommittee :
". . . because of the multiple handicaps which affect many of
these youngsters in varying degrees as well as diagnostic difficul-
ties, licensing sometimes becomes a stumbling block rather than an
aid to the provision of optimum care for a given child."
In a letter written to the subcommittee, Mr. Richard 0. Pancost,
president, California Association of Executives of Children's Institu-
tions, pointed out the licensing problems members of his organization
have had with the fragmentation and duplication of state licensing
responsibility. Many of these children's institutions are licensed by
both the Department of Social Welfare and the Department of Mental
Hygiene. Mr. Pancost concluded :
"It is our belief that further study and consideration should
begin to having one licensing body, which could establish stand-
ards and provide licensing supervision across the board to chil-
dren's institutions regardless of the children's services, programs
operated, and the source of funds used to operate the programs."
Mr. George Argys, executive director of the California Association
for Mental Health, also vigorously supported the unification of state
licensing activities :
"For many years we have followed the problems inherent in
separate licensing functions of the Departments of Public Health,
Social Welfare, and Mental Hygiene, and we have concluded that
in the interests of uniformity, quality, and coordination, we wish
licensing functions would be placed in a separate unit directly
under the direction of the Health and Welfare Agency, and that
it should have whatever resources it requires to set the necessary
standards and to insure that those standards are lived up to."
Criticism of fragmented state licensing practices came from one of
the important departments vitally involved in institutional licensing.
Dr. William B. Beach, Deputy Director, Division of Local Programs,
Department of Mental Hygiene, stated :
"The solution of these licensing problems is to develop a single
licensing unit in the Health and Welfare Agency which will have
responsibility for licensing the institutions now licensed by the
Department of Mental Hygiene, Department of Public Health,
and the Department of Social Welfare ... If a single licensing
unit is not established, the Department of Mental Hygiene would
propose a reassignment of several of the categories that are now
licensed by the Department of Mental Hygiene to other more ap-
propriate licensing agencies. ' '
The subcommittee believes that executive action to provide greater
unification of state institutional licensing responsibilities is long over-
due. Since the Legislature has already granted the executive branch
power to effect such a reorganization, the key question is : will the
Legislature also have to compel it to do so ?
14 ASSEMBLY INTERIM COMMITTEE ON WAYS AND MEANS
III. There is a third basic issue that vitally deserves attention —
what is the purpose of licensing? And how can this purpose best be
achieved? The subcommittee believes that the following principle
should be the basic underpinning of all state institutional licensing
practices : the setting of standards required of the institutional licensee
that promote and insure that clients served will receive a service of
high finality in a safe environment geared to the satisfaction of client
needs. The subcommittee believes, however, that mere consolidation of
state licensing responsibility, desirable as this may be, will not by itself
lead to the realization of high-quality institutional services for clients
served. It has been reported to the subcommittee that present licensing
standards place considerable emphasis on the institutional physical
plant, rather than on quality of service rendered as well. The subcom-
mittee believes that a matter of top priority in the future is the de-
velopment of governmental standards that will raise the quality of
service provided clients. Insofar as consolidation of state licensing
responsibility will lead to the more efficient use of existing licensing
personnel, and insofar as it will facilitate a thorough evaluation of all
licensing standards for different programs, consolidation doubtless will
have a beneficial effect on improving state licensing programs.
Nevertheless, if the State of California is to expect to achieve high
quality institutional services, the subcommittee believes that considera-
tion must be given to two additional matters. The first relates to state
reimbursement rates. Presently, there are a wide variety of client
groups for whom the state is purchasing services in the private market-
place. Not only does the state pay different rates for different groups
of clients, but also there are different licensing standards applicable.
This creates confusion on the part of vendors and users alike. The sub-
committee believes that along with the consolidation of licensing re-
sponsibility, there is a need for some consolidation of reimbursement
rates paid to vendors under different programs for comparable services
rendered. Further, the subcommittee believes that consolidation of
licensing and standards with the rate-setting function may be a worth-
while reform, in that the two functions are intimately connected. Al-
though adequate reimbursement rates do not guarantee high quality
services, they are an essential ingredient to achieving high-quality
services, and are a requisite to the setting of high standards.
It was also reported to the subcommittee that there is a shortage of
state licensing personnel. The subcommittee believes that consolidation
of licensing is likely to lead to a more efficient use of existing man-
power, but that staff increases may still be necessary subsequent to
consolidation.
The subcommittee is disturbed that so little progress has been made
toward an improved state licensing service since legislative concern
developed several years ago, and that further legislative attention to
this problem is imperative in light of the apparent inability of the
departments involved to institute the necessary changes.
CHILD DEVELOPMENT CENTERS FOR PHYSICALLY AND
MENTALLY HANDICAPPED MINORS
This program serves severely handicapped children whose disability
is usually too severe for them to be accepted by regular special educa-
tion programs in the public schools, but at the same time these young-
sters can be served in the community while living at home without the
necessity of semipermanent residence in a state hospital. The subcom-
mittee found that these centers appear to be serving a valuable func-
tion, but that there is a sizable unmet need for additional centers.
Presently, there are 14 such centers either in operation or about to be
established in different parts of the state (Stockton, Oakland, San
Jose, Seaside, San Diego, San Francisco, Whittier, Panorama City,
Santa Cruz County, Santa Rosa, Visalia, El Segundo, Los Angeles
County, and Marin County).
Department of Education officials estimate that there is need for as
many as 90-100 centers, each serving on the average 40 children, and
the need for expansion of these centers was advocated repeatedly by
witnesses before the Subcommittee.3 Since the Department of Educa-
tion is currently undertaking a study that will attempt to assess the
true need for these centers, the subcommittee believes that this study
may well serve as one basis for legislative consideration of expanding
the program in the future.
The subcommittee, however, believes that any future expansion of
the centers warrants a thorough reevaluation of the method of financ-
ing the program. Presently, the state reimburses participating school
districts for approximately 85 percent of the operating costs of the
centers, and parental surcharges account for the remaining 15 per-
cent of the operating costs. It is the school districts' financial respon-
sibility to provide the facility. The following criticisms of this arrange-
ment can be made :
A. The parental surcharges constitute an unfair double taxation of
the parents of children served. These parents of necessity pay
taxes for the support of free public schools (which their severely
handicapped children do not attend) and for partial support of the
development centers.
B. The state allowance for transporting these children to the centers
is based on a 10-month period, whereas the centers usually operate
for 12 months.
C. The lack of state building aid for the construction of the centers
often results in the use of inadequate community facilities for
housing the centers.
D. The present method of financing tends to segregate the develop-
ment centers away from the public school system, of which regular
special education programs are now an integral part.
3 Mrs. Esther E. Smith, executive director, Easter Seal Society; March K. Fong,
member, Alameda County Board of Education ; and Mrs. Walter Dunbar, Cali-
fornia Council for Retarded Children.
(15)
l(j ASSEMBLY INTERIM COMMITTEE ON WAYS AND MEANS
In light of these considerations, including the likelihood that the
Legislature in the foreseeable future will consider proposals to increase
the number of centers, the subcommittee recommends that a new
method of financing the centers be developed. The new method would
incorporate the following changes :
A. Elimination of the parental surcharge 4 ;
B. Adjusting the transportation allowance to account for the 12-month
operating period ;
C. Allowance for some state participation in the financing of the
facilities ;
D. Rearranging the total financing of the centers to the method cur-
rently used under special education programs.
Recommendation D is directed toward reforming the present method,
which, in effect, gives school districts 100 percent assistance for the
operating costs of the centers, but no assistance whatsoever for build-
ing costs. Recommendation D would give the school districts state aid
for both operating costs and building costs, but would require the dis-
tricts to expend the same amount as they expend for children without
handicaps. The state would pay for the excess costs of educating chil-
dren served by the development centers; the districts would pay the
same amount as they do for normal children ; and impoverished dis-
tricts would be eligible to receive state building aid for special educa-
tion facilities.
Although the present method of financing special education is not
without shortcomings,5 the subcommittee believes that the advantages
to be gained by converting to the same method used for special educa-
tion outweighs any disadvantages. Moreover, when further improve-
ments in financing special education are made, these can easily be ap-
plied to the development center program.
COORDINATING COUNCIL ON PROGRAMS
FOR HANDICAPPED CHILDREN
Established in 1961, the Coordinating Council on Programs for
Handicapped Children consists of the directors of the six state de-
partments having program responsibility for serving handicapped
children. A main purpose of the council is to "make a continuous re-
view of programs and services being offered to the physically and men-
tally handicapped persons under age 21 in California, both by state
and local agencies ; and coordinate and evaluate the existing programs. ' '
By admission of council representatives,6 the council has not effectively
lived up to this statutory responsibility. The main reason, they believe,
is the lack of staff to coordinate the council's efforts on an ongoing
basis. Accordingly, a recommendation to provide permanent staff for
the council was made to the subcommittee.
4 The state pays about $65,000 per center; parental surcharges total about $10,000
per center.
5 Assembly Interim Committee on Education, Report of the Subcommittee on Special
Education (January 1965), pp. 32-35.
8 Testimony of P. W. Doyle, Deputy Superintendent of Public Instruction, State De-
partment of Education.
SERVICES FOR HANDICAPPED CHILDREN 17
The subcommittee, however, does not believe that staffing the council
would contribute in a meaningful way to the solution of the problems
of handicapped children due to three considerations.
A. The council is not vested with any power to coordinate its compo-
nent sectors. It is thus difficult to envisage how any major changes
that might affect adversely one or more of the departments involved
could emerge from the deliberations of such a body, even if staff
were provided.
B. The composition of the council is limited to department heads or
their representatives, with no representation given to interested
voluntary organizations. Because of the constructive role played by
voluntary groups in the development of public policy, this appears
to be a distinct weakness of the council.
C. The council to some extent duplicates the composition and activities
of another council, the Mental Retardation Program and Standards
Advisory Board.
In light of these considerations, the subcommittee does not believe
that staffing of the council is called for. However, the possibility re-
mains that the Mental Retardation Program and Standards Advisory
Board can evolve into a board that serves people of all handicaps, not
simply the retarded. The subcommittee believes that this is the appro-
priate direction for the Mental Retardation Program and Standards
Advisory Board to be moving toward, and that as this development
takes place, the Coordinating Council on Programs for Handicapped
Children should be abolished.
THE MENTAL RETARDATION REGIONAL
DIAGNOSTIC CENTER PROGRAM
The Legislature in 1965 approved AB 691 (Waldie), which estab-
lished two regional diagnostic centers for the mentally retarded.7 One
serves the San Francisco Bay Area, the second — Los Angeles County.
To be eligible for diagnostic services and, when appropriate, various
kinds of outpatient or residential care, clients must first be on the
state hospital waiting list. The regional center concept is a radical
departure from established patterns of service in which the state tra-
ditionally has not assumed responsibility for care until the affected in-
dividual was admitted to a state hospital. Administrative responsibility
for the program is vested in the Department of Public Health, which,
in turn, has contracted with the two regional centers for the provision
of services.
Also established was a coordinator of Mental Retardation Services
within the Health and "Welfare Agency, and a Program and Advisory
Standards Board consisting of representatives of State departments and
interested public members.
7 For background information, the following- two documents are essential : Assembly
Ways and Means Committee, Subcommittee on Mental Health Services, A Re-
definition of State Responsibility for California's Mentally Retarded (1965) ;
and State of California Study Commission on Mental Retardation, The Unde-
veloped Resource, A Plan for the Mentally Retarded in California (January
1965).
18 ASSEMBLY INTERIM COMMITTEE ON WAYS AND MEANS
Although the two regional centers have been in operation for only
six months, present indications are that the centers are making a
positive contribution to the health and welfare of the retarded popula-
t ion who have been served to date.
Moreover, the subcommittee did receive considerable testimony ad-
vocating :
A. That additional diagnostic centers be established in order to create
the regional network envisaged by AB 691 8 ; and
B. That the centers be broadened in scope to serve all handicaps, not
simply the retarded.9
The subcommittee believes that the basic concepts of the diagnostic
program are sound and that unless actual experience under the program
during fiscal year 1966-67 demonstrates major problems, the Legisla-
ture ought to expand the number of diagnostic centers by three centers
during 1967-68 and another three centers during 1968-69, creating a
regional network of eight centers by 1969.
The subcommittee further believes that as the program develops
during the next three years, the Mental Retardation Program and
Advisory Standards Board, and the Coordinator of Mental Retarda-
tion Programs in the Health and Welfare Agency, should begin efforts
to analyze the feasibility of broadening the scope of services provided
by the diagnostic centers to include all handicapping conditions. Such
efforts should include discussions with representatives of voluntary
associations vitally concerned with services for the handicapped popu-
lation, and a progress report with recommendations to be submitted to
the Legislature by January 5, 1968.
A MASTER PLAN FOR THE HANDICAPPED
CHILDREN OF CALIFORNIA
Assemblyman Leroy Greene, a member of the subcommittee, has
recommended that there be developed a Master Plan for the Handi-
capped Children of California. Although the details of Assemblyman
Greene's proposal have yet to be worked out, presumably the master
plan would use existing mechanisms, or establish additional ones, (1) to
determine the actual numbers of handicapped children in California,
the nature of their disabilities and the total array of services required
to meet these needs; (2) to analyze in terms of these benchmarks the
effectiveness of existing programs; (3) to recommend both new pro-
grams and reorganization of existing ones; and (4) to pinpoint admin-
istrative responsibility at every level for the implementation and
evaluation of programs for handicapped children.
The subcommittee believes that the master plan proposal has very
definite merits. Not only would it likely lead to improved services for
8 Mrs. Walter Dunbar, California Council for Retarded Children, and Dr. Lester
Breslow, Director, State Department of Public Health.
0 Dr. Robert A. O'Reilly, president, California Association for Neurologically Handi-
capped Children ; Mrs. Marybelle R. Dole, The Belle Curtis Foundation ; Mrs.
Esther E. Smith, executive director, Easter Seal Society ; Mr. George Argys,
executive director, California Association for Mental Health ; and Mrs. Gene
Greenleaf, president, California Association of Parents of Deaf and Hard of
Hearing Children.
SERVICES FOR HANDICAPPED CHILDREN 19
handicapped children, but also it would lead to a more efficient use of
public monies. Programs for handicapped children have grown in a
piecemeal fashion, and no overall analysis of the effectiveness of these
programs in California has ever been made. The issues analyzed in this
report are only pieces of a larger picture that involve the expenditure
of millions of tax dollars. The subcommittee believes that the subject
clearly warrants the thorough overall analysis inherent in the master
plan concept.
ADDENDUM
Assembly, California Legislature
January 20, 1967
MEMORANDUM
TO : Nicholas C. Petris, Subcommittee Chairman
FROM : Charles J. Conrad
RE : Reservations on the Report ' ' Subcommittee Report on Services
for Handicapped Children ' '
While I am in general agreement with the report and especially the
concept of a master plan for the handicapped children of California,
I do not believe it is feasible to either add additional diagnostic centers
or broaden their scope in the next fiscal year because of the serious
fiscal problems facing our state in the 1967-68 fiscal year.
Respectfully submitted,
Charles J. Conrad
printed in California office of state printing
L-3027 — 100 2-67 1M
ASSEMBLY INTERIM COMMITTEE REPORT
1965-67
Volume 21
Number 20
CALIFORNIA LEGISLATURE
ASSEMBLY INTERIM COMMITTEE ON
WAYS AND MEANS
REPORT OF THE
SUBCOMMITTEE ON HEALTH, EDUCATION
AND WELFARE SERVICES
on
THE COSTS OF MEDICAL EDUCATION
HALE ASHCRAFT
ANTHONY BEiLENSON
FRANK BELOTTI
CARL BRITSCHGI
JOHN L. E. COLLIER
CHARLES CONRAD
PAULINE DAVIS
Members of the Committee
ROBERT W. CROWN, Chairman
BURT HENSON, Vice Chairman
LEROY GREENE
JOSEPH KENNICK
FRANK LANTERMAN
CHARLES MEYERS
JAMES MILLS
DON MULFORD
NICHOLAS C. PETRIS
CARLEY PORTER
HOWARD THELIN
JEROME WALDIE (Resigned)
JOHN WILLIAMSON
GORDON WINTON, JR.
GEORGE ZENOVICH
Committee Staff
LOUIS J. ANGELO, Committee Coordinator JOHN H. SIMONS, Consultant
WILLIAM BARNABY, Consultant KEITH AXTELL, Legislative Intern
GAIL VESSELS, Committee Secretary
MARIA HUSUM, Secretary
Published by the
ASSEMBLY
OF THE STATE OF CALIFORNIA
JESSE M. UNRUH
Speaker
GEORGE ZENOVICH
Majority Floor Leader
JAMES D. DRISCOLL
Chief Clerk of the Assembly
CARLOS BEE
Speaker pro Tempore
ROBERT MONAGAN
Minority Floor Leader
ASSEMBLY INTERIM COMMITTEE ON
WAYS AND MEANS
Robert W. Crown, Chairman
REPORT OF THE
SUBCOMMITTEE ON HEALTH, EDUCATION
AND WELFARE SERVICES
Nicholas C. Petris, Chairman
on
THE COSTS OF MEDICAL EDUCATION
Members of the Subcommittee
ANTHONY BEILENSON CHARLES MEYERS
FRANK BELOTTI DON MULFORD
CHARLES CONRAD HOWARD THELIN
LEROY GREENE GORDON WINTON
JOSEPH KENNICK
Staff
LOUIS J. ANGELO, Coordinator
JOHN H. SIMONS, Consultant
ALFRED BAXTER, Contract Consultant
GAIL VESSELS, Secretary
(3)
2— L-3116
LETTER OF TRANSMITTAL
Assembly Interim Committee on Ways and Means
February 6, 1967
TO THE SPEAKER AND MEMBERS OF THE ASSEMBLY
Dear Mr. Speaker and Members :
Your Interim Committee on Ways and Means, in accordance with
House Resolution 710 (v), 1965 General Session, herewith respectfully
submits the final report of the Subcommittee on Health, Education and
Welfare Services on the subject of costs of medical education.
The report was adopted by nine of the 10-member subcommittee and
we, the undersigned, concur in their findings and recommendations.
The chairman is appreciative of the intelligent and energetic leader-
ship provided by Subcommittee Chairman Nicholas C. Petris as well as
the diligent application of the subcommittee members and its staff.
Respectfully submitted,
Robert W. Crown, Chairman
Anthony Beilenson *
Frank Belotti
Carl Britschgi
Charles Conrad
Leroy Greene
Burt Henson
Joseph Kennick
Charles Meyers
James Mills *
Nicholas C. Petris
Carley V. Porter
Howard Thelin
John Williamson
Gordon Winton, Jr.
George Zenovich
* With reservations
<B)
LETTER OF TRANSMITTAL
January 6, 1967
Hon. Kobert W. Crown
Chairman, Assembly Interim Committee on Ways and Means
Dear Chairman Crown :
In accordance with House Resolution 710 (v), 1965 General Session,
the Subcommittee on Health, Education and Welfare Services herewith
submits its report on the costs of medical education.
The resolution requesting interim study of this subject was H.R. 526
(Petris), 1965 General Session.
The subcommittee is grateful to all who participated in the public
hearing as well as those who communicated with the subcommittee and
its staff.
Respectfully submitted,
Anthony Beilenson *
Frank Belotti
Charles Conrad
Leroy Greene
Nicholas C. Petris, Chairman
Joseph Kennick
Charles Meyers
Howard Thelin
Gordon Winton, Jr.
* With reservations
(6)
TABLE OF CONTENTS
Page
Background 9
Initial Recommendations 9
Market Enlargement 10
Posthearing Activities 11
Next Steps 11
Appendix A 12
Appendix B 15
Appendix C 16
(7)
REPORT ON THE COSTS OF MEDICAL EDUCATION
BACKGROUND
On the occasion of the assignment of the subject matter of H.R. 526
(1965) to the Committee on Ways and Means for interim study, the
topic of medical education costs was referred to the Subcommittee on
Health, Education and Welfare Services chaired by Assemblyman
Nicholas C. Petris. The general charge to the subcommittee was to con-
sider the desirability and alternative designs of a comprehensive study
of medical educational costs in California.
In October of 1965, the consulting firm of Alfred Baxter was asked
by the chairman to undertake certain staff assignments for the sub-
committee under a more general contract of the firm with the Assembly
Rules Committee. On approval of this request by the Rules Committee
and the Office of the Speaker, work was begun.
INITIAL RECOMMENDATIONS
Following meetings with cognizant staff members of the several medi-
cal schools in California, with officials of local medical societies and of
the American Association of Medical Colleges, the consultants recom-
mended to the subcommittee chairman that the scope of the study be
broadened slightly to cover the design of a general review of the ade-
quacy of medical and paramedical services to Californians. In-state
training of physicians would then be placed in a larger and more
strategic context.
Upon authorization of the subcommittee chairman to proceed with
the development of this line of attack, the contractors were led to the
belief that a full and comprehensive study of the large topics proposed
would very likely prove more elaborate, costly, and technically demand-
ing than appropriate for an Assembly interim investigation. In addi-
tion, certain crucial limitations on data and on judgments regarding
appropriate levels of medical services made it most unlikely that results
and findings might be obtained of sufficient persuasiveness to ground
major legislative policies. The arguments and considerations which led
to this recommendation against proceeding with an earlier and tentative
line of attack were summarized in Job Memorandum 65-35-002 (Appen-
dix A). The subcommittee chairman accepted the recommendations and
authorized the continuation of staff work with a significantly different
focus.
10 REPORT ON THE COSTS OF MEDICAL EDUCATION
MARKET ENLARGEMENT
The revised focus of staff work was derived from two considerations.
First, that the question of how many doctors should there be in Cali-
fornia was not answerable in any reasonable way. And second, that
the marginal costs of training additional doctors and paramedical spe-
cialists might vary significantly among existing institutions and com-
binations of institutions currently training physicians. It was argued
that if no one knows or can determine how many physicians California
needs, it might still be possible to design a minimum cost program for
providing any specified increase to the state's capacity for training
doctors.
The essentials of this ''minimum cost" strategy were summarized in
a memorandum which was quite widely circulated for comment among
interested medical school staffs, hospital associations, and other groups
(Appendix B).
The basic notion was that the Legislature might solicit carefully de-
veloped plans from medical schools (large, small, public, private, etc.)
which might wish to seek public funds to expand the size of their
classes. It was anticipated that the marginal costs associated with such
expansions might vary significantly depending upon the degree of
saturation of existing facilities (laboratories, classrooms, hospital
space, boiler plants, etc.) and upon the exact size of the proposed in-
crease in capacity. Should institutions or combinations of institutions
be interested in developing such plans and marginal cost proposals in a
form which would permit effective comparisons, the Legislature could
then determine the least expensive combination of expansions required
to produce any specified level of training capacity.
It was anticipated that technical evaluations and qualitative ques-
tions could be considered, in part, with the aid of a specially convened
technical advisory committee of prominent, out-of-state medical educa-
tion experts.
This basic plan was distributed to potentially interested institutions
and used as a basis for discussions at a hearing in Sacramento on May
23, 1966, attended by subcommittee members, legislative staff and rep-
resentatives of interested institutions and organizations.
REPORT ON THE COSTS OF MEDICAL EDUCATION 11
POST HEARING ACTIVITIES
Following the hearing, five institutions indicated a positive interest
in further discussions of the plan and of possible variations of it:
Stanford University Medical School, the Presbyterian Medical School
in potential collaboration with San Francisco State College or the Uni-
versity of the Pacific (or both), the Medical School of the University of
Southern California, the University of Santa Clara, and the Kaiser
Foundation Medical Care Program.
Staff discussions were held with senior officials of each of these or-
ganizations with the result that each of the institutional staffs proposed
to develop tentative proposals for review and action by their several
governing boards. This process is currently in progress.
NEXT STEPS
While it is not possible to know which, if any, of the interested
institutions will obtain board approval to proceed with the formulation
of detailed proposals, it is unlikely that any actual proposals will be sub-
mitted to the Legislature until 1968 at the earliest. Should such pro-
posals be submitted, it will probably prove necessary to maintain staff
liaison during the design of the proposals (to insure a minimum basis
for comparability) and to convoke a technical advisory committee to
assist the Legislature in reviewing the submittals.
Further, it would seem prudent to consider parallel action to place
before the Constitutional Revision Commission the question of framing
amendments of sufficient strength unambiguously to permit the grant-
ing of public funds to private or semiprivate institutions to carry out
expansions in training capacity to serve the public interest in increas-
ing the locally trained supply of physicians and related health person-
nel. Commentary on constitutional problems is attached in an opinion
of the Legislative Counsel, dated March 25, 1966 (Appendix C).
APPENDIX A
TO : The Hon. Nicholas C. Petris
FROM : Alfred Baxter & Associates
SUBJECT: Progress Report on the Design of a Study of Medical
Education Costs in California
DATE : December 14, 1965
JOB MEMORANDUM 65-35-002
The following notes summarize and record the results of our meeting
on November 19 regarding the design of the study relating to the costs
of medical education in California :
1. Recapitulation of Earlier Recommendations
At our last meeting in Sacramento, I recommended that the scope
and horizons of the study be broadened considerably from the orig-
inal intent. In particular, we agreed that the following topics should
be given preliminary consideration :
a. How many physicians might be required in California, given
changes in effective demand resulting from Medicare and related
programs? What kind of physicians should these be, and what
would be a desirable geographic distribution?
b. What is the present and potential mix of sources for new phy-
sicians (e.g., import, train locally, keep more of the locally
trained, increase efficiency by provision of paramedical staffs) ?
c. Answers to the questions suggested under (a) and (b) above
were thought to lead to the design of a rational and efficient mix
of programs to obtain in the short and long run the quantity of
additional physicians thought to be required.
As a result of further reading in the relevant literature, and particu-
larly after talking with medical officials at the University of California
and the American Association of Medical Colleges in Evanston, Illinois,
it is clear that there is no useful way of answering "How many doctors
is enough ? ' ' — let alone identify an optimal mix among medical special-
ties or among physicians and paramedical assistants. Accordingly, al-
though I still believe the larger study to be an ideal way to proceed, I
should like to rescind my earlier recommendations and suggest instead
a return to the more modest focus which was originally embodied in
your resolution.
2. Outline of Current Recommendations
On the hypothesis that the marginal costs of accommodating addi-
tional students will vary among California medical schools, and on
the further assumption that some of these marginal costs for some
student increments will be lower than the average student cost at a
hypothetical new medical center, I would propose that the follow-
ing steps be taken :
(12)
REPORT ON THE COSTS OF MEDICAL EDUCATION
13
a. Write, and then meet individually with the deans of California
medical schools (public and private) and with representatives of
their boards to determine whether or not these schools would be
interested in receiving contributions from the state equal to the
marginal capital and operating costs of additional students. The
key questions here are whether any of California's private medi-
cal schools would accept state funds to finance an increase in
their student bodies; and, given their willingness, would their
"asking price" be lower than the cost of building all-new facil-
ities ?
b. For those schools interested in pursuing such possibilities, re-
quest that they undertake a study, with possibly a $15,000 con-
tribution from the study committee, to determine for, say, 5, 10,
15, 20, etc. additional students per year the marginal capital and
operating costs.
c. During the preparation of these cost calculations, and upon their
receipt, cause a technical advisory committee to the Assembly to
be formed to review the work of the participating institutions.
This technique should help damp the effects of errors in fact or
omissions, as well as of unreasonable or disingenuous assump-
tions.
d. In tandem with the above efforts, the technical advisory commit-
tee, or a staff under its direction, should be asked to develop cost
estimates for a new "public medical center."
At the conclusion of these four steps, the committee should be in pos-
session of an edited and annotated chart of the following format :
Marginal costs in thousands of dollars —
additional students
5/yr
10/yr
15/yr
20/yr
School A
Cap.
Op.
School B
Cap.
Op.
School C
Cap.
Op.
Hypothetical
New Public
Medical
School*
Cap.
Op.
* Comparison entries for the hypothetical new school would be adjusted to permit
direct comparison with other entries.
14 REPORT ON THE COSTS OF MEDICAL EDUCATION
Given that reasonable entries could be obtained for the chart sketched
above, there are existing techniques for selecting the optimal combina-
tion of increases at various schools ; i.e., the combinations at any speci-
fied level of increase of medical student production which would result
in the lower total marginal costs. This approach is essentially an eco-
nomic one and puts the state in the position of the evaluator in a market
composed of public and private institutions.
This calculation would identify the most efficient mix of sources for
any specified number of new medical graduates. It would not consider
alternative sources of money. The hunt for federal grants and private
benefactions would come at a later stage.
3. Collateral Requirements
a. Unless there are special difficulties, it would seem wise to carry
out this study under a joint legislative committee structure rather
than having it the act of a single house.
b. The Attorney General has ruled that it will require a constitu-
tional amendment to make possible appropriation of public moneys
to private institutions, and without such an amendment, such a
process would be illegal even if it were clothed in the form of a
contract. I should strongly recommend that staff liaison be main-
tained with the Committee on Constitutional Amendments to the
end that a suitable amendment would be in form for processing
in 1966.
4. The Next Step
It was agreed that Mr. Baxter would take primary responsibility for
the preparation, by January 1966, of a study design along the lines
sketched above in paragraphs 2, a-d, and that this report should in-
clude estimates of cost and time.
APPENDIX B
OUTLINE OF A PROCEDURE FOR EXPANDING THE
PRODUCTION OF PHYSICIANS IN CALIFORNIA
Should the Legislature see fit to encourage an increase in the number
of doctors trained annually in California, it is appropriate that the state
should consider proposals from public and private schools alike.
A possible procedure for considering such proposals would include
the solicitation, from potentially interested institutions, of voluntary
planning studies containing estimates of the marginal costs (capital and
operating) of stated increments of new or additional medical students.
On the basis of such careful, institutional studies, the Legislature could
identify efficient combinations of new institutions and expanded exist-
ing ones to produce various levels of increased production. On the basis
of economic analyses and other relevant considerations, further deter-
minations could then be made in regard to the magnitude and timing
of appropriations to the university and/or long-term contracts with in-
dividual private institutions or with joint ventures of two or more pri-
vate institutions.
Table A.l is a possible form in which to collect the incremental ca-
pacity and marginal cost information from institutional plans. Needless
to say, the general approach and the draft data form are quite prelim-
inary and subject to alteration or abandonment in the face of effective
criticism and suggestions.
Table A.l
ILLUSTRATIVE DATA COLLECTION FORM FOR
COSTS OF TRAINING ADDITIONAL PHYSICIANS
Institution or Joint Venture
Sum of annual operating and capital costs in thousands of dollars
Size of incre-
mental, annual
Planning and construction years
Operational years
production
18
19
20
5
10
15
100
Not all rows need be filled out. If a row is used, all the columns must be used.
Assembly Ways and Means Subcommittee
on the Costs of Medical Education
Nicholas C. Petris, Chairman
March 2, 1966
(15)
APPENDIX C
STATE OF CALIFORNIA
OFFICE OF LEGISLATIVE COUNSEL
Sacramento, California
March 25, 1966
Honorable Nicholas Petris
Assembly Chamber
State Aid: Private Medical Schools
#3916
Dear Mr. Petris :
You have asked the several questions which are separately stated and
considered below.
QUESTION NO. 7
Are there any serious constitutional problems which would be raised
by legislation which would authorize the state to contract with a pri-
vetely owned medical school over a 20-year period whereby the medical
school would increase its facilities to train 10 more students each year,
and the state would pay for the cost of the increased facilities and the
additional expenses incurred in the operation thereof?
OPINION NO. i
We assume that the program contemplated would permit the funds
to be used for the operation and maintenance of medical school and
hospital buildings including nurses' homes, purchase and maintenance
of equipment, payment of instructors ' and other employees' salaries,
and for such other costs as are normally incurred in the operation of a
medical school.
We assume also that the program would apply to private medical
schools in general and not to specific schools, which would raise ques-
tions of special legislation.
In our opinion, if the authorization to contract under the proposed
legislation permitted the incurring of obligations in excess of $300,000,
and no money were appropriated therefor, the legislation would violate
Section 1 of Article XVI of the State Constitution unless the legisla-
tion were approved by the electorate of the state. Also legislation of a
kind under consideration to grant state funds directly to private medi-
cal schools for the purposes suggested would probably be held to violate
Article IX, Section 8 of the California Constitution. However, indirect
aid in the form of tuition grants and scholarships to medical students
would be possible.
ANALYSIS NO. 7
Since the legislation under consideration would authorize the state
to enter into a contract for a 20-year period and to incur obligations
thereunder, Section 1 of Article XVI of the State Constitution must
be considered. The section reads in part :
(16)
EEPOET ON THE COSTS OF MEDICAL EDUCATION 17
i i
Section 1. The Legislature shall not, in any manner create any
debt or debts, liability or liabilities, which shall, singly or in the
aggregate with any previous debts or liabilities, exceed the sum of
three hundred thousand dollars ($300,000) . . . unless the same
shall be authorized by law [as specified] . . . ; but no such law shall
take effect until, at a general election or at a direct primary, it
shall have been submitted to the people and shall have received a
majority of all the votes cast for and against it at such elec-
tion,. . ."
The Supreme Court of this state has considered this debt limitation
upon a number of occasions. It has consistently held that if the liability
created, although in excess of $300,000, is covered by an appropriation
the constitutional limitation is not applicable. In the early case of
State v. McCaidey (1860), 15 Cal. 429, the Legislature provided for a
contract obligating the state to pay $10,000 a month over a five-year
period for the rendition of services by the contracting party and ap-
propriated $600,000 therefor. The point was made that the $600,000
appropriation created a liability in excess of the constitutional limita-
tion. There follows the language of Chief Justice Field in upholding
the validity of the legislation in question :
/'The eighth article was intended to prevent the State from run-
ning into debt, and to keep her expenditures, except in certain cases
within her revenues. These revenues may be appropriated in antici-
pation of their receipt, as effectually as when actually in the treas-
ury. The appropriation of the moneys, when received, meets the
services as they are rendered, thus discharging the liabilities as
they arise, or rather anticipating and preventing their existence.
The appropriation accompanying the services operates in fact in
the nature of a case payment." (15 Cal. at page 455; emphasis
added)
The effect of this decision is to hold that no debt is created within
the meaning of the constitutional limitation if an appropriation has
been made that is available to pay the obligation as liability for pay-
ment accrues.
Thus, if money were to be appropriated under the legislation in
question to cover the payment of the obligations incurred under the
contract authorized thereunder, this constitutional prohibition would
not be violated. On the other hand, if the obligations to be incurred
under the contract for a current fiscal year exceeded $300,000 singly
or in the aggregate with any previous debts or liabilities and no appro-
priation were made therefor, Section 1 of Article XVI of the State
Constitution would be violated unless it were submitted to the electorate
for approval.
It may be observed, however, that in determining whether the $300,-
000 maximum debt limitation is exceeded under a contract which is
in operation over a number of years, a question arises whether the
state immediately incurs the total obligation under the contract for its
entire life or whether it incurs an obligation in each year of the con-
tract for only that amount due under the contract for that year.
18 REPORT ON THE COSTS OF MEDICAL EDUCATION
In 1951 the Supreme Court decided the case of Dean v. Kuchel* 35
Cal.2d 444, which involved a contract that had been executed by the
Director of Finance under the authority of Government Code Section
13114. Under that contract the state leased to a private corporation cer-
tain real property in Los Angeles for a term of 35 years for the sum of
one dollar. The company agreed to erect an office building on the prop-
erty in accordance with specified plans and to lease the building and the
property to the state for a term of 25 years at a specified monthly
rental. The validity of the agreement was challenged on the basis that
it violated the constitutional debt limitation imposed by Section 1 of
Article XVI.
The Supreme Court upheld the validity of the agreement. During the
course of its opinion, it stated :
" . . .if the lease or other agreement is entered into in good faith
and creates no immediate indebtedness for the aggregate install-
ments therein provided for, but, on the contrary, confines liability
to each installment as it falls due and each year's payment is for
the consideration actually furnished that year, no violence is done
to the constitutional provision, ..."
The court then went on to state:
' ' . . . If , however, the instrument creates a full and complete liabil-
ity upon its execution, or if its designation as a ' lease ' is a subter-
fuge and it is actually a conditional sales contract in which the
'rentals' are installment payments on the purchase price for the
aggregate of which an immediate and present indebtedness or lia-
bility exceeding the constitutional limitation arises against the pub-
lic entity, the contract is void. "
While it is true that the Dean case involved the validity of a long-
term lease arrangement, rather than a purchase agreement, we see no
reason why the two situations would not be regarded, in principle, in
the same light.
The State Constitution also prohibits the Legislature from making
any gift of public money or thing of value to any individual, municipal
or other corporation (Art. IV, Sec. 31). However, it is well settled that
if public funds are expended for a "public purpose" the expenditure
does not constitute a gift within the meaning of that section; neither
does such expenditure fall within the prohibitions of Section 22 of Arti-
cle IV of the State Constitution which, among other things, generally
prohibits expenditures for the purpose or benefit of private corpora-
tions or associations (Simpson v. City of Los Angeles (1953), 40 Cal.2d
271, 282; County of Alameda v. Janssen (1940), 16 Cal.2d 276). There-
fore, if the Legislature should find that there is a shortage of qualified
medical personnel in the state, the courts would probably hold that ex-
penditures reasonably designed to alleviate this condition would serve
a "public purpose." Thus, we think that legislation of a kind under
consideration would probably serve a "public purpose."
* Other decisions to the same effect are Vandergrift v. Riley, 16 Pac. 2d 734 ; McBean
v. City of Fresno, 112 Cal. 159 ; State v. McCauley, 15 Cal. 429.
REPORT ON THE COSTS OF MEDICAL EDUCATION 19
There is still another provision of the Constitution which must be
considered, however. Section 8 of Article IX provides in part that :
"No public money shall ever be appropriated for the support of
any sectarian or denominational school, or any school not under the
exclusive control of the officers of the public schools ; . . . "
Since an appropriation to be used by a private medical school for its
normal operating expenditures, such as costs of operating the school and
hospital buildings, purchasing supplies, and paying salaries, would ap-
pear to be "for the support of" the school, we believe any such appro-
priation would be held to violate Section 8 of Article IX of the Consti-
tution. If the school or hospital were "controlled by any religious creed,
church, or sectarian denomination" there would be an additional viola-
tion of Section 30 of Article IV, which prohibits use of public funds or
property in aid of religious sects or institutions controlled by them.*
These constitutional prohibitions, of course, would not prevent state
grants to public medical schools.
Legislation which would result in indirect aid to private medical
schools through the medium of scholarships or tuition grants to medical
students would probably be upheld under some circumstances. The
courts have sustained some legislation where only a remote, indirect or
incidental benefit results to a person or organization coming within the
terms of constitutional provisions discussed herein, or where such bene-
fits are offset by some predominate public purpose being served by the
legislation. Thus, it is accepted that legislation providing for state edu-
cational assistance to veterans (M. & V.C., Sees. 981 and following) is
valid though the recipient may use the funds received to pay for attend-
ance at private schools (See Veterans' Welfare Board v. Riley (1922),
188 OaL 607).
We note that the state has also established competitive scholarship
programs under which students may attend private institutions of col-
legiate grade (Ed.C. Sees. 31201-31237 incl.).
We believe therefore that properly drafted legislation making schol-
arships or tuition grants to medical students would similarly be upheld,
and would not be invalidated by the fact that the money might indi-
rectly benefit private or parochial schools (see also Bowker v. Baker
(1946), 73 Cal.App.2d 653 approving transportation of pupils to a
parochial school by public schoolbuses).
QUESTION NO. 2
Would the duration of the proposed contract have any effect on the
constitutionality of the legislation described in the first question ¥
OPINION AND ANALYSIS NO. 2
In view of what we have said in our analysis of the first question, it is
our opinion that the duration of the proposed contract would not have
any effect on the constitutionality of the legislation which would author-
ize it.
* It should be noted that Section 22 of Article IV of the State Constitution does permit
state financial aid for the construction of hospital facilities by nonprofit corpo-
rations.
20 REPORT ON THE COSTS OF MEDICAL EDUCATION
QUESTION NO. 3
Is there any provision of law which specifically authorizes the state to
contract for services to be rendered by private organizations for a pe-
riod of 20 years or more ?
OPINION AND ANALYSIS NO. 3
We have not found any statutory authority which specifically permits
the state to contract for services with private persons or organizations
over periods of 20 years or more. However, various agencies have gen-
eral authority to contract, and it may be that under such authority,
long-term contracts are executed (see e.g. W. & I.C. Sees. 6300, 12016
and 18650).
Very truly yours,
George H. Murphy
Legislative Counsel
By Edward F. Nowak
Deputy Legislative Counsel
printed in California office of state printing
L-3116 — 100 2-67 1M
ASSEMBLY INTERIM COMMITTEE REPORT
1965-67
Volume 21
Number 21
CALIFORNIA LEGISLATURE
ASSEMBLY INTERIM COMMITTEE ON
WAYS AND MEANS
REPORT OF THE
SUBCOMMITTEE ON INDIAN PROBLEMS
on the
STATE ADVISORY COMMISSION ON
INDIAN AFFAIRS
Members of the Committee
Robert W. Crown, Chairman
Burt Henson, Vice Chairman
HALE ASHCRAFT
ANTHONY BEILENSON
FRANK BELOTTI
CARL BRITSCHGI
JOHN L. E. COLLIER
CHARLES CONRAD
PAULINE DAVIS
LEROY GREENE
JOSEPH KENNICK
FRANK LANTERMAN
CHARLES MEYERS
JAMES MILLS
DON MULFORD
NICHOLAS C. PETRIS
CARLEY PORTER
HOWARD THELIN
JEROME WALDIE (Resigned)
JOHN WILLIAMSON
GORDON WINTON, JR.
GEORGE ZENOVICH
Committee Staff
LOUIS J. ANGELO, Coorcfinafor
WILLIAM BARNABY, Consultant
JOHN SIMONS, Consultant
KEITH AXTELL, Legislative Intern
GAIL VESSELS, Commiffee Secretary
MARIA HUSUM, Secretary
Published by the
ASSEMBLY
OF THE STATE OF CALIFORNIA
JESSE M. UNRUH
Speaker
GEORGE ZENOVICH
Majority Floor Leader
CARLOS BEE
Speaker pro Tempore
ROBERT MONAGAN
Minority Floor Leader
JAMES D. DRISCOLL
Chief Clerk of the Assembly
ASSEMBLY INTERIM COMMITTEE ON
WAYS AND MEANS
Robert W. Crown, Chairman
Report of the
SUBCOMMITTEE ON INDIAN PROBLEMS
on the
STATE ADVISORY COMMISSION ON
INDIAN AFFAIRS
Members of the Subcommittee
LEROY GREENE, Chairman
HALE ASHCRAFT PAULINE DAVIS HOWARD THELIN
Staff
KEITH AXTELL, Intern
GAIL VESSELS, Secretary
LETTER OF TRANSMITTAL
Assembly Interim Committee on Ways and Means
California Legislature, March 29, 1967
To the Speaker and Members of the Assembly
Dear Mr. Speaker and Members :
Your Interim Committee on Ways and Means herewith submits its
final report on the State Advisory Commission on Indian Affairs.
The committee is indebted to the many persons and agencies who
provided information and assistance during the course of the study.
Respectfully submitted,
Hale Ashcraft
Anthony Beilenson
Frank Belotti
Carl Britschgi
Charles Conrad
Pauline Davis *
* With reservations.
Leroy Greene
Joseph Kennick
Frank Lanterman
Charles Meyers
James Mills *
Robert W. Crown, Chairman
Carley Porter
Howard Thelin
Jerome Waldie (Resigned)
John Williamson
Gordon Win ton, Jr.*
George Zenovich
LETTER OF TRANSMITTAL
February 15, 1967
Honorable Robert W. Crown
Chairman, Assembly Interim Committee
on Ways and Means
Dear Chairman Crown :
In accordance with House Resolution 710 (v), 1965 General Session,
the Subcommittee on Indian Problems herewith submits its report on
the State Advisory Commission on Indian Affairs.
The resolution requesting interim study of this subject was H.R. 499
(Veysey), 1966 First Extraordinary Session.
The subcommittee is grateful to all who participated in the public
hearing as well as those who communicated with the subcommittee and
its staff.
Respectfully submitted,
Leroy F. Greene, Chairman
Subcommittee on Indian Problems
Leroy Greene Pauline Davis *
Hale Ashcraft Howard Thelin
* With reservations.
CONTENTS
Page
Introduction 11
Findings 12
Recommendations 14
Comments 15
INTRODUCTION
The Assembly Interim Committee on Ways and Means was assigned
the subject matter of House Resolution 499 (Veysey), 1966 First Ex-
traordinary Session, which requested a study of the State Advisory
Commission on Indian Affairs.
The studjr requested had among its objectives: (1) determining
whether there was sufficient participation and representation of In-
dians in the activities of the commission, and (2) determining the
desirability or need for Indians as members of the commission.
The Ways and Means Committee chairman referred the subject mat-
ter to the Subcommittee on Indian Problems, which was formed spe-
cifically for this study. A public hearing was conducted December 16,
1966, at San Diego. The report that follows presents the findings and
recommendations resulting from that hearing as well as from supple-
mental staff research.
The State Advisory Commission on Indian Affairs was established
by the Legislature in 1961, under SB 1007, authored by Senator Stan-
ley Arnold. It was originally constituted for a period of three years,
and its existence has been extended twice. The commission's purpose is
to "study the problems of the American Indians residing in California,
including, but not limited to, the problems presented by the termina-
tion of federal control over Indian affairs, the operation, effect, admin-
istration, enforcement, and needed revision of any and all state laws
pertaining to the Indians and the three relocation centers in Califor-
nia. ' '
The commission is composed of nine members: three members of the
Senate appointed by the Senate Committee on Rules, three members of
the Assembly appointed by the Speaker, and the State Directors of
Education, Public Health, and Social Welfare. The chairman of the com-
mission is designated by the Governor. The advisory committee to the
commission consists of seven members, three of whom are appointed
from among the recognized leaders of the California Indian reserva-
tions in the northern, central and southern sections of the state.
11
I. FINDINGS
A. There is considerable dissatisfaction with the State Advisory Com-
mission on Indian Affairs among the Indians of this state, for the
following reasons :
1. Indian leaders believe that the Indian people are not sufficiently
represented in the commission 's decision-making activities. Many
hold the opinion that a non-Indian cannot understand and appre-
ciate Indian problems and Indian culture. They are fearful that
a commission composed of non-Indians will make recommenda-
tions which are not consistent with the needs and interests of
Indians.
2. Tribal leaders do not participate in the selection of advisory com-
mittee members from their areas. And because terms of office are
not limited, there is no mechanism for replacement of an unpop-
ular member of the committee.
3. There are no channels of communication between the commission
and the leaders of Indian reservations and rancherias. Many In-
dians are not f amilar with the commission ; and they do not un-
derstand how the commission can speak on their behalf without
meeting with them and attempting to understand their problems.
The executive secretary of the commission had not met with any
of the tribal leaders from southern California.
4. Indian leaders were displeased with a series of proposed govern-
ment programs to serve Indians because it was presented to the
Legislature in early 1966 by the commission before Indian lead-
ers and the Indian people were allowed to respond to them
through public hearings. Only after the adoption of HR 499,
which expressed specific concern for the need of public hearings,
did the commission publicly hear Indian views.
5. Among many California Indians the commission is considered
ineffective. During five years of existence, they state, the com-
mission has presented only one progress report to the Legislature.
6. There have been three executive secretaries of the commission in
the space of three years. The first two during their tenure col-
lected information for research papers to be submitted for grad-
uate degrees. Some Indian leaders felt that the first executive
secretary took all of the commission's research results with him
when he accepted a faculty position at an eastern university.
B. A vocal group of Indian leaders wish the commission abolished.
They are fearful that it will become a State Bureau of Indian Af-
fairs, with control of Indian property and Indian lives, just at the
time that they are achieving freedom from federal paternalism and
are assuming more responsibility for their own affairs.
C. Many Indians have expressed concern that the commission might be
attempting to gain control of the $29.1 million settlement against
the federal government of California Indians for lands taken from
them. This money is now held in trust in the Federal Treasury,
awaiting congressional enactment of a distribution plan. Members
12
of the advisory committee alienated many California Indians by
supporting federal legislation to turn a portion of these funds over
to the State Department of Education for Indian education (HR
8021, 1965). The following statements represent the fears of some
Indians :
"... the Legislature or the Governor could not enact legislation
and set up a political committee and hope to grab funds or a
court award belonging to other citizens of the State, as A.B. 1007
[sic] provides regarding Indian funds.
" . . . the current scheme to grab California Indian-owned funds
in the United States Treasury, and additional millions expected
under claims still pending under the Indian Claims Act of De-
cember 13, 1946, is the fifth similar plan." 1
D. Those Indian leaders who support the existence of the State Ad-
visory Commission on Indian Affairs represent a majority of the
reservation Indians. They appreciate its recommendations but are
afraid that little will come of them. They would like to insure the
implementation of these recommendations by strengthening the ad-
visory commission.
E. The State Advisory Commission's 1966 Progress Report indicates
that the Indian reservations and ranch erias in California, of which
there are over 100, are generally enclaves of poverty located in re-
mote areas throughout the state. This report shows that about 70
percent of the families earn less than $3,000 annually, that unem-
ployment rates are high, and that few reservation Indians complete
high school. Existing houses are reported structurally unsound ; and
if they exist, domestic water and sanitary facilities are found
grossly inadequate. The death rate from disease is several times the
national average, and the average lifespan is 42 years.
Despite these depressing statistics, the committee has found
through its field research a growing interest among reservation In-
dians in improving their conditions of life. There is a deep concern
about better education for Indian children and for utilizing the eco-
nomic resources of the reservation to improve their own lives. Il-
lustrative of this attitude is the recent statement by the tribal
chairman of the Rincon Band of Mission Indians:
"Rincons are determined to make for themselves and their chil-
dren a better life through development of their resources. . . .
We are not idly waiting around, but have begun to take the
steps we could take toward development of what we have." 2
In spite of these desires for self -improvement, progress has been
slow because of a lack of technical assistance and a lack of informa-
tion on the programs available to assist them in developing economic
resources. The unique legal situation of reservation Indians has also
militated against their assuming greater responsibility for reserva-
tion economic development.
1 Letter to the committee by Mr. Purl Willis, counselor, Mission Indian Federation,
Inc., of California.
2 Statement by Mrs. Patricia Duro at the Tribal Leaders Conference, Las Vegas,
Nevada, December 12, 1966 (pp. 3-4).
13
II. RECOMMENDATIONS
A. The committee recommends that the State Advisory Commission
be assisted by an all-Indian advisory committee, rather than by the
present advisory committee which includes only three Indians.
The advisory committee should consist of nine members: three
from northern California, three from southern California, two from
central California, and one to represent rural Indians never relo-
located on reservations or rancherias. No two members of the com-
mittee should be from the same tribe. In addition, the California
area director for the Bureau of Indian Affairs should be invited to
serve as an ex officio member of the committee.
The commission should appoint the advisory committee members
after consultation with, and insofar as is possible, consistent with the
wishes of the Indians being represented. Terms of advisory com-
mittee members should be not more than four years.
B. Communication between the State Advisory Commission and the
Indian people should be improved through the following :
1. Each member of the advisory committee should meet regularly
with tribal and rancheria leaders in his district to discuss the
commission's activities and to learn about reservation problems
so that these can be considered by the committee for discussion
with the commission.
2.1 A newsletter should be distributed by the commission to inform
J tribal councils and rancheria leaders about its activities.
3. The Advisory Commission should continue the program of pub-
lic hearing by meeting whenever possible in various parts of the
state so that Indian leaders can attend and discuss their prob-
lems.
4. The executive secretary of the commission should actively solicit
the attitudes and opinions of Indian tribal leaders.
C. The commission should hold public hearings before recommenda-
tions and proposed legislation are submitted to the Legislature.
D. The State Advisory Commission should make clear to the Indian
people that it neither has nor seeks authority or control over the
Indian Claims Judgment Funds.
E. The State Advisory Commission on Indian Affairs should be
strengthened so that it may :
1. Cooperate with any other governmental agencies and private or-
ganizations to insure that commission recommendations are im-
plemented.
2. Seek out federal and other funds to be used by state and local
governmental agencies in implementing these recommendations.
3. Provide information to Indian reservations, rancherias, Indian
organizations, and individual Indians about grant and loan pro-
grams, and other government services and programs for which
14
they are eligible, if such information is not available from other
sources.
4. Advise reservations and rancherias, upon their request, as to
methods of improving the economy of Indian lands, and coordi-
nate state and local government agencies which are called upon
to assist with the economic development of these lands. In turn
these activities should be coordinated with those of the U.S. Bu-
reau of Indian Affairs.
F. The committee further recommends that a legislative inquiry be
conducted in two years to determine the commission's record of
achievement.
III. COMMENTS
A. Denning the commission's purpose
The committee believes that the State Advisory Commission on
Indian Affairs should be revised and strengthened in line with the
foregoing recommendations. However, the commission 's scope should
not be broadened to include program responsibilities toward urban
Indians. Despite many requests for representation of urban Indians
on the advisory committee, it has not been satisfactorily demonstrated
that the problems of urban Indians are different from the prob-
lems of other urban ethnic minorities. Consequently urban Indians
should be served by government on a basis of equality with all
other citizens.
It is the long-range policy of the federal government to terminate its
remaining authority over Indian reservations. The commission should
be continued for the purpose of clarifying state and local government
responsibilities in the event that this should occur. However, a comple-
mentary purpose should be to assist the residents of California reserva-
tions in accepting responsibility for their own affairs so that they will
be capable of competing in the general society should termination occur.
A psychology of self-respect and self-reliance must be substituted for
the psychology of dependence upon government.
One major problem in Indian affairs is overcoming the lack of coordi-
nation and poor utilization of existing government programs. Agencies
at all levels of government have neglected their duties to these citi-
zens. The commission's major purpose should be to advise agencies on
better means of serving Indians, and to advise Indians on how to better
utilize government services and programs. The commission should serve
as a liaison rather than conducting administrative programs of its own.
Consequently, a large staff is unnecessary. All attempts to control In-
dian affairs without Indian consent, or to reinstitute a paternalistic
relationship, must be studiously avoided.
A growing interest in self-help should be encouraged and assisted
by the state in as many ways as possible. Better education and better
employment opportunities seem the best keys to improvement of the
Indian condition. The state is in a unique position to assist with these
matters, but assistance at the county level is also important.
15
B. Composition of the Advisory Committee
A nine-member advisory committee to the commission is recommended
to allow district representation and better communication between tribal
leaders and members of the advisory committee. It is hoped that greater
involvement of Indians in the commission's affairs will help build en-
lightened leadership within the Indian community. This in turn would
provide a strong stimulant to the movement toward self-help.
An all-Indian advisory committee is not the only alternative. Other
states, with good records of achievement in solving Indian problems,
have Indian representatives serving directly on the state commission.
Further attention should be given to consideration of Indian member-
ship on the Advisory Commission itself.
C. Commission Effectiveness
Indian advisory commissions of other states have been quite effective
while receiving smaller appropriations than the California State Ad-
visory Commission. The Arizona commission's appropriation is 60 per-
cent of California's, yet it maintains seven advisory committees and
hires 13 consultants. There is considerable sentiment among the Indians
of California that the commission should cease making studies and
begin implementation of the recommendations included in the progress
report ' c Indians in Eural and Keservation Areas. ' '
printed in California office of state printing
L-3393— 100 3-67 1M
ASSEMBLY INTERIM COMMITTEE REPORTS
VOLUME 22 1965-67 NUMBER 9
REPORT OF THE
ASSEMBLY INTERIM COMMITTEE ON CRIMINAL PROCEDURE
on
NARCOTICS CONTROL
MEMBERS OF THE COMMITTEE
PEARCE YOUNG, Choir/nan
W. CRAIG BIDDLE, Vice Chairman
E. Richard Barnes
Anthony C. Beilenson
Robert W. Crown
George Deukmejian
John T. Knox
Howard J. Thelin
Gordon H. Winton, Jr.
January 1967
Clyde M. Blackmon, Consultant
Edward H. Juers, Special Consultant
Sue Johnson, Secretary
Robert L. Monk, Legislative Intern
(September 1965-June 1966)
Donald C. Green, Legislative Intern
(September 1966-January 1967)
Published by the
ASSEMBLY
OF THE STATE OF CALIFORNIA
JESSE M. UNRUH
Speaker
GEORGE ZENOVICH
Majority Floor Leader
CARLOS BEE
Speaker pro Tempore
ROBERT T. MONAGAN
Minority Floor Leader
JAMES D. DRISCOLL
Chief Clerk
TABLE OF CONTENTS
Page
Letter of Transmittal 5
Preface 7
Summary of Recommendations 9
Introduction 11
Section I — Committee Findings 13
1) Patterns of Illegal Drug Use 14
2) Treatment Facilities and Programs 15
3) Public Education 15
4) Penalties 16
Section II — Committee Recommendations 19
1) Introduction 20
2) Public Education 20
3) Research Coordination 21
4) Dial-for-Help Centers 22
5) Treatment Facility 22
6) Penalties 23
7) Cooperation Between Enforcing Agencies 23
Appendix 25
Proposed Bills 26
Proposed Resolutions 29
(3)
LETTER OF TRANSMITTAL
To the Speaker and Members of the Assembly
Your Interim Committee on Criminal Procedure, in accordance with
your instructions, herewith respectfully submits a report on narcotics
control, a study conducted by the committee in accordance with House
Resolution No. 710 of the 1965 Regular Session.
Respectfully submitted.
Pearce Young, Chairman
W. Craig Biddle, Vice Chairman
E. Richard Barnes John T. Knox
Anthony C. Beilenson Howard J. Thelin
Robert W. Crown Gordon H. Winton, Jr.
George Deukmejian
(5)
r?f :•-•: •* •
PREFACE
The Assembly Committee on Criminal Procedure conducted a study
during the 1965-1967 interim period on the subject of drug control.
The results of that study are reported in the following pages.
Unfortunately, the 1965 and 1966 General and Extraordinary Ses-
sions of the Legislature curtained the length of time available for in-
terim study and as a result the committee was unable to conduct as
intensive an investigation as the subject matter warrants. Nevertheless,
we feel that we can look with satisfaction on the work completed and
hopefully to the successful passage of the recommended bills. Assembly-
man Biddle, on behalf of the interim committee has introduced legisla-
tion based on the recommendations in this report. Copies of the bills
and resolutions introduced are reproduced in the Appendix.
Members of the committee wish to express gratitude to those who
participated in the work during sessions and interim. They provided
us with valuable assistance in the gathering of material for our studies.
We would also like to give special acknowledgment to the contribution
of Edward H. Juers, who served as the special consultant to the com-
mittee for this study.
Information regarding hearing transcripts and the names of witnesses
appearing before the committee can be obtained from the office of the
chairman of the Criminal Procedure Committee.
(7)
SUMMARY OF RECOMMENDATIONS
1. The committee recommends that the State Department of Public
Health be given the responsibility to develop and carry out an
extensive program of education about drug use and abuse.
2. JThe committee recommends that the State Department of Public
(Health be given the specific responsibility for reviewing proposals
"for research on drugs.
3. The committee recommends establishing pilot dial-for-help centers
in some of the metropolitan counties under the auspices of the
Department of Public Health.
4. The committee recommends that a study be conducted to determine
the feasibility of establishing a state institution for the treatment
of people who abuse drugs other than the opiates.
5. The committee recommends that the Assembly immediately begin
an in-depth study of the penalty provisions of the law with par-
ticular reference to the deterrent effect, minimums and maximums,
indeterminate sentences and coordination with the work of the
Joint Committee for the Revision of the Penal Code.
6.1 The committee recommends that continued effort be made to effect
Icloser cooperation between all agencies concerned with the drug
[traffic across the Mexican border.
i;
(9)
INTRODUCTION
"Superior Court Judge Francis McCarty, in his plea for re-
vision of what he calls 'our sick narcotics laws': 'How fine it
is that so many find inspiration in the ruins of an old church,
an old building or an ancient civilization, but how strange and
sad it is that so few discern anything of value in the ruins of a
human being.' " l
The first large-scale attempt at controlling the use of mind-altering
drugs came in 1914 in the form of the Harrison Act.2 Since that time,
the issue of drug use and control has been a hot coal in the political
arena. Despite the fact that the issue of drug control has generated
widespread debate and opinion, the trends and manner in which we
have sought to control drugs in this country have been steady and
consistent.
The drug-control policies have been firmly anchored by the basic
philosophical assumption that strong punitive laws serve as an effective
deterrent to the use of drugs which alter one's state of consciousness.
In spite of the adherence to that basic doctrine, the rate of illegal use
of mind-altering drugs has apparently continued to rise in California
(as well as nationwide). The effectiveness of the law as a deterrent,
then, is open to speculation.
The fact that in 1965 there were 24,135 arrests 3 for the illegal use
of various drugs stands as proof positive that the deterrent notion has
some severe limitations (at least 24,135 of them). But, on the other
hand, many persons who may have otherwise used drugs may have
chosen not to do so because of the law. At least to a certain extent the
deterrent notion as an effective operational principle is a failure, but
the extent of its failure forms the essence of the debate about the issue
of drug control.
Whether or not there should be any controls over drug use is a ques-
tion that is hardly considered these days. Most concede that some form
of control is necessary. It is the manner in which the control is exercised
and by whom and to what degree the control is exercised that opens the
issue to lively debate.
The committee attempted to assess the present situation in California
in respect to illegal drug use. Three public hearings were held during
which the committee inquired about: (1) the nature and extent of
illegal drug use in California and the economic and distributional pat-
terns of illegal drugs in this state; (2) the effectiveness and adequacy
of private and public treatment programs for drug abusers in Cali-
fornia; and, (3) suggestions for ways in which the state's approach
to the drug problem could be changed and made more effective.
1 Herb Caen's column, San Francisco Chronicle, August 15, 1966.
2 Mind-altering- drugs in this report refer to the opiates (heroin, etc.), the so-called
dangerous drugs (barbiturates, amphetamines, LSD, etc.), and marihuana. The
concept, as used in this report, does not include alcohol, tobacco, coffee, etc.),
although they all have mind-altering properties. We are concerned in this report
only with the drugs that are controlled by the so-called drug laws.
s Drug Arrests and Dispositions in California, 1965, California Bureau of Criminal
Statistics, p. 27.
(11 )
SECTION I
COMMITTEE FINDINGS
o\
14 ASSEMBLY INTERIM COMMITTEE ON CRIMINAL PROCEDURE
1) Patterns of Illegal Drug Use
The pattern of illegal drug use in California is changing.
In the past six years there has been a shift in the type of drugs that
are prevalently used in the illegal marketplace. In 1960, about half of
the drug arrests were for possession, sale or use of heroin. From 1961
through 1963 the arrests for illegal use and sale of dangerous drugs and
marihuana began to increase rapidly, and by 1965 only one-fourth of
Ithe total adult arrests were for heroin-type offenses.4 In addition, the
past year or two has seen a rapid increase in the use of the so-called
hallucinogenic drugs.5
There are probably several reasons for this shift in the types of drugs
used and sold in the illegal marketplace, but there is no substantial
evidence which supports any one of the reasons that was offered to the
committee. One suggestion was that the decreased rate of heroin use
and abuse reflects the effectiveness of the harsh sentences that are in
effect for the violation of the narcotic laws. But this conclusion ignores
the fact that marihuana penalties are also harsh, or that the penalties
for illegal sale and use of dangerous drugs were increased recently and
still the rate of use of these drugs has climbed significantly.
/^Olhers suggest that the dangerous drugs and marihuana are more
/available on the market, and are therefore used as a substitute until
\heroin becomes more available. This conclusion, however, contradicts
ieVidence heard by the. committee that the price of heroin is down be-
cause the demand for heroin is down.6 It seems that many people are
using other drugs as a matter of choice, rather than as a result of lack
of availability.
Some people familiar with the illegal drug market indicate that there
is a difference in the types of people who are using the illegal drugs. It
was felt that more and more middle- and upper-class adults and chil-
dren are using illegal drugs and are looking for a different type of drug
experience than one gets from using heroin. Again, the available data
only suggests that such a shift is taking place and much more detailed
information is necessary before any definite conclusions can be drawn.
The committee was interested in exploring the manner in which il-
legal drugs are distributed in California to see if changes in the drug
use pattern reflected changes in a distributional pattern. California's
proximity to the Mexican border has always served as a deterrent to
the establishment of a syndicated illegal drug distribution network. In-
dividuals who want drugs can, with comparative ease, cross the border
and obtain the drugs in Mexico. Therefore, a large-scale supply and
price-control organization has not developed in this state.
It appears that the shift in types of drugs used has not interfered
ith the distributional patterns to any significant extent. A majority
of the illegal drugs sold in California still come from Mexico, and are
urchased and resold by individuals or small groups of individuals. At
*7d. at 1.
6 A rate of illegal use of these drugs is not indicated in the arrest statistics since the
control laws affecting these drugs (LSD and DMT) went into effect only recently.
The statement that there is an increased use of these drugs is based on opinions
of police, school officials and others who are familiar with the illegal drug market.
8 This statement is based on testimony given by John Storer, Chief, State Bureau of
Narcotics, during the committee hearing held in Sacramento on June 21 and 22,
1966,
ASSEMBLY INTERIM COMMITTEE ON CRIMINAL PROCEDURE 15
this time there still does not appear to be any centralizing and control-
ling of the illegal drug market in the state.
2) Treatment Facilities and Programs
There is a shortage of facilities and programs which help people over-
come drug dependency.
In light of the state's continuing interest in the problem of drug
abuse, the extreme shortage of programs for the treatment of those who
abuse drugs is appalling. The state operates one facility, the California
Rehabilitation Center at Corona, for the treatment of persons addicted
to opiates. For all practical purposes that is the only specialized state-
operated treatment program for persons involved in the illegal use of
drugs.7
The most obvious gap in services occurs in respect to the illegal use
of the dangerous drugs and marihuana. The state has no programs that
are designed to address that portion of the drug abuse problem. This
occurs in spite of the fact that the most significant portion of the drug
abuse problem is the misuse of these substances, rather than the misuse
of the opiates.
Some local and private programs have developed which attempt to
provide services where the state fails to. Examples of such efforts are
the City and County of San Francisco's Center for Special Problems
and the privately operated Synanon Foundation.
But organizations such as these can, at best, only provide help for a
small proportion of those who need and want help. Representatives of
the Synanon Foundation testified before the committee and indicated
that Synanon has to turn away as many as 10 to 15 people a day who
want help.8 Since Synanon is not a big enough organization to absorb
everyone who comes to them for help, many people are turned away,
and the state provides no adequate services to take up the slack.
3) Public Education
There is a need to educate people at all levels and walks of life about
drug-related problems.
We do not know a great deal about the problems of drug abuse. First
of all, we have only a vague and inaccurate notion about who uses drugs.
The statistics on drug use are based primarily on statistics about people
who are arrested for illegal drug involvement. To have some kinds of
drugs in one's possession is illegal, and can lead to arrest. Most drug
arrests are, in fact, for possession of one or more illegal substances.9 In
spite of the fact that over half of the drug-related arrests are for pos-
session of drugs, and not related specifically to use of the drugs, in-
ference about the patterns and nature of drug use are drawn from these
7 The criteria for acceptance into the CRC program limit its availability as a treat-
ment resource for many. About 88 percent of the felon narcotic offenders are ad-
dicts, but only a small proportion of those go to the CRC program.
8 The representatives from Synanon who testified before the committee were Mr. John
Ciampa and Mr. Arnold Ross. The committee wishes to commend the Synanon
Foundation for its fine efforts to provide a service for people in need of help. The
committee also wants to express the hope that the departments of state govern-
ments will adopt a cooperative attitude towards private organizations, such as
Synanon.
9 In 1965, over 55 percent of adult drug arrests and over 66 percent of juvenile drug
arrests were for possession. (Drug Arrests and Dispositions in California.)
16 ASSEMBLY INTERIM COMMITTEE ON CRIMINAL PROCEDURE
arrest statistics. The inferences thus drawn are highly speculative and
open to grave error, but unfortunately many policy decisions are based
upon these unsubstantiated inferences.
Most people do not know much about drugs. They have only vague,
and often inacurate, conceptions of the hazards and the benefits of using
various types of drugs.10 In spite of this lack of knowledge, programs in
public education tend to be limited.
One reason for the limited nature of educational programs about drug
use is the limited nature of the source materials for teaching about
drugs. Before an adequate educational program can be developed, much
more has to be known about the good and bad effects of using various
kinds of drugs. The need for an increased research effort on the subject
of drugs and their effects was consistently mentioned as a prime need
as the first step in an adequate educational program. Most people who
are involved in the business of trying to control drug use or help drug
users seem to comment on the need for a more effective public education
and information system.
4) Penalties
There is a need to review the penalty provisions of the law.
There is concern expressed by many that the penalties for the illegal
use of drugs are too rigid and too long in proportion to the seriousness
of the problem. The move in the direction of tougher and tougher
penalties has been slow, but steady and consistent since the Harrison
Act was passed by the federal government in 1914. These penalties
have generated much of the debate that exists relative to the control of
the drug problem.
The nature of the debate about penalties has taken on an unusual
dimension. The genesis of the debate seems to lie in a basic conflict in
how the law relates to and either helps or hinders the ability of those
responsible for drug control to do their job. There are two types of
responsibility in the drug control field, namely, the responsibility to
apprehend those who sell and use drugs, and the responsibility to treat
those who use drugs. The "catchers" are usually the police and the
"treaters" are usually the medical and paramedical professionals. The
law, as a tool, can affect one 's ability to carry out this responsibility.
The police are totally dependent upon the law in their job. The law
defines their responsibility and sets limits on their actions. Since their
responsibility is to apprehend people who use and sell drugs, the police
are interested in laws which will help them apprehend people and will
keep those apprehended from returning to the marketplace of illegal
drugs. As a result, and logically so, the police tend to support laws
which outlaw any type of activity connected with illegal drug use and
sale, are sufficiently severe to remove from the community for an ex-
tended period of time those who violate the drug laws, and which con-
tain sufficiently severe penalties to deter non-drug-involved persons
from becoming drug involved.
The professions given the responsibility for treating the drug-in-
volved persons are not as directly dependent upon the law as the police,
10 See testimony given by Dr. Richard Blum at a public hearing held by the committee
in San Francisco on September 7 and 8, 1966.
ASSEMBLY INTERIM COMMITTEE ON CRIMINAL PROCEDURE 17
but find that the law is a tool which can hinder their treatment efforts.
For example, the mandatory minimum aspect of some of the drug laws
requiring a person to be incarcerated for a long period of time without
possibility of parole negates treatment efforts. In addition, the law
hinders treatment of some types of drug involvement by prohibiting
the furnishing of the drugs as part of the treatment process. The ri-
gidity of the laws limits the resources and the methods the "treaters"
can use.
So the battle wages. But the interesting, yet unfortunate and false,
aspect of the debate is the implication of taking sides in the debate. If
one argues for stricter penalties one is immediately branded as "pro-
cop" and "anti-people." If one argues for more lenient penalties and
more flexible laws one is branded "anti-cop" and " sof t-on-narcotics. "
The truth of the matter is that both sides are concerned with finding a
solution to a problem of human misery. There is a difference of opinion
on how the law helps or hinders the effort to find that solution. But the
nature of the debate has become so hysterical and emotion charged that
there has been little rational discussion about how the law can be
changed to achieve that end.
If there is to be a solution to the problem of drug abuse, and we do
not mean a solution in the sense of totally eradicating people's use of
drugs, there has to be a careful review of the penalty provisions of the
law and how they relate to the total problem.11 To continue the present
debate at the existing intensity with the present lack of knowledge
would be a disservice to the state.
11 An example of the kind of review that is necessary is the kind of review done for
the committee during this study by the Department of Corrections. The depart-
ment reviewed the case histories of all felons committed under the mandatory
minimum provisions of the law and the results of that review raise some grave
questions about the effectiveness of those provisions. That study should be fol-
lowed up, additional questions should be asked, and new studies relative to the
effectiveness of other provisions of the law should be requested.
SECTION II
COMMITTEE RECOMMENDATIONS
20 ASSEMBLY INTERIM COMMITTEE ON CRIMINAL PROCEDURE
1) Introduction
The following recommendations are made by the Criminal Procedure
Committee in an attempt to move in the direction of a solution to the
drug problem in light of the findings of the present study. The com-
mittee members recognize that the solutions to the problem will not be
outlined below, but at the same time feel that some progress has been
made in that direction. Continued investigation of the issues in the
control-of-drug-abuse debate is necessary, and the lack of a solution at
tli is time stems directly from a lack of adequate information which, we
hope, will be developed in the near future through more and better
research.
2) Public Education
The committee recommends that the State Department of Public
Health be given the responsibility to develop and carry out an extensive
program of education about drug use and abuse.
One of the most apparent deficiencies in the present attempts to deal
with the drug problem is the lack of information that people have about
drugs, their use and abuse. Schools are presently required to teach about
drugs, but the amount that is taught and the quality of the information
varies significantly. In spite of the present requirement, some schools
teach nothing about drugs.
Part of the problem of education has been the lack of adequate data
about drug use. There is a need to develop better data. But beyond that,
most teachers have little background from which they can develop an
adequate course which will explore all of the facets of the problem.
The Department of Public Health is an organization which is in the
best position to develop a broad-based curriculum and draw upon the
knowledge of all the participants responsible for drug control. The de-
partment is experienced in working in the community and dealing with
a variety of community agencies. Also, they have diverse professional
resources at their disposal that can contribute toward developing a
curriculum which will examine all aspects of the problem. In addition,
they are an agency which has ties that go beyond the borders of the
state enabling them to gain a wider perspective of the problem than is
often possible in a locally based agency such as a school.
Initially, the Public Health drug education program should be fo-
cused on three levels:
a. Junior High School and High School Level. It is necessary to
give children an adequate understanding of the role that drugs
can play in their life. Basic information about drugs and their use
should be taught in an objective, factual manner.
b. Community Education Level. It would be desirable to develop a
community education program which could be used as a spring-
board for rational discussion about the issue of drug control. The
biggest myths and misconceptions about drug use exist in the
adult community, and this ignorance is passed on to the children.
Final action and decisions are going to be made on this issue by
adults, and the decisions will be better if they are adequately in-
formed.
ASSEMBLY INTERIM COMMITTEE ON CRIMINAL PROCEDURE 21
c. Seminars for College Health Center Personnel. Apparently one
of the places where illegal drugs are being used with increased
frequency is on college campuses. Those responsible for adminis-
tering the health needs of the student body should be among the
best informed about all aspects of the drug abuse problem. This
will enable the health center personnel to not only attend to the
physiological aspects of the problem, but will enable them to give
the students adequate advice and counseling.
These educational programs that are to be developed by the Depart-
ment of Public Health should be funded by state funds. Drug abuse is
not the problem of just a few communities, it represents a problem to
the entire state. Since decisions about the control of drugs are made on
a statewide basis, the educational programs, designed to inform the
citizens, should also be set up on a statewide basis.
3) Research Coordination
The committee recommends that the State Department of Public
Health should be given the specific responsibility for reviewing pro-
posals for research on drugs.
One of the ironies in the whole area of drug use and control is the
disparity between the need for adequate data and the lack of research
being done. The amount of good data about the effects of drug use,
especially when related to a social context, is nil. There have been some
studies about the physiological effects of drugs on the human organism,
but there is almost no data on the effects that the drugs have on be-
havior in various social situations. This is indeed unfortunate, for it is
the social situation that legislation seeks to control. In essence, social
control legislation relative to drug use has been passed with almost no
knowledge of the true relationship between drug use and social behavior.
Federal agencies control, to a certain extent, the amount and type of
research to be done on many kinds of drugs. One of the present prob-
lems seems to be a lack of coordination between the state and federal
agencies, and one reason for that lack of coordination seems to relate to
the fact that there is no agency within the state that has been designated
specifically to review drug-related research proposals. The State De-
partment of Public Health would be the most suitable agency in the
state to oversee this responsibility.
Designating the Department of Public Health as the agency respon-
sible for reviewing and recommending on research proposals should
establish some order to the present picture. This department can serve
as a natural liaison between local and federal agencies. Public Health
is in tune with the needs of the state, and at the same time can relate
the state and local needs to the federal agencies responsible for making
the final decisions about some of the research.
Much research is needed, but it should be good research that meets
the needs of the state. Questions need to be asked, but they should be
asked in a way that will provide answers. The sooner that good research
is undertaken, the sooner that we will have answers to some of the prob-
lems that plague the issue of drug control.
22 ASSEMBLY INTERIM COMMITTEE ON CRIMINAL PROCEDURE
4) Dial-for-Help Centers
The committee recommends establishing pilot dial- for -help centers in
some of the metropolitan counties under the auspices of the State De-
partment of Public Health.
These centers should be located in general or emergency hospitals and
should be staffed by medical personnel who have received special train-
ing in how to handle drug problems. They would be operated on a 24-
hour-a-day basis, and would accept calls from any person concerned
about drug abuse.
In addition to giving information on drug effects and reactions, the
centers would refer sick abusers to doctors on call or to special services,
and could dispatch police and medical aid in emergency cases. Such
centers have proved valuable in aiding alcoholics, in helping potential
suicides, and are helpful in poison control.
As the public becomes better educated about drug abuse, the need for
such centers should decrease. But at this point in time drug abuse is
increasing, most people know little or nothing about drugs and have
no way to find out about them, and medical personnel are generally
not adequately informed about the problem. Until the educational pro-
grams are developed, the centers could serve the dual function of in-
formation resources and coordinators of emergency service.1
5) Treatment Facilities
The committee recommends that a study be conducted to determine
the feasibility of establishing a state institution for the treatment of
people who abuse drugs other than the opiates.
Presently, the only institution operated by the state especially for
treating drug abusers is the California Rehabilitation Center at Corona.
That institution, however, treats only those persons adicted to the opiate
drugs such as heroin.
A substantial majority of the people using illicit drugs do not use the
opiates, but rather, use marihuana or some of the other dangerous drugs
such as the barbiturates, amphetamines or LSD. At this time the state
has no facility to deal specifically with the problems people have as a
result of the use of these drugs. If incarcerated, these people usually go
to jail or to prison and receive only limited treatment.
A specialized treatment facility to provide help for these people may
be necessary. Most of those who testified indicated that the dangerous
drug users should not be treated in the CRC facility, that that institu-
tion should continue to deal exclusively with opiate addicts, but many
felt that an institution similar to CRC might be valuable in the overall
approach to control of the problem. Before such an institution is built,
however, it is necessary to do a feasibility study to determine the costs
and to explore, if possible, the effects that such an institution might
have.
The feasibility study should take into consideration the question of
which department of state government should operate the new facility,
if it is built. One of the reasons that witnesses felt that dangerous drug
offenders should not be admitted to the CRC program was that, by com-
1 Mr. Deukmejian dissents.
ASSEMBLY INTERIM COMMITTEE ON CRIMINAL PROCEDURE 23
parison, dangerous drug offenders tend to be much less criminally in-
volved than opiate addicts. If this is the case, and since the focus of the
institution will be upon the rehabilitation of the offenders, it may be
desirable to place the facility within the Department of Mental Hy-
giene, rather than the Department of Corrections. This question, how-
ever, can only be resolved by careful stud}r.
Once the feasibility study is completed, the results and recommenda-
tions should be submitted to the Legislature for consideration.2
6) Penalties
The committee recommends that the Assembly immediately begin a
detailed review of the penalty aspects of the law.
One of the central points of debate in the issue of drug control relates
to the subject of penalties. Some claim they are too long and too rigid,
others feel they are adequate and necessary. No systematic study has
been done which would shed light on the real impact of penalties on
drug control. Opinions are abundant, but facts are nearly nonexistent.
Such a study will take time and will involve some detailed and skilled
research. The study could best be done by a contract, or series of con-
tractual agreements, with individuals or organizations who have exten-
sive access to research talent and facilities (such as a university). The
project should be done under the auspices of the Legislature with the
Legislature actively involved in the development and interpretation of
the data as it is gathered.
Because the Penal Code is in the process of undergoing extensive re-
vision, it may be desirable to go beyond the notion of the penalties im-
posed by laws relating to narcotics and include in the study a review
of all of the penalty provisions of the law. An extensive review such as
this is timely, and in light of the importance of the revision of the
Penal Code would be worth the time and expense.
Because the problem of the abuse of drugs is growing, and because
the revision of the Penal Code has already begun, it is felt that this
study should be started at the earliest possible date.3
7) Cooperation Between Enforcing Agencies
The committee recommends that continued effort be made to effect
closer cooperation between all of the agencies that work in connection
with the Mexican border.
Some concern has been expressed in recent years about a lack of
cooperation between policing agencies. The committee heard testimony
from federal, state, county and local police agencies, and the general
feeling was that cooperation is good and continually improving.
The problem of controlling the flow of drugs over the border goes
well beyond the issue of cooperation between agencies, at least agencies
affected by state legislative policy. Much of the problem lies in the na-
ture of the culture of Mexico, and testimony indicated that even some
of the cultural differences are being worked out through cooperative
2 Mr. Deukmejian dissents.
3 Mr. Deukmejian dissents.
24 ASSEMBLY INTERIM COMMITTEE ON CRIMINAL PROCEDURE
agreements between the United States and Mexico. The Legislature
strongly recommends that continued effort be made to effect closer co-
operation between state, local and federal agencies as well as increase
the cooperation between those agencies and the agencies of the Mexican
government.
APPENDICES
26 ASSEMBLY INTERIM COMMITTEE ON CRIMINAL PROCEDURE
CALIFORNIA LEGISLATURE— 1967 REGULAR SESSION
ASSEMBLY BILL No. 1399
Introduced by Assemblyman Biddle
March 30, 1967
REFERRED TO COMMITTEE ON PUBLIC HEALTH
An act to add Section 210 to the Health and Safety
Code, relating to drug use research.
The people of the State of California do enact as follows:
1 Section 1. Section 210 is added to the Health and Safety
2 Code, to read :
3 210. It shall collect, and act as a repository of, information
4 on research projects completed or in progress relating to drug
5 abuse and shall provide, to any person, institution or public
6 agency proposing any research project on such subject, advice
7 with respect to the areas in which research is needed and with
8 respect to methods of research. No state agency shall conduct
9 any research project on drug abuse until it has submitted its
10 proposal for the project to the State Department of Public
11 Health for review and has received the department's recom-
12 mendations.
LEGISLATIVE COUNSEL'S DIGEST
AB 1399, as introduced, Biddle (Pub.H.). Drug use research.
Adds Sec. 210, H. & S.C.
Kequires Department of Public Health to collect, and act as a re-
pository of, information on research projects relating to drug use, to
provide advice with respect to methods of research and areas in which
research is needed. Provides that state agency shall not conduct re-
search project on subject of drug abuse until department has reviewed
proposal and given its recommendations.
Vote — Majority ; Appropriation — No ; State Expense — Yes.
O
ASSEMBLY INTERIM COMMITTEE ON CRIMINAL PROCEDURE 27
CALIFORNIA LEGISLATURE— 1967 REGULAR SESSION
ASSEMBLY BILL No. 1400
Introduced by Assemblyman Biddle
March 30, 1967
REFERRED TO COMMITTEE ON PUBLIC HEALTH
An act to add Section 209.5 to the Health and Safety
Code, relating to drug abuse.
The people of the State of California do enact as follows:
1 Section 1. Section 209.5 is added to the Health and Safety
2 Code, to read :
3 209.5. It shall develop and carry out programs of educa-
4 tion on the subject of drug use and abuse, including programs
5 for high school students, college health center personnel, and
6 the community at large.
LEGISLATIVE COUNSELS DIGEST
AB 1400, as introduced, Biddle (Pub.H.). Drug abuse.
Adds Sec. 209.5, H. & S.C.
Kequires Department of Public Health to develop and carry out ed-
ucation programs on drug use and abuse, including programs for high
school students, college health center personnel, and the community at
large.
Vote — Majority ; Appropriation — No ; State Expense — Yes.
O
28 ASSEMBLY INTERIM COMMITTEE ON CRIMINAL PROCEDURE
CALIFORNIA LEGISLATURE— 1967 REGULAR SESSION
ASSEMBLY BILL No. 1401
Introduced by Assemblyman Biddle
March 30, 1967
REFERRED TO COMMITTEE ON CRIMINAL PROCEDURE
An act to amend Section 11718 of the Health and Safety
Code, relating to narcotics offenses.
The people of the State of California do enact as follows:
1 Section 1. Section 11718 of the Health and Safety Code
2 is amended to read :
3 11718. In any criminal proceeding for violation of any
4 provision of this division no allegation of fact which, if ad-
5 mitted or found to be true, would change the penalty for the
6 offense charged from what the penalty would be if such fact
7 were not alleged and admited or proved to be true may be
8 dismissed fey the eewt e¥ stricken from the accusatory plead-
9 ing except upon motion of the district attorney , or by the
10 court on its own motion and in the interest of justice .
LEGISLATIVE COUNSEL'S DIGEST
AB 1401, as introduced, Biddle (Crim. Pro.). Narcotics offenses.
Amends Sec. 11718, H. & S.C.
Permits court on its own motion and in the interest of justice to
strike from the accusatory pleading allegations of prior offenses in
criminal actions for violations of narcotic laws, rather than permitting
dismissal or striking only upon motion of district attorney.
Vote — Majority; Appropriation — No; State Expense — No.
0
ASSEMBLY INTERIM COMMITTEE ON CRIMINAL .PROCEDURE 29
House Resolution No. 162
Relative to a study of the feasibility of establishing an institution
for treatment of nonopiate drug users
WHEREAS, Presently, the only institution operated by the state especially for
treating drug abusers is the California Rehabilitation Center at Corona ; and
WHEREAS, That institution, however, treats only those persons addicted to the
opiate drugs such as heroin ; and
WHEREAS, A substantial majority of the people using illicit drugs do not use
the opiates, but rather, use marihuana or some of the other dangerous drugs such as
the barbiturates, amphetamines or LSD ; and
WHEREAS, At this time the state has no facility to deal specifically with the
problems people have as a result of the use of these drugs, and if incarcerated these
people usually go to jail or to prison and receive only limited treatment ; and
WHEREAS, A specialized treatment facility to provide help for these people
appears to be necessary ; and
WHEREAS, Before such an institution is built it is necessary to do a feasibility
study to determine the costs and to explore the effects that such an institution
might have ; now, therefore, be it
Resolved by the Assembly of the State of California, That the Assembly Committee
on Rules is requested to refer for study to an appropriate committee of the Assembly
the subject of the feasibility of establishing a state institution for the treatment
of people who abuse drugs other than opiates, including, but not limited to, the
question of which department of the state government should operate such facility ;
and be it further
Resolved, That the Committee on Rules is requested to direct the committee to
which such subject is referred to report its findings and recommendations to the
Legislature not later than the fifth legislative day of the 1968 Regular Session of
the Legislature.
House Resolution No. 163
Relative to a study of the penalty aspects of drug control laws
WHEREAS, Many persons claim that the penalties for violation of the drug
control laws are too harsh and too rigid, while others feel that they are adequate
and necessary ; and
WHEREAS, Since no systematic study has been done which would shed light
on the real impact of penalties on drug control, opinions are abundant, but facts
are nearly nonexistent ; now, therefore, be it
Resolved by the Assembly of the State of California, That the Assembly Com-
mittee on Rules is requested to refer for study to an appropriate committee of the
Assembly the subject of the penalty aspects of drug control laws ; and be it further
Resolved, That the Committee on Rules is requested to direct the committee to
which such subject is referred to report its findings and recommendations to the
Legislature not later than the fifth legislative day of the 1968 Regular Session of
the Legislature.
printed in California office of state printing
L3796— 100 4-67 1M
ASSEMBLY INTERIM COMMITTEE REPORTS
Volume 22 1965-67 Number 10
REPORT OF THE
ASSEMBLY INTERIM COMMITTEE ON CRIMINAL PROCEDURE
on
DELINQUENCY CONTROL
MEMBERS OF THE COMMITTEE
Pearce Young, Chairman
W. Craig Biddle, Vice Chairman
E. Richard Barnes
Anthony C. Beilenson
Robert W. Crown
George Deukmejian
John T. Knox
Howard J. Thelin
Gordon H. Winton, Jr.
January 1967
Clyde M. Blackmon, Consultant Robert L. Monk, Legislative Intern
Edward H. Juers, Special Consultant (September 1965-June 1966)
David Matza, Special Consultant Donald C. Green, Legislative Intern
Sue Johnson, Secretary (September 1966-January 1967)
Published by the
ASSEMBLY
OF THE STATE OF CALIFORNIA
JESSE M. UNRUH
Speaker
GEORGE ZENOVICH
Majority Floor Leader
JAMES D. DRISCOLL
Chief Clerk
CARLOS BEE
Speaker pro Tempore
ROBERT T. MONAGAN
Minority Floor Leader
TABLE OF CONTENTS
Page
Letter of Transmittal 5
Preface 7
Summary of Committee Recommendations 9
I. REPORT ON DELINQUENCY CONTROL 11
A. Introduction 11
B. Issues 13
C. Recommendations 19
1. Pilot program for diagnosis and treatment of neurologi-
cally handicapped Youth Authority wards 19
2. Remand of minors 16 years of age to adult court 19
a. Committee-recommended legislation 20
3. Participation by district attorneys in juvenile hearings 20
a. Committee-recommended legislation 21
4. Hearings on issue of release from protective custody 21
a. Committee-recommended legislation 22
5. Extension of Work Furlough Act to juveniles 23
a. Committee-recommended legislation 23
6. Encouraging cooperation between public agencies and
private organizations concerned with treatment and re-
habilitation of juvenile offenders 25
D. Conclusion 27
APPENDIX 29
Witnesses who appeared at August 30 and 31 hearing 29
LETTER OF TRANSMITTAL
To the Speaker and Members of the Assembly
Your Interim Committee on Criminal Procedure in accordance with
your instructions, herewith respectfully submits a report on delinqency
control, a study conducted by the committee in accordance with House
Resolution No. 710 of the 1965 Regular Session.
Respectfully submitted,
Pearce Young, Chairman
W. Craig Biddle, Vice Chairman
E. Richard Barnes John T. Knox
Anthony C. Beilenson Howard J. Thelin
Robert W. Crown Gordon H. Winton, Jr.
George Deukmejian
PREFACE
The Assembly Committee on Criminal Procedure conducted a study
during the 1965-67 interim period on the subject of delinquency con-
trol. The results of that study are reported in the following pages.
The 1965 and 1966 General and Extraordinary Legislative Sessions
curtailed the length of time available for interim study and as a result
the committee was unable to conduct as intensive an investigation as
the subject matter warrants.
Our accomplishments, we feel, however, were considerable, and the
committee can look back with satisfaction on the work completed and to
successful passage of the recommended legislation.
The committee held public hearings on this subject in San Francisco
on August 30 and 31, 1966. Testimony presented at those hearings by
judges, agency representatives and interested citizens contributed
greatly to the committee 's accomplishments. Information regarding that
hearing can be obtained in the office of the Criminal Procedure Com-
mittee chairman.
Members of the committee wish to express gratitude to those who
participated in the work during sessions and interim, and who provided
valuable assistance in the gathering of material for our studies. The
committee would like to give special acknowledgment to Edward H.
Juers and Dr. David Matza, who served as special consultants to the
committee for this study. Sincere appreciation is also given for the
diligent work and efforts of the committee staff.
SUMMARY OF RECOMMENDATIONS
1) The committee recommends that a pilot program be established in
the Youth Authority to specifically deal with the problems of
identification and treatment of the neurologically handicapped
delinquent.
2) The committee recommends that Section 707 of the Welfare and
Institutions Code be revised to allow a minor to be remanded to
the adult court at age 16, regardless of the type of offense.
3) The committee recommends that a notice procedure be established
where the district attorney 's office is notified of the time and place
of all juvenile hearings involving a 602 petition, and if the ju-
venile judge consents, the district attorney be allowed to come into
the hearing; but where the petition alleges a.n act by the parent
against the minor, the district attorney has the right to represent
the minor in the juvenile court proceedings.
4) The committee recommends revision of Section 628 of the Welfare
and Institutions Code to allow for a hearing on the issue of release
from protective custody in selected cases.
5) The committee recommends that the principles present in the Work
Furlough Act for adult prisoners be extended to juvenile offenders.
■6) The committee recommends that privately supported agencies be
encouraged to provide public agencies with supplemental casework
services or resources.
I.
REPORT ON DELINQUENCY CONTROL
A. INTRODUCTION
Resolutions adopted by the Assembly pertaining to the study of pro-
grams for delinquency control in California were predicated on two
concerns :
a) A concern with the rate of delinquency in the State of Cali-
fornia; and
b) A desire to seek ways in which the state's overall approach to
the problem might be improved.
Present programs for delinquency control are costly.1 If the rate of
delinquency remains constant, the rapid increase in the size of the
adolescent population will still send the cost of the existing programs
soaring to new heights.2 Legislative concern about the problem arises
not only out of a concern for those we call delinquents, but also, out of
a concern for those who must bear the burden of the cost of delinquency
control programs.
This interim was broken by several events which limited the amount
of time that the Criminal Procedure Committee could devote to the
study of delinquency related problems. As a result, the study had to
be limited to deal with that portion of the control system which ap-
peared to promise the greatest results in terms of understanding and
productivity.
The decision was made to have the interim study effort focus on the
law regulating the operation of the juvenile court. It is through the
vehicle of the law that a child becomes a delinquent. One is not a de-
linquent, that is to say does not become a part of the delinquency
statistics, and therefore a contributor to the rate of delinquency, unless
one is arrested by the police.
But arrest is not the sole criterion for achieving the label of delin-
quent. Many children are arrested, counseled by the police, and then
released to never appear again as * ' official delinquents. ' ' Although these
persons become a part of the statistic which is known as the delin-
quency rate, many of them probably never think of themselves as delin-
quents nor are thought about by other as delinquents.
Those who go further along in the process of juvenile justice are the
ones upon who the most money is spent and about whom most people
1 In this instance "programs for delinquency control" refers to all types of programs
related to the problem. Included are such things as policing costs, court costs,
the cost of probation services, as well as the cost of running the Youth Authority
operation. The total budget for the Youth Authority alone is approximately $35,-
000,000.
2 For the past year the rate of delinquency as measured by juvenile arrests has re-
mained fairly stable. There was a 3-percent decrease in the arrest rate for law
violations which was partially offset by a 1-percent increase in the arrest rate
for delinquent tendencies.
11
think when they talk about juvenile delinquents. These are the children
that the police refer to probation departments for possible filing of
petitions for appearance in juvenile court, and those who subsequently
go to juvenile court and are placed on probation, in one or another
community based programs, or are incarcerated in county or state
facilities.
It is the law which defines the route from arrest, to probation, to
incarceration and back to the community via parole. It is the law that
defines a delinquent. Since the law is the vehicle of definition, an exami-
nation of the manner in which the law works would give the most in-
sight into the process by which one becomes "officially" delinquent.
A second reason for reviewing the juvenile court law was to enable the
committee to investigate the manner in which the present law works.
In 1961 the Legislature made extensive revisions in the laws relating to
delinquency, and it was felt that the committee should inquire of those
who are operating within the framework of the 1961 revisions their
views of the present law and their proposals for change. Thus, the com-
mittee inquiry was directed primarily to juvenile judges, probation of-
ficers, police officers, and spokesmen from the Department of the Youth
Authority. In addition to the above, others who were interested in dif-
ferent aspects of the problem of delinquency definition and treatment
supplied the committee with valuable information and ideas.
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B. ISSUES
The literature in the field of criminology in the past several years
has more and more frequently pointed out the critical nature of the
act of officially defining a youngster a delinquent, Lombroso first postu-
lated a theory of criminality which changed the direction of the search
for answers from "how much pain is necessary to convince people to
forego the pleasures of crime" to "how are criminals different from
noncriminals. ' ' Since Lombroso, researchers and philosophers have been
looking for ways to differentiate criminals from noncriminals. The re-
search and literature leads one to the inescapable conclusion that there
presently is only one known variable among the vast universe of pos-
sible variables which separates people we call criminals from people we
call noncriminals. That variable is the variable of official definition of
"delinquent" or "criminal."
The preponderance of evidence forces one to conclude that there
probably is no such thing as a " delinquent type. ' ' Delinquents are like
other people in all respects save one, they have been officially deemed
delinquent through the mechanism of the law. Not even the variable of
commission of offenses separates delinquents from those we call non-
delinquents. Studies indicate that probably everyone has broken the
law. Most have committed offenses which are serious enough to be
classed as felonies.3 If there is such a thing as a delinquent type, the
variables which separate the delinquent type from the nondeliquent
type are yet to be discovered.
Since there apparently is no such thing as a delinquent type, and
since the only variable which separates those we call delinquent from
those we call nondelinquent is the official label which results from being
caught and brought into contact with the control system of courts,
supervision, and incarceration, it is imperative in a study of the prob-
lem of delinquency to be concerned first and foremost with how a person
gets the label ' ' delinquent, ' ' One must ask what the child did, and what
made it necessary to put the label of delinquent upon him, and not upon
others. Also, one should always try to be aware of the consequences to
the child for having to carry the label.
In light of the above considerations the committee reviewed the 1961
revisions of California law pertaining to the juvenile court by asking
two questions:
1) Is the content of the law adequate?
This question deals with whether the law adequately defines
those we should officially label as delinquent. Maybe the present
law allows the definition of too many people as delinquent, or
maybe some people who should be labeled delinquent cannot be
labeled as such under the law.
2) Is the law fair?
This question deals with whether the law adequately provides
protection for those who may be incorrectly labeled as delin-
3 A study by Wallstein and Wile indicated that of 1,600 randomly selected adults in
New York, 91 percent admitted to crimes. A study by Short found that only 1
percent did not admit to crimes. Surprisingly, kids in high school who were in
the middle and upper class committed more crimes than did the kids in the re-
formatory. Toch, in a study of police recruits, found that the average recruit
reported he owed the state 2 J years on the basis of the felonies admitted to.
13
quent and who would then have to unjustly bear the conse-
quences of the delinquent label.
Interviews with judges, probation officers, police, and those defined
as delinquents, coupled with observations of court procedures and in-
formation in a public hearing indicated that the California law may be
deficient in both areas of content and fairness. There is extreme di-
versity of opinion on this issue, but there is evidence of feeling on the
part of some responsible for administering the law that it is too easy
to define a child as delinquent under the present law.
The following is an example of testimony which questions the ade-
quacy of the content of the law.4 The question to which the following
remarks were being addressed was the question of whether or not the
present Section 601 of the Welfare and Institutions Code may contain
too broad a definition of delinquency which results in too many children
receiving the label of delinquent.6
Dr. Matza : Given the almost necessarily vague definition of offenses
like incorrigibility, do you think there is any problem created for the
courts in issuing findings in those kinds of cases?
Judge Gardner: Definitely. 601 is a nightmare. I ask those members
of the committee who are attorneys, how would you like to defend some-
one who is charged with the following offense : from any reason being
in danger of leading an idle or immoral life? I couldn't defend myself
against that in 12 hours. Sometime during the next 12 hours, some-
thing's going to happen which will bring me within that. It's a rather
broad and terrifying power that a juvenile court judge has ... I think
history has shown the necessity of limiting those of us in authority,
including judges of the juvenile court. That's why I feel so strongly
on the 602.
Now when you get down to the 600 's, we have to have the power to
move and move fast. We have to do this for the protection of the child.
The 601 is a continuing nightmare. I sometimes think the only results
we get from 601 is that eventually both parent and child get so mad
at us that they combine as a common enemy and we get some results
that way. We force them back together. But, seriously, I wonder if
anybody really ever thought about taking 601 out of the law.
Dr. Matza: That was the next question I wanted to ask you.
Judge Gardner : I suggested that one time at a meeting of the Cali-
fornia Parole, Probation and Correctional Officers Association and they
thought that the earth was going to open up and swallow me. Keally, if,
when the irate parent comes in and says my child is a complete incor-
rigible, you would say, "All right, this child was not born incorrigible.
If you want to file on this child, file under Section 600. You say to me,
Mrs. So and So, that I want you to take jurisdiction over this child
* This testimony given by Judge Robert Gardner of the Superior Court of Orange
County at a public hearing of the committee in San Francisco on August 30 and
31, 1966.
B Section 601 of the Welfare and Institutions Code reads as follows: "Any person
under the age of 21 years who persistently or habitually refuses to obey the
reasonable or proper orders or directions of his parents, guardian, custodian or
school authorities, or who is beyond the control of such person, or any person
who is a habitual truant from school within the meaning of any law of this state,
or who from any cause is in danger of leading an idle, dissolute, lewd, or im-
moral life, is within the jurisdiction of the juvenile court which may adjudge such
person to be a ward of the court."
1A
because he has no parent willing or capable of exercising proper paren-
tal control." That would take care of part of 601.
I have indicated my worries about the last sentence of 601 and the
middle sentence, the one about schools. I guess it's necessary, but I've
never been very happy over the results of taking a kid who refuses to
go to school, and so to keep him from becoming a criminal we take him
into juvenile court and lock him up, because he refuses to go to school.
I don 't think it makes a very good student out of him. I doubt that we
improve his surroundings. I just wonder if somebody might someday
say let's really be honest about this. If we're honest about this com-
pulsory public education, let's make it a crime not to go to school. And
when the kid says I don 't want to go to school, let 's either forget it, or
treat it as a crime and step into the thing and give him all the rights
that anyone else would have who is charged with a criminal offense.
The end of the school year we find juvenile hall bulging with kids who
won 't go to school. I don 't know that we 've ever proven very much by
that. We have all kinds of little girls in there who are in danger of
leading immoral lives. I doubt that I 've changed the moral standard of
very many of them by taking them into juvenile hall. I have grave
questions about the results of 601 handling. I guess it has to be there.
I'm not going to be that much of a radical to say that we take 601 out.
I just have some questions of myself.
Judge Gardner is by no means alone in his concern about Section 601
of the Welfare and Institutions Code. Conversations with other judges,
as well as with probation officers and others, revealed that there is a
concern about the all-encompassing aspect of this portion of the code.6
But for each person concerned with the broad aspects of Section 601
and the potential for abuse there is a person who defends this section
as necessary in order to get the juvenile into the treatment system
before he commits a serious offense.
Further testimony reveals concern about the other question of interest
to the committee, the question of the fairness of the law. The following
are examples of statements which reflect this concern and which raise
the issue of due process in the juvenile courts.7
Assemblyman Winton: One of the questions that has arisen now is
the fact that the juvenile is entitled to counsel and sometimes brings
counsel in. I know you say that it hasn't happened very often in your
court, but the question on the other side as law enforcement looks at it
is why shouldn't there be someone there as a counsel for law enforce-
ment? In effect, for the prosecution. Would you have any comment
upon that?
Judge Carkeet: Yes, I have ideas on that. I think probably Judge
Gardner can do more justice to it than I, because it was while he was
chairman of the conference committee last year that we did submit a
proposal to the Legislature to add or amend the act which would permit
6 In 1965, over 50 percent of the arrests of juveniles were under the delinquent tend-
encies section and over 50 percent of the initial referrals to probation were for
delinquent tendencies. So cases handled under this section of the code represent
a significant proportion of the workload of the delinquency control system.
7 Testimony from public hearing- of the Criminal Procedure Committee on August 30
and 31, 1966. Judge Carkeet is the superior court judge in Tuolumne County,
Judge Gardner is from Orange County, Referee Harris is from Los Angeles
County, and Mr. Carl Goldin, high school student from Sacramento.
15
a judge, upon request of the probation department, to appoint counsel.
Now, we very advisedly used the word counsel, rather than district
attorney or public defender or anything else, because you've got a
different situation in every county and you have the problem of the
attorney general's opinion that district attorneys don't belong in the
juvenile court and don't have to go. You also have the question of
philosophically whether a district attorney belongs in a juvenile court,
since lie represents the people and indicates prosecution. And that is
related to criminal work. With all of those thoughts we concluded and
recommended that the courts be empowered to appoint counsel. If this
were private counsel, then it could be so, and he would be reimbursed
to conduct the interrogation. We had this problem before the 1961 re-
vision, so this isn't really new, except that we are confronted more often
with attorneys now than we were then. But judges still have the prob-
lem of who is going to conduct questioning. What happens is the pro-
bation officer brings the case in, hands you a probation report and, of
course, if the minor admits it there is no problem. But if the minor
comes in and says, * ' I deny this, ' ' and he has counsel, and this man is
trained in cross-examination and so on, why of course the probation
officer is no match for him. In very few counties is the probation officer
an attorney, and, anyway, we don 't think that is the probation officer 's
role, to question the minor. He's supposed to be in the minor's corner.
Assemblyman Winton: I would think it would be a serious draw-
back if you put the probation officer in the position of being the prose-
cutor.
Judge Carkeet : Exactly. Personally, I don't let my probation officer
ask a single question in court. But this dumps it in the judge 's lap and
this means the judge sits there and does the questioning and puts the
defense counsel in the uncomfortable position of having to object to the
judge 's questions. I always tell them to go ahead and object and I will
rule. But it's a difficult situation for the judge, because it makes the
minor wonder how a judge can sit up there and be fair and still be the
one that's asking the $64 questions that are hanging him. It's a mean
situation.
Assemblyman Biddle: One of the witnesses we had this morning,
Mr. Keldgord, was talking about this possibility and he raised the ques-
tion of the immature 13-year-old or 14-year-old or 15-year-old. He is of
the opinion that they should not be handled in an adversary proceeding.
That it would be better to handle them in the informal manner that we
do in the juvenile court. Now if this individual is charged with a crime,
and is the immature 15-year-old, and has the maturity of an 8-year-old,
then he is going to be treated just like an adult under your system.
Judge Gardner: Kemember, we have now just gotten to the juris-
dictional phase. If this boy says, "I didn't do it," I don't care whether
he is 60 years old or whatever. I think that when a person says, "I
didn't do it," he has a right to have his rights protected exactly the
same as his father at age 54.
Assemblyman Biddle: Even if he's eight years old?
Judge Gardner: If he's eight years old, even more so.
16
Assemblyman Biddle: Tell me what happens then when they
come in.
Mr. Harris : Well, if they are in custody they come from the deten-
tion area through one door and they are brought into the courtroom
where they are seated in chairs that are before the bench. Some of the
referees prefer to have a desk for counsel. They are joined by their
parents and their attorney, if they have an attorney. The probation
officer is seated over to one side, at one end of the bench, and probably
the legal statement reporter would be present at the opening to get the
names of those appearing. There would be a bailiff, according to the
court rules, present at all times.
The procedure would begin by having the referee read the petition
to the youngster, advise the parents of their constitutional rights, the
general nature of his presence in the court, and the possibilities of what
are in store for him in the event the petition is found to be true. Then
they would hear the evidence, if the petition was denied. If it was ad-
mitted at the time, the matter would go to disposition. Our hearings
are rigidly bifurcated. We follow, very religiously, the bifurcation pro-
cedure. Now, the referee does not see, as I indicated before, the file.
The file is brought to him after he sustains a petition. The social study
is then introduced in evidence and read by the referee at that point.
If the petition is found not to be true, that's the end of it. He probably
doesn't see the social study and probation officer's report and recom-
mendation for disposition.
Assemblyman Biddle : When he is making the decision on the first
part of the bifurcated portion, at that time he doesn't have the police
report before him ?
Mr. Harris: He has nothing but the petition and jurisdictional
service of process, the notice to parent, and citation, if it has been is-
sued, and subpoenas if they have been served.
Assemblyman Biddle: And a list of witnesses.
Mr. Harris : And a list of witnesses.
Assemblyman Biddle: Let's say that the minor denies the robbery
charge, the referee then calls the first witness?
Mr. Harris : After having advised the minor and his parents of his
right to cross-examine.
Assemblyman Biddle: Who interrogates the first witness?
Mr. Harris: The referee.
Assemblyman Biddle: The probation officer does not interrogate
at all?
Mr. Harris: Not in our courts; no, sir.
In my particular court I don 't permit the probation officer to inter-
rogate the witnesses. I do permit him to suggest questions to the referee.
But I ask the questions in order to play down the situation that Mr.
Muntz described, so that the kid doesn't feel "here is this guy that
has solicited all this information from me and my friend on my behalf,
theoretically, now he is turning around and using it against me. " We
try to avoid that wherever possible.
17
Chairman Young: What you're really saying, aren't you, is that
minors, like adults, are different people. They have different ways of
looking at life and other tilings, and that by treating them all one way
you're really getting a problem.
Mr. Goldin: Yes, sir, this is what I'm saying.
Chairman Young: Go ahead; continue.
Mr. Goldin: Thus the minor is usually protected in the juvenile
court, but he loses the right of being innocent until proven guilty be-
yond reasonable doubt. In the informal juvenile court hearing most of
the rules of evidence are not followed closely. Thus hearsay testimony,
irrelevant and immaterial testimony, opinions by unqualified per-
sons, and other forms of improper and biased testimony are allowed in
an attempt to find the best solution for the delinquent 's problem. Often
it is assumed that the juvenile is guilty before trial and they always
ask the juvenile, they don't ask him how he pleads, but they ask him
if he denies the charges. It is usually just a formality, because often-
times when the juvenile does deny the charges, especially in an incor-
rigible case, the judge will say to you, "Now don't be silly. You're not
going to say your parents are lying. They say this is what you did."
And so, he is assumed to be guilty.
The above testimony clearly points out some of the problems that the
existing law can present to those concerned with the notion of fairness.
The legal guidelines and procedures are not precise nor mandatory in
many instances. Judges disagree and practices differ from court to
court.8 The law apparently allows for a degree of variability which could
be, and is, interpreted as potentially unfair by some people.
The severe limitation of time and the lack of adequate data prevented
the committee from arriving at any recommendations relative to large
scale content and procedural changes in the code. The committee recog-
nizes the relevancy of the issues, but felt that adequate data was not
developed or presented to compel recommendations for extensive revi-
sion of a code section which was extensively revised only five years ago.
Although many persons expressed concern about the present form of the
law as many or more felt that the law was basically adequate.
Recent Supreme Court decisions indicate that juveniles may be en-
titled to constitutional rights not presently accorded to them under the
present law. The committee recommends that the Legislature continue to
review this important area, and further recommends that individual
superior court judges voluntarily adopt procedures which comply with
the court decisions.
The committee also received testimony from many persons indicating
a desire to remove wards of the court as defined in Section 600 of the
Welfare and Institutions Code from the jurisdiction of the juvenile
court to another court jurisdiction. A family court was suggested. The
committee felt that such a recommendation at this time would be pre-
mature and that the issue should be reviewed again when and if a
family court has been established in California.
8 An excellent case in point is the portion of the proceeding at which the social
history is allowed to be introduced for consideration. In some courts it was ob-
served that the judge had read the social history prior to the hearing. In other
courts, Los Angeles County for instance, the social history is not seen by the
judge (or referee) until after a determination is made on the question of
whether or not the child is guilty of the alleged <*ffense.
18
C. RECOMMENDATIONS
?. The committee recommends that a pilot program be established in the
Youth Authority to specifically deal with the problems of identification and
treatment of the neurologically handicapped delinquent.
Evidence given to the committee indicates that many neurologically
handicapped children exhibit behavioral characteristics which result in
violations of the law. Many such children are especially in jeopardy of
being defined as delinquent under Section 601 of the Welfare and In-
stitutions Code as a result of being incorrigible or beyond control. If the
neurological condition is not diagnosed, and it seldom is, the child is
treated the same way as a child whose problem stems from a psycho-
genic origin.
The type of treatment necessary to compensate for a neurological
deficiency is totally different from the treatment approach to a problem
of psychogenic origin. Some studies show that as many as two-thirds of
those in penal institutions may have some degree of neurological impair-
ment which renders them less capable of reacting to their environment
without special education and treatment. Almost all corrections pro-
grams for delinquents are predicated on the assumption that the roots
of the problem are sociogenic or psychogenic. If, in fact, a significant
percentage of delinquents' problems stem from neurological impair-
ments, then traditional correctional programs are doomed to monumen-
tal failure from the start.
It seems imperative that the state initiate a pilot program for the
identification and treatment of neurologically handicapped persons who
are committeed to the Youth Authority. Presently the state supports a
community based screening program designed to diagnose neurologically
handicapped children at an early age, but the program is new and not
fully operative, so some of the neurologically handicapped children do
not get diagnosed as such and are committed to the Youth Authority.
As a result, we need a program in the Youth Authority which can ef-
fectively deal with this type of delinquency.
2. The committee recommends that Section 707 of the Welfare and Institutions
Code be revised to allow a minor to be remanded to the adult court at
age 16 regardless of whether the offense would have been a felony or a
misdemeanor.
Presently the law allows that a juvenile may be remanded to the adult
courts if he "would not be amenable to the care, treatment, and train-
ing program available through the facilities of the juvenile court" at
age 16 if the alleged offense is a felony, but not until age 18 if the
alleged offense is a misdemeanor. This provision sets a somewhat arbi-
trary limitation upon the juvenile judge which prevents him from deal-
ing with a problem in the way he considers most effective.
Age alone tends to be an arbitrary standard, and the distinction be-
tween felony and misdemeanor is also arbitrary. The present form of
the law is doubly arbitrary by limiting the alternatives available to the
court differently for different ages as well as for different types of of-
fense.
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a. COMMITTEE-RECOMMENDED LEGISLATION
An act to amend Section 707 of the Welfare and Institutions Code,
relating to crimes of minors.
The people of the State of California do enact as follows:
Section 1. Section 707 of the Welfare and Institutions Code is
amended to read :
707. At any time during a hearing upon a petition alleging that a
minor is, by reason of violation of any criminal statute or ordinance, a
person described in Section 602, when substantial evidence has been
adduced to support a finding that the effense alleged is punishable as a
felony under lie general law and that the minor was 16 years of age
or older at the time of the alleged commission of such offense - of that
the offense alleged is punishable as a misdemeanor under the general law
and that the mine* was i8 years ef age er elder at the time ef the alleged
commission ef such offense^ and that the minor would not be amenable
to the care, treatment and training program available through the fa-
cilities of the juvenile court, or if, at any time after such hearing, a
minor who was 16 years of age or older at the time of the commission
of an offense and who was committed therefor by the court to the Youth
Authority, is returned to the court by the Youth Authority pursuant
to Section 780 or 1737.1, the court may make a finding noted in the
minutes of the court that the minor is not a fit and proper subject to be
dealt with under this chapter, and the court shall direct the district
attorney or other appropriate prosecuting officer to prosecute the person
under the applicable criminal statute or ordinance and thereafter dis-
miss the petition or, if a prosecution has been commenced in another
court but has been suspended while juvenile court proceedings are held,
shall dismiss the petition and issue its order directing that the other
court proceedings resume.
A denial by the person on whose behalf the petition is brought of any
or all of the facts or conclusions set forth therein or of any inference
to be drawn therefrom is not, of itself, sufficient to support a finding
that such person is not a fit and proper subject to be dealt with under
the provisions of the Juvenile Court Law.
3. The committee recommends that a notice procedure be established where
the district attorney is notified of the time and place of juvenile hearings
involving a 602 petition, and if the juvenile judge consents, that the district
attorney be allowed to participate in the hearing; but where the petition
alleges an act by the parent against the minor, the district attorney has
the right to represent the minor in the juvenile court proceedings.
There are some juvenile court cases where the offense is of such a
nature or the circumstances of the case are of such a nature that there
is a likelihood that the child may be remanded to the adult court for
prosecution. The introduction of the district attorney to the facts and
circumstances of the case at the earliest possible stage of the process is
desirable in such cases. Since concern for the juvenile as well as concern
for the community is at stake, it is felt that the judge is in the best
position to make the ultimate decision as to when the district attorney
should enter the case.
20
A routine notification procedure from the juvenile court to the dis-
trict attorney 's office would serve as a means of alerting the district at-
torney to possible cases of this nature and give him the opportunity to
request permission to enter the case or observe the proceedings in those
instances where the court may overlook extending an invitation.
a. COMMITTEE-RECOMMENDED LEGISLATION
An act to amend Section 658 of, and to add Section 681 to, the Welfare
and Institutions Code, relating to juvenile court proceedings.
The people of the State of California do enact as follows:
Section 1. Section 658 of the Welfare and Institutions Code is
amended to read:
658. Upon the filing of the petition, the clerk of the juvenile court
shall issue a notice, to which shall be attached a copy of the petition,
and he shall cause the same to be served upon the minor, if the minor
is 14 or more years of age, and upon each of the persons described in
subsection subdivision (e) of Section 656 whose residence addresses are
set forth in said petition and thereafter before the hearing upon all such
persons whose residence addresses become known to the clerk. If the
petition alleges that the minor comes within the provisions of Section
602 in that there has been a violation of any law of this state, the clerk
shall also issue a notice, with a copy of the petition, to the district at-
torney containing the time, date, and place of the hearing.
Sec. 2. Section 681 is added to the Welfare and Institutions Code,
to read :
681. In a juvenile court hearing, including those hearings which are
the result of cases certified pursuant to Section 604, where there is a
contested issue of fact or law and the minor who is the subject of the
hearing is represented by counsel, and it is alleged in the petition that
the minor is a person who has violated any law of this state, the district
attorney may, with the consent of the juvenile court judge, appear and
participate in the hearing to assist in the ascertaining and presenting
of the evidence. If the court finds the minor to be a person who has
violated any law of this state, the district attorney may present his views
to the court on the question of the proper disposition to be made of the
minor.
Where the petition in a juvenile court proceeding alleges that a minor
is one described in subdivision (b) of Section 600 whose home is an unfit
place for him by reason of neglect, cruelty, or depravity of either of his
parents, or of his guardian, or other person in whose custody or care
he is, and either of the parents, or the guardian, or other person having
custody or care of the minor, or who resides in the home of the minor,
is charged in a pending criminal prosecution based upon unlawful acts
committed against the minor, the district attorney may represent the
minor in the interest of the state at the juvenile court proceeding.
4. The committee recommends revision of Section 628 of the Welfare and
Institutions Code to allow for a hearing on the issue of release from pro-
tective custody in selected cases.
This proposed revision serves the purpose of protecting the interests
of the state in cases where juveniles are the victims of crimes. In some
21
instances such juveniles, after being placed in protective custody pend-
ing investigation of the crime, are placed back in the home or commu-
nity situation where the crime occurred during the pendency of the
criminal prosecution. This places undue pressures on the child, often
renders him incapable of serving as a witness in the criminal action, and
can pose a danger to the safety and welfare of the child.
The proposal is not designed to give the district attorney the power
to keep the child in custody, but is an attempt to set up a review process
whereby both the interests of the child and the state can be determined
before the child is released. The juvenile court judge will have the re-
sponsibility of deciding when and to whom the child shall be released
in cases that are open to question.
a. COMMITTEE-RECOMMENDED LEGISLATION
An act to amend Section 628 of the Welfare and Institutions Code,
relating to care and custody of minors.
The people of the State of California do enact as follows:
Section 1. Section 628 of the Welfare and Institutions Code is
amended to read :
628. Upon delivery to the probation officer of a minor who has been
taken into temporary custody under the provisions of this article, the
probation officer shall immediately investigate the circumstances of the
minor and the facts surrounding his being taken into custody and shall
immediately release such minor to the custody of his parent, guardian,
or responsible relative unless one or more of the following conditions
exist :
(a) The minor is in need of proper and effective parental care or
control and has no parent, guardian, or responsible relative; or has no
parent, guardian, or responsible relative willing to exercise or capable
of exercising such care or control; or has no parent, guardian, or re-
sponsible relative actually exercising such care or control.
(b) The minor is destitute or is not provided with the necessities of
life or is not provided with a home or suitable place of abode.
(c) The minor is provided with a home which is an unfit place for
him by reason of neglect, cruelty, or depravity of either of his parents,
or of his guardian or other person in whose custody or care he is.
(d) it appears that further Continued detention of such the minor is
a matter of immediate and urgent necessity for the protection of such
minor- e* the person or property of another 7 e? unless it appears that
such .
(e) The minor is likely to flee the jurisdiction of the court 7 of unless
*fe appears that such .
(/) The minor has violated an order of the juvenile court.
The probation officer may not release a minor if the delivering officer
alleges that the minor is the victim of an unfit home as described in
condition (c) without first notifying the district attorney. If the district
attorney makes an objection to the release of the minor, the probation
officer must refer the matter immediately to the judge of the juvenile
court who shall review the facts and decide the matter.
22
5. The committee recommends that the principles present in the Work Furlough
Act for adult prisoners be extended to juvenile offenders.
Presently the law allows for work furlough programs for adult of-
fenders, but not expressly for juveniles. The concept is operating in
some adult institutions in California where institutional programs have
developed that allow the inmate to work at a job or participate in ap-
prentice training during the day, but return to the institution or half-
way house at night and on weekends. It would seem logical to allow
delinquents to work under the provisions of this act.
Utilization of a work furlough notion could result in savings through
more complete utilization of existing facilities and personnel. It could
eliminate some costly duplication of training facilities and staff by en-
abling institutions for youth to send the wards to training programs
that already exist in the community, rather than having to develop
special institutional training programs. In addition, the work furlough
practice helps the inmate to bridge the gap between institution and
community.
a. COMMITTEE-RECOMMENDED LEGISLATION
An act to add Article 17 (commencing with Section 925) to Chapter 2
of Part 1 of Division 2 of, and to add Article 8 (commencing with
Section 1830) to Chapter 1 of Division 2.5 of, the Welfare and Insti-
tutions Code, relating to work furloughs.
The people of the State of California do enact as follows:
Section 1. Article 17 (commencing with Section 925) is added to
Chapter 2 of Part 1 of Division 2 of the Welfare and Institutions Code,
to read:
Article 17. Work Furloughs
925. The provisions of this article shall be operative in any county
in which the board of supervisors by ordinance finds, on the basis of
employment conditions, the state of juvenile detention facilities, and
other pertinent circumstances, that the operation of this article in that
county is feasible. In such ordinance the board shall prescribe whether
the probation officer or any official in charge of a county juvenile deten-
tion facility shall perform the functions of the juvenile work furlough
administrator. The board of supervisors may also terminate the opera-
tiveness of this article in the county if it finds by ordinance that, be-
cause of changed circumstances, the operation of this article in that
county is no longer feasible.
926. When a minor is adjudged a ward of the juvenile court and
committed to a county juvenile home, ranch, camp, or forestry camp,
the juvenile work furlough administrator may, if he concludes that such
person is a fit subject therefor, direct that such person be permitted to
continue in his regular employment, if that is compatible with the re-
quirements of Section 928, or may authorize the person to secure em-
ployment for himself in the county, unless the court at the time of com-
mitment has ordered that such person not be granted work furloughs.
927. If the juvenile work furlough administrator so directs that the
minor be permitted to continue in his regular employment, the adminis-
23
trator shall arrange for a continuation of such employment so far as
possible without interruption. If the minor does not have regular em-
ployment, and the administrator has authorized the minor to secure
employment for himself, the minor may do so, and the administrator
may assist him in doing so. Any employment so secured must be suitable
for the minor. Such employment must be at a wage at least as high as
the prevailing wage for similar work in the area where the work is
performed and in accordance with the prevailing working conditions in
such area. In no event may any such employment be permitted where
there is a labor dispute in the establishment in which the minor is, or
is to be, employed.
928. Whenever the minor is not employed and between the hours or
periods of employment, he shall be confined in a juvenile detention fa-
cility unless the court or administrator directs otherwise.
929. The earnings of the minor shall be collected by the juvenile
work furlough administrator, and it shall be the duty of the minor's
employer to transmit such wages to the administrator at the latter 's
request. Earnings levied upon pursuant to writ of attachment or execu-
tion or in other lawful manner shall not be transmitted to the adminis-
trator. If the administrator has requested transmittal of earnings prior
to levy, such request shall have priority. When an employer transmits
such earnings to the administrator pursuant to this subdivision he shall
have no liability to the minor for such earnings. From such earnings the
administrator shall pay the minor's board and personal expenses, both
inside and outside the juvenile detention facility, and shall deduct so
much of the cost of administration of this article as is allocable to such
minor. If sufficient funds are available after making the foregoing pay-
ments, the administrator may, with the consent of the minor, pay, in
whole or in part, the preexisting debts of the minor. Any balance shall
be retained until the minor's discharge and thereupon shall be paid
to him.
930. In the event the minor violates the conditions laid down for
his conduct, custody, or employment, the juvenile work furlough ad-
ministrator may order termination of work furloughs for such minor.
Sec. 2. Article 8 (commencing with Section 1830) is added to Chap-
ter 1 of Division 2.5 of the Welfare and Institutions Code, to read :
Article 8. Work Furloughs
1830. The Director of the Youth Authority may, with approval of
the Youth Authority Board, conduct or discontinue a work furlough
rehabilitation program, in accordance with the provisions of this article,
for appropriate classes of wards at one or more Youth Authority insti-
tutions. He may designate any officer or employee of the department
to be the Youth Authority work furlough administrator and may assign
personnel to assist the administrator.
1831. When a person is committed to a facility under the jurisdic-
tion of the Youth Authority, the Youth Authority work furlough ad-
ministrator may, if he concludes that such person is a fit subject
therefor, direct that such person be permitted to continue in his regular
employment, if that is compatible with the requirements of Section 1833,
24
or may authorize the person to secure employment for himself in the
county, unless the court at the time of commitment has ordered that
such person not be granted work furloughs.
1832. If the Youth Authority work furlough administrator so directs
that the ward be permitted to continue in his regular employment, the
administrator shall arrange for a continuation of such employment so
far as possible without interruption. If the ward does not have regular
employment, and the administrator has authorized the ward to secure
employment for himself, the ward may do so, and the administrator
may assist him in doing so. Any employment so secured must be suitable
for the ward. Such employment must be at a wage at least as high as
the prevailing wage for similar work in the area where the work is per-
formed and in accordance with the prevailing working conditions in
such area. In no event may any such employment be permitted where
there is a labor dispute in the establishment in which the ward is, or is
to be, employed.
1833. Whenever the ward is not employed and between the hours
or periods of employment, he shall be confined in a detention facility
unless the court or administrator directs otherwise.
1834. The earnings of the ward shall be collected by the Youth Au-
thority work furlough administrator, and it shall be the duty of the
ward's employer to transmit such wages to the administrator at the
latter 's request. Earnings levied upon pursuant to writ of attachment
or execution or in other lawful manner shall not be transmitted to the
administrator. If the administrator has requested transmittal of earn-
ings prior to levy, such request shall have priority. When an employer
transmits such earnings to the administrator pursuant to this subdivi-
sion he shall have no liability to the ward for such earnings. From such
earnings the administrator shall pay the ward's board and personal
expenses, both inside and outside the detention facility, and shall deduct
so much of the costs of administration of this article as is allocable to
such ward. If sufficient funds are available after making the foregoing
payments, the administrator may, with the consent of the ward, pay, in
whole or in part, the preexisting debts of the ward. Any balance shall
be retained until the ward's discharge and thereupon shall be paid to
him.
1835. In the event the ward violates the conditions laid down for
his conduct, custody, or employment, the Youth Authority work fur-
lough administrator may order termination of work furloughs for such
minor.
6. The committee recommends that public agencies be encouraged to increase
their utilization of the treatment and rehabilitation resources offered by
private agencies or organizations.
It is the committee 's impression that public agencies are reluctant to
fully utilize the service potential that exists in various sectarian and
nonsectarian private agencies interested in the treatment and rehabili-
tation of youthful offenders. Part of this reluctance evidently stems
from the fact that public agencies are hesitant to become involved in a
situation where they might share supervision over a delinquent child
with a private agency. However, it is the committee's view that state
and local agencies could materially increase the flexibility of their treat-
25
merit and rehabilitation programs through increased cooperation with
such organizations as Big Brothers, Incorporated ; the Salvation Army ;
the Northern California Service League ; the American Friends Service
Committee; the Catholic Youth Organization, and similar private
groups or organizations.
This cooperation should be formalized through contractual agree-
ments wherein the public agency sets standards for the performance of
the services offered by the private agency. Such contractual agreements
would then hold the private agency or organization to the same level of
responsibility as the law requires of public agencies.
The use of the resources and talents available through private agen-
cies and organizations could result in an extension of public agency pro-
grams to those wards who are in need of specialized treatment methods.
26
D. CONCLUSION
During the past year the Criminal Procedure Committee has retained
Mr. Ed Juers and Dr. David Matza as special contract consultants to
help develop and carry out the present study. The committee wishes to
thank them for their valuable services.
The following statements of this report are suggestions for further
legislative inquiry made by the above named consultants. These sugges-
tions are made to help guide the Legislature in its attempts to resolve
some of the issues which were developed during the present study.
1) There is a need to consider in greater detail the issue of the kinds
of behavior which constitute delinquency. A good look at this issue
will require a careful analysis of the present portion of the law re-
relating to "delinquent tendencies" (Section 601 of the Welfare
and Institutions Code) including an analysis of the effect on the
future behavior of children who are found to be delinquent under
this section.
There should be several elements to this analysis :
a) A representative sampling of 601 cases to determine the fre-
quency with which petitions are filed under 601 as a result of
an inability to sustain the charges of a 602 petition.
b) A determination of the frequency with which those initially
found delinquent under Section 601 are subsequently found
to be delinquent under Section 602.
c) A determination of the frequency with which a filing under
Section 601 occurs where there is animosity between the child
and parents.
d) A request to those working with delinquents to develop data
indicating 1) how the child was helped, or; 2) how the com-
munity was protected by filing a petition of delinquency for
"delinquent tendencies." Exclude truancy from consideration
in this portion of the inquiry.
2) There is a need to consider in greater detail the notion of the fair-
ness of the juvenile court procedure. The Supreme Court may
force the Legislature into dealing with this problem directly in the
near future. This portion of the inquiry will inevitably lead to a
discussion of "the juvenile court philosophy."
a) The present study revealed that there may again be a need to
reexamine the notion of the juvenile court philosophy by asking
what is the philosophy, is it consistent with the times, and is
there a need to reformulate the basic notions of a court for
juvenile offenders.
b) The key word in the juvenile court philosophy is treatment.
But what, practically, constitutes treatment these days? Is
there such a thing and, if so, how effective is it ? Is the limiting
of the freedom of juveniles without due process justified in the
terms of the effectiveness of the treatment programs?
c) There is a need to establish criteria of effectiveness of programs
for treating delinquents. These criteria have to be explicit and
27
concise before statements can be made relative to whether a
given program is, or is not, effective.
3) There is a need to carefully consider the whole matter of record-
keeping. The notions of sealing of records and accessibility to rec-
ords needs comprehensive review.
a) There is a need to determine precisely the possible negative
ramifications of having a record with the court.
b) The Legislature should define more precisely the notion of what
constitutes an arrest for juveniles. In addition, a decision must
be made as to when in the legal process an individual's record
should begin. This is necessary if record sealing provisions are
going to be effective.
c) The limits on the keeping of juvenile records need to be related
to the state's shift to computerized data gathering.
28
APPENDIX
WITNESSES WHO APPEARED AT SAN FRANCISCO
HEARINGS ON AUGUST 30 AND 31, 1966
Honorable Ross Carkeet, Judge, Juvenile Court, Sonora
Mr. Lynn Compton, Assistant District Attorney, Los Angeles County
Mr. Elmer Gaetjen, Acting Chief, San Francisco County Probation Department
Honorable Robert Gardner, Judge, Superior Court, Santa Ana
Mr. Carl Goldin, citizen, Sacramento
Dr. Keith Griffiths, California Youth Authority
Lt. Charles R. Gross. California State Juvenile Officers Association
Mr. Irving Harris, Supervising Referee, Los Angeles County Juvenile Court, Los
Angeles
Mr. Robert Keldgord, California Council on Crime and Delinquency
Mr. Archie Moore, American Savings & Loan Company
Mr. Harold Muntz, Chief Deputy, Los Angeles County Probation Department
Dr. Lester Tarnopol, California Association on Neurologically Handicapped Children
Dr. A. Lamont Smith, President, Northern California Service League
Honorable Richard Vaughn, Judge, Superior Court, San Diego County Juvenile Hall
L3797— 100 4-67 1M
printed in California office of state printing
29
ASSEMBLY INTERIM COMMITTEE REPORTS
1965-67
Volume 22 Number 12
CALIFORNIA LEGISLATURE
REPORT OF THE
ASSEMBLY INTERIM COMMITTEE ON CRIMINAL PROCEDURE
on
SEARCH AND SEIZURE
PREEMPTION
WATTS
FIREARM CONTROL
Members of the Committee
Pearce Young, Chairman
W. Craig Bid die, Vice Chairman
E. Richard Barnes John T. Knox
Anthony C. Beilenson Howard J. Thelin
Robert W. Crown Gordon H. Winton, Jr.
George Deukmejian
January 1967
Clyde M. Blackmon, Consultant Robert L Monk, Legislative Intern
Sue Johnson, Secretary (September 1965-June 1966)
Donald C. Green, Legislative Intern
(September 1966-January 1967)
Published by the
ASSEMBLY
OF THE STATE OF CALIFORNIA
JESSE M. UNRUH CARLOS BEE
Speaker Speaker pro Tempore
GEORGE ZENOVICH ROBERT T. MONAGAN
Majority Floor Leader Minority Floor Leader
JAMES D. DR1SCOLL
Chief Clerk
TABLE OF CONTENTS
Page
Letter of Transmittal 5
Preface 6
PART I. SEARCH AND SEIZURE— Procedure for Challeng-
ing Evidence Obtained by Search and Seizures 7
PART II. PREEMPTION— State Preemption in the Field of
Criminal Law 35
PART III. WATTS — Law Enforcement and Criminal Law Aspects
of the Los Angeles Riot 39
PART IV. FIREARM CONTROL— Control of Arms and Ammu-
nition 45
I. PROCEDURE FOR CHALLENGING EVIDENCE
OBTAINED BY SEARCHES AND SEIZURE
Introduction 9
Present Law 10
1. Motion to quash a search warrant and return property 11
2. Preliminary motion to suppress evidence 12
3. Objection to the introduction of evidence at preliminary
examination 12
4. Motion to set aside accusatory pleading 12
5. Objection to the introduction of evidence at trial 13
6. Raising the issue on appeal 13
Problems in the Operation of the Present Law 13
1. Unnecessary expenditure of time and effort 13
2. Disadvantageous use of jury time 13
3. Undue restrictions on the prosecution's opportunity for
appeal 15
Proposals Presented to the Committee 16
Committee Recommendations 18
1. Search and seizure 18
a. Nature of the procedure 18
b. Timing of the motion 18
c. Who should hear the motion 19
d. Burden of proof 20
e. Raising the issue at trial 20
f. Appeal 20
2. Feasibility of pretrial procedure for all questions of admis-
sibility 21
Appendices 23
2— L-878 ( 3 )
TABLE OF CONTENTS-Continued
II. STATE PREEMPTION IN THE FIELD OF
CRIMINAL LAW Page
A. Introduction 37
B. Committee Findings 37
C. Committee Recommendations 38
III. LAW ENFORCEMENT AND CRIMINAL LAW
ASPECTS OF THE LOS ANGELES RIOTS
Introduction 41
Committee Action 41
Conclusion 43
IV. CONTROL OF ARMS AND AMMUNITION
Summary of Committee Recommendations 47
Introduction 48
Committee Recommendations 49
1. Destructive devices
Committee-recommended legislation 51
2. Out-of-state purchases of concealable firearms
Committee-recommended legislation 53
3. Definition of concealable firearms
Committee-recommended legislation 55
4. Machineguns and machinegun parts
Committee-recommended legislation 56
Statement of Assemblyman Barnes 56
Appendices 57
Witnesses appearing at the hearing on law enforcement and
criminal law aspects of the Los Angeles riots on November
5, 1965 59
Witnesses appearing at the hearing on control of arms and
ammunition on November 18-19, 1965 60
(4)
LETTER OF TRANSMITTAL
To the Speaker and Members of the Assembly
Your Interim Committee on Criminal Procedure, in accordance with
your instructions, herewith respectfully submits a report on Search
and Seizure, Preemption, Watts, and Firearm Control, studies con-
ducted by the committee in accordance with House Kesolution No. 710
of the 1965 Regular Session.
Respectfully submitted,
E. RICHARD BARNES
ANTHONY C. BEILENSON
ROBERT W. CROWN
GEORGE DEUKMEJIAN
Pearce Young, Chairman
W. Craig Btddle, Vice Chairman
JOHN T. KNOX
HOWARD J. THELIN
GORDON H. WINTON, JR.
(5)
PREFACE
The Assembly Committee on Criminal Procedure conducted a series
of studies during the 1965-1967 interim period on the subjects of search
and seizure (procedural aspects in criminal proceedings), state preemp-
tion, riot control (Watts), and firearms control. The results of these
studies are reported in the following pages.
Unfortunately, the 1965 and 1966 general and special extraordinary
sessions of the Legislature curtailed the length of time available for
interim study and as a result the committee was unable to conduct
as intensive an investigation as the subject matters warranted. Never-
theless, we feel that we can look with satisfaction on the work com-
pleted and hopefully to the successful passage of the recommended bills.
Members of the committee wish to express gratitude to those who
participated in the work during sessions and interim. They have pro-
vided us with valuable assistance in the gathering of material for our
studies.
Information regarding hearing transcripts and the names of wit-
nesses appearing before the committee can be obtained from the office
of the chairman of the Criminal Procedure Committee.
(6)
SEARCH AND SEIZURE
PROCEDURE FOR CHALLENGING EVIDENCE
OBTAINED BY SEARCH AND SEIZURE
PROCEDURE FOR CHALLENGING EVIDENCE
OBTAINED BY SEARCH AND SEIZURE
The right of the people to be secure in their persons, houses,
papers, and effects, against unreasonable searches and seizures,
shall not be violated, and no Warrant shall issue, but upon
probable cause, supported by Oath or affirmation, and particu-
larly describing the place to be searched, and the persons or
things to be seized.1
INTRODUCTION
The provisions of the Fourth Amendment juxtapose two concepts
which are fundamentally important to a democratic society. The
amendment grants to the people a right to be free from unreasonable
governmental intrusion into their personal affairs. However, the grant
of privacy is necessarily a limitation upon law enforcement officers in
crucial aspects of their efforts to apprehend and convict those respon-
sible for crime. Recent judicial decisions dealing with the interpreta-
tion and enforcement of the amendment have resulted in continuing
controversy and debate between law enforcement officers, judges, at-
torneys, and legal scholars. Such controversy is not surprising. The
Fourth Amendment seeks to balance liberty against order in society
and any attempt to decide which of these two concepts should have
the greater weight is bound to create controversy.
The question of the manner in which evidence is obtained is not
actually relevant to the ultimate issue in a criminal proceeding. Evi-
dence seized in violation of the Fourth Amendment is not any the
less reliable merely because it is obtained unlawfully. But the use of
unlawfully seized evidence to obtain a conviction reduces the consti-
tutional guarantee against unreasonable searches and seizures to an
empty phrase. Judicial recognition of this fact resulted in the devel-
opment of the rule that evidence obtained in violation of the Fourth
Amendment is inadmissible in criminal cases.
This exclusionary rule was first enunciated by the United States
Supreme Court in 1914 when it held that evidence unlawfully seized
by federal officers could not be used in a federal criminal proceeding.2
But the rule applied only to federal courts and the states were left
free to admit or reject evidence as they saw fit. Illegally obtained
evidence continued to be admitted in California courts until 1955. In
that year the California Supreme Court adopted the exclusionary rule
as a rule of evidence saying that it was forced to do so because "other
remedies have completely failed to secure compliance with the con-
stitutional provisions on the part of police officers with the attendant
result that the courts under the old rule have been constantly re-
quired to participate in, and in effect condone, the lawless activities
of law enforcement officers."3 Then in 1961, in the case of Mapp v
Ohio* the United States Supreme _Cgjirt heJd that- th#— Constitution
prohibits thej:dmission of unlawfuflyjseized evidenc_g..in. state -courts.
Therefore, the exclusionary rule is no longer merely a rule of evidence
iTJ.S. Const, amend. IV.
2 Weeks v. United States, 232 U.S. 383.
a People v. Cahan, 44 Cal. 2d 434, 445, 282 P.2d 905, 911.
*367 U.S. 643.
(9)
10 COMMITTEE ON CRIMINAL PROCEDURE
in California; it is now a rule mandated by the United States Con-
stitution.
But the exclusionary rule alone is not sufficient to enforce the guar-
antee against unreasonable searches and seizures. As with any sub-
stantive provision of law it is necessary that there be an adequate
procedure leading to the application of the exclusionary rule. If the
procedure for invoking a substantive provision of law is inadequate
then the substantive provision itself becomes meaningless. In this sense
the procedure through which the legality of a search and seizure is
tested is as important as the rule which excludes unlawfully obtained
evidence.
During the 1965 General Session of the Legislature, Assemblyman
George Deukmejian sought to streamline the California procedure for
challenging searches and seizures. His proposal, contained in Assem-
bly Bill 1651, was to establish a single pretrial motion and allow both
the defense and the prosecution to take an appeal from an adverse
decision. The proposed legislation was referred to the Assembly Com-
mittee on Criminal Procedure and considered in committee on May 4,
1966. The bill was referred to interim study to give the committee
time to assess the need for changing the present law and to study
particular provisions of the proposal.
On September 21-22, 1966, the committee held a public hearing on
Assembly Bill 1651 in Anaheim at the annual meeting of the State
Bar of California. Witnesses who appeared at the hearing were asked
to critically analyze the measure and to express their views on the
need for changing the present law. The following persons appeared
before the committee :
Mr. Warren Ettinger, Attorney at Law, Los Angeles
Mr. William B. Enright, Attorney at Laiv, San Diego
Hon. Evelle J. Younger, District Attorney of Los Angeles County
Mr. Lynn Compton, Assistant District Attorney, Los Angeles
Mr. Paul Breckenridge, Chief Trial Deputy, Public Defender's Office, Los An-
geles
Hon. Arthur L. Alarcon, Judge of the Superior Court, Los Angeles
Hon. J. Frank Coakley, District Attorney of Alameda County
In addition to the testimony of witnesses the committee was assisted
in its study by an article which appeared in a recent issue of the
California Law Review.5 The author, Mr. Carl «L: Seneker IL was a
legislative summer intern on the staff of the Criminal Procedure Com-
mittee during the summer of 1965.
THE PRESENT LAW
A distinguishing feature of the present law is that it allows a crim-
inal defendant many opportunities to assert his constitutional right to
have illegally obtained evidence excluded.6 In general, there are two
procedural devices available to challenge the methods used by the
police to gather evidence. However, these may be employed at various
times within the criminal proceedings. Moreover, if a defendant
6 Comment, Methods of Challenging .Searches and Seizures in California, 54 Calif. L.
Rev. 1070 (1966).
• The discussion here is primarily concerned with the procedure available in felony
cases. The procedure in misdemeanor cases is similar to that followed in felony
prosecutions initiated by indictment.
SEARCH AND SEIZURE 11
raises a search and seizure issue and it is decided against him, he may
nevertheless raise the same issue at a later point in the process.
If the material seized is not contraband, the defendant may move
for its return on the ground that its seizure was unlawful. If the ma-
terial is contraband, it will not be returned but he may move for its
suppression as evidence in the case. The latter motion is more fre-
quently used since the bulk of cases wherein the legality of a search
is at issue involve contraband materials such as narcotic drugs or gam-
bling paraphernalia.
1. Motion to quash a search warrant and return property.
Sections 1539 and 1540 of the Penal Code provide a special proce-
dure to attack the lawfulness of a search made pursuant to a war-
rant. Although these sections pertain to the return of property which
has been illegally seized the procedure is also used as a device to quash
a warrant. Thus, the procedure is available to test the seizure of prop-
erty which cannot be returned because of its contraband nature.7
A motion made pursuant to sections 1539 and 1540 tests the truth-
fulness of the facts supporting the issuance of a search warrant 8 and
it is usually made before the issuing magistrate.9
Prior to the case of People v. Butler10 a defendant's failure to
pursue the remedy provided by sections 1539 and 1540 resulted in a
waiver of his right to controvert the facts underlying a warrant.11
But Butler held that facts in the affidavit supporting a warrant may
be attacked at the preliminary examination or at trial even though
the procedure provided by sections 1539 and 1540 has not been fol-
lowed.12 The effect of Butler was to make the rule governing the timing
of a, mflfion to quash a warrant and return property conform to theij
rule pertaining" to tne timing of a motion to suppress evidence seized!
without a warrant.13 '
Denial of a Sections 1539-1540 motion may not be appealed 14 and
a defendant's remedy is to seek a writ of prohibition or mandamus.15
However, failure to seek the extraordinary writ is not considered a
waiver of the right to attack the warrant and the objection may be re-
newed at the preliminary examination or at trial.16 If the defendant's
motion is granted it is probable that the prosecution may appeal that
ruling.17
7 Dunn v. Municipal Court, 220 Cal. App. 2d 858, 34 Cal. Rptr. 251 (1963).
s People v. Keener, 55 Cal. 2d 714, 12 Cal. Rptr. 859, 361 P.2d 587 (1961).
» However, People v. Peterson, 233 Cal. App. 2d 481, 43 Cal. Rptr. 457 (1965), indi-
cates that the magistrate conducting the preliminary examination may hear the
motion and this is evidently not an infrequent practice. Comment, 54 Calif. L.
Rev., supra note 5, at 1073.
m People v. Butler, 64 Cal. 2d 842, 52 Cal. Rptr. 4, 415 P.2d 819 (1966).
u People v. Marion, 197 Cal. App. 2d 835, 18 Cal. Rptr. 219 (1961) ; People v. Prieto,
191 Cal. App. 2d 62, 12 Cal. Rptr. 577 (1961).
^People v. Butler, 64 Cal. 2d 842, 52 Cal. Rptr. 4, 415 P.2d 819 (1966).
13 "The rule allowing the defendant to object for the first time at the preliminary
hearing or at the trial to the introduction of evidence illegally obtained without
a warrant has proved workable. We see no reason to adopt a different rule merely
because evidence was obtained under a warrant." Id. at 486, 52 Cal. Rptr. at 7,
415 P.2d at 822.
"People v. Keener, 55 Cal. 2d 714, 12 Cal. Rptr. 859, 361 P.2d 587 (1961).
15 Dunn v. Municipal Court, 220 Cal. App. 2d 858, 34 Cal. Rptr. 251 (1963).
"People v. Keener, 55 Cal. 2d 714, 12 Cal. Rptr. 859, 361 P.2d 587 (1961).
"Alarcon, Search and Seizure Problems, in Continuing Education of the Bar, Cali-
fornia Criminal Law Practice 179, 213 (1964) (hereinafter cited as Alarcon).
12 COMMITTEE ON CRIMINAL PROCEDURE
2. Preliminary motion to suppress evidence.
Prior to the preliminary examination, in cases initiated by informa-
tion, or prior to the presentation of evidence to the grand jury in
cases where an indictment is sought, a defendant may attack the le-
gality of a search by making a motion to suppress the evidence.18 The
motion is optional and failure" to make it will not preclude an objec-
tion to the introduction of the evidence at the preliminary examina-
tion or at trial.19
This motion may be used regardless of whether the search was made
with or without a warrant. If it is granted then the evidence cannot
subsequently be used to obtain an indictment or information.20 An
order granting or denying this motion is not subject to review either
by way of appeal 21 or petition for a writ of mandamus.22
3. Objection to the introduction of evidence at preliminary exami-
nation.
Even through the preliminary motion to suppress is available most
attorneys prefer to make the first attack on a search and seizure at the
preliminary examination. In many instances the attorney lacks suffi-
cient familiarity with the case to mount an attack prior to that time.
/If the defendant wants to preserve the possibility of raising the search
[ and seizure issue later in a motion under Penal Code section 995 it is
\ essential that he object to the introduction of the evidence at the pre-
l liminary examination when the prosecution seeks to use it against
\ him.23
4. Motion to set aside accusatory pleading.
At his arraignment in the trial court a defendant may move to set
aside the indictment or information on the grmind ' tha-t-ne-has--been
indictedjor committedwithoutprobable jause,2j/Search and seizur
a issues~^ay~ibe raisedHby this m6tioii~iJecause ""an indictment or com
[ mitment based solely on inadmissible evidence is not based on probable
\qaiise.25^If there is other— a4m4ssrbte~5vldence suffici^f~To^up^ort>-gr
finding of probable cause the motion will not be granted merely be-
cause some unlawfully obtained evidence was presented to the Grand
Jury or introduced at the preliminary examination.
Failure to jnake this motion results in a waiver of the right to
object to "thesumciency^of the accusatory pleading.*0 If th~e~ motion
is made and denied then the defendant lhay petition for a writ of
rohibition to restrain J^ J^uj^from^ proceedingjwith the trial.27
ofeovef^granting of thTmotion does not"preclude the district "attbr-
18 Id. at 190 ; See People v. Gershenhorn, 225 Cal. App. 2d 122, 37 Cal. Rptr. 176 (1964).
10 People v. Gershenhorn, supra note 18; People v. Berger, 44 Cal. 2d 459, 282 P 2d
509 (1955).
20Alarcon, supra note 17, at 190.
21 People v. Gershenhorn, 225 Cal. App. 2d 122, 37 Cal. Rptr. 176 (1964).
22 People v. Justice Court, 185 Cal. App. 2d 256, 8 Cal. Rptr. 176 (1960). But if the
property seized is not contraband a defendant may move, either as an alternative
or in conjunction with a motion to suppress, for its return. Denial of a motion to
return is reviewable by way of a petition for a writ of mandamus. People v.
Gershenhorn, supra note 21, Gershenhorn v. Superior Court, 227 Cal. App. 2d 361,
38 Cal. Rptr. 576.
23 Hollopeter, Preliminary Examination, in California Continuing Education of the
Bar, California Criminal Law Practice 233, 247 (1964).
24 Cal. Pen. Code sec. 995.
^People v. Valenti, 49 Cal. 2d 199, 316 P.2d 633 (1957).
26 Cal. Pen. Code sec. 996.
27 Cal. Pen. Code sec. 999a.
SEARCH AND SEIZURE 13
ney from seeking a new indictment or information and the court's
determination that the evidence was illegally obtained is not binding
in any subsequent prosecution.28
5. Objection to the introduction of evidence at trial.
Despite the availability of pretrial motions to attack the validity
of a search and seizure a defendant may forego these and raise the
issue for the first time in the trial court. A ruling by the trial judge
excluding the evidence cannot be appealed by the prosecution because
the defendant is placed in jeopardy by the start of the trial.29 There-
fore, if a defendant has a strong case on the search and seizure issue
his best tactical move may be to wait until the case goes to trial to
raise the point.
6. Raising the issue on appeal.
A defendant who has not attacked a search and seizure in the trial i
court generally may not raise that issue for the first time on appeal.30
However, there is some possibility that the search and seizure issue
may be urged on appeal, even though it is not raised at trial, if the
defendant has raised the issue at some point prior to trial.31 From
the defendant's point of view the best practice is always to raise the
point at trial and thereby assure its preservation on appeal.
PROBLEMS IN THE OPERATION OF THE PRESENT LAW
As a result of its study the committee has concluded that the exist-
ing law governing the procedure for challenging the legality of a
search and seizure is defective in three major respects.
1. Unnecessary expenditure of time and effort.
The existing procedure results in an unnecessary expenditure of
time and effort because it allows search and seizure questions to be
raised repeatedly within the context of criminal proceedings.
It has already been pointed out in this report that it is possible for
a criminal defendant to make repeated attacks upon the legality of
a search and seizure. An adverse decision at one point in the process
does not prevent him from litigating the same question at another
point in the proceedings. In short, the law does not now provide for
a final determination of search and seizure questions prior to the trial
of the case.
The committee has no evidence to indicate that defendants have
taken advantage of the present procedure to delay the criminal process
through the making of dilatory motions. But the procedure is sus-
ceptible to that abuse.
The important point is that a considerable amount of time of the
courts and district attorney's offices is spent litigating search and
seizure questions. In his testimony before the committee Mr. Evelle J.
28 Cal. Pen. Code sec. 999 ; See People v. Van Eyk, 56 Cal. 2d 471, 15 Cal. Rptr. 150,
364 P.2d 326 (1961). See also Cal. Pen. Code sec. 1238.
29 People v. Valenti, 49 Cal. 2d 199, 316 P.2d 633 (1957).
80 People v. Silva, 54 Cal. 2d 115. 4 Cal. Rptr. 509, 351 P.2d 781 (1960).
iiSee Comment, 54 Calif. L. Rev., supra note 5, n.40 at 1077.
14 COMMITTEE ON CRIMINAL PROCEDURE
Younger, District Attorney of Los Angeles County, stressed this aspect
of the problem.
Mr. Younger: Conceding that it is a difficult thing to measure
precisely the amount of time which is spent on certain operations
of the administration of justice, we have concluded from informa-
tion presently available to us that approximately 12 percent, or
one-eighth of the time of our deputy district attorneys is devoted
to the handling of search and seizure issues at all stages of the
proceedings. Based upon our complement of approximately 220
deputy district attorneys, this means that the time of approxi-
mately 26 deputies is consumed daily with this problem. This
necessarily means a comparable amount of court time is also con-
sumed in the handling of this issue.
Due to the greater number of cases handled by the district attor-
ney's office in Los Angeles the problem is probably more serious in
that city than in other prosecutors' offices around the state. However,
it would appear that on a statewide basis the total time expended both
by the courts and by prosecutors in handling search and seizure ques-
tions is significant.
2. Disadvantageous use of jury time.
The present law allows search and seizure issues to he raised during
trial and this results in a waste of jury time since questions regarding
the admissibility of evidence are determined out of the presence of the
jury.
The committee does not have precise information on the number of
cases wherein search and seizure questions are argued in the trial
court. Therefore, we cannot determine with any certainty how much
jury time is actually lost in this manner. But there does appear to be
general agreement that the arguing of these questions at trial breaks
up the continuity of the trial proceedings and results in unused jury
time. The following exchange between Assemblyman George Deukme-
jian and Mr. Lynn Compton, Assistant Los Angeles County District
Attorney, at the committee's hearing in Anaheim indicates the nature
of this problem.
Mr. Deukmejian: The question was raised earlier as to the
amount of time that it takes to decide these issues out of the
presence of the jury. Is it possible that sometimes on these issues
it takes as much as a day or two to take testimony or hear argu-
ment?
Mr. Compton: Yes. I have been involved in cases where it took
that much time.
Mr. Deukmejian : So for a couple of days you have the jury out
sitting around and getting aggravated, I suppose.
Mr. Compton: Yes. I think that many times this works against
the defendant. I think that when juries are held out of these pro-
ceedings conducted in their absence they get some suspicion that
there is something that they are not going to get to hear or know.
I think defendants probably suffer more than the prosecution
suffers from these interruptions.
SEARCH AND SEIZURE 15
3. Undue restrictions on the prosecution's opportunity for appeal.
The present law unduly restricts the prosecution's opportunity to
obtain appellate review of an adverse decision on a search and seizure
issue.
A prosecutor is limited in his ability to obtain appellate review of
a decision holding that property has been unlawfully seized. One com-
mentator has indicated that the people might be able to appeal a
judgment quashing a search warrant and ordering the return of prop-
erty.32 But the law on this point is not clear. The only instance in
which the prosecution is clearly permitted to seek appellate review is
when the defendant chooses to attack a search and seizure by means
of a motion to set aside the accusatory pleading. In that situation
Penal Code Section 1238 expressly authorizes an appeal by the prose-
cution.
This lack of adequate opportunity for appellate review can have
an adverse effect upon the administration of criminal justice. If a
lower court judge or magistrate erroneously rules that evidence must
be excluded the result will probably be that the district attorney will
lose a case he should have won and a person who should have been
convicted will go free. District Attorney Younger has proposed that
both the defendant and the prosecution be permitted to take an ap-
peal from an adverse decision on a search and seizure question. He
gave the following testimony in support of his proposal :
Mr. Younger : Let me indicate that this is not just an academic
problem as far as we are concerned. We lose a lot of cases that
we should not lose. Mr. Crown asked if this [Mr. Younger 's pro-
posal] will increase the percentage of convictions. Yes, it will.
And I think we can all agree that this would be good so long
as we only increase our conviction rate at the ■ expense of those
people who are admittedly guilty. The cases we are concerned
about here are cases, for the most part, where there has never
been a question about the guilt of the defendant. As you know,
the Cahan decision came down because the Court in its wisdom
felt that the police should be disciplined and that has been the
whole theory behind this search and seizure problem. Usually the
item of evidence, a half a million dollars' worth of uncut heroin,
for example, is the very thing that clearly establishes the guilt
of the defendant. So we are really talking about people who are
guilty in fact but who can't legally be prosecuted because there
was some deficiency so far as the search and seizure was con-
cerned.
... It's going to increase convictions at the expense of guilty
people who thus far have avoided convictions in some cases where
judges have been mistaken. There is no question that judges can
be mistaken in this area. We had, for example, just after the
Cahan decision, a very distinguished judge who had a good deal
of experience in the criminal field and we reversed him seven
successive times on search and seizure questions. I cite this exam-
ple to show how reasonable minds can differ on these things. For-
tunately, he ruled against us at the 995 stage where we have an
82 Alarcon, supra note 17, at 213.
3— L-878
IQ COMMITTEE ON CRIMINAL PROCEDURE
appeal. If ... he had saved these rulings until the trial stage we
would have been dead on all seven cases.
Moreover, the lack of sufficient opportunity for appellate review by
the prosecution has another less obvious impact on the system of crim-
inal justice. It is the defendant who usually initiates appellate pro-
ceedings. This means that the bulk of cases which go before appellate
courts for review are those least favorable to the prosecution. There-
fore, the law of search and seizure tends to be made on the basis of
cases in which the activities of the police appear in their worst light.
If the prosecution had greater latitude to seek appellate review the
courts would be presented with a more balanced view of law enforce-
ment activities.
PROPOSALS PRESENTED TO THE COMMITTEE
In addition to Assembly Bill 1651 the committee has considered
two other proposals for revision of the present law. One of these was
presented to the committee by Mr. Evelle J. Younger, District Attor-
ney of Los Angeles County, and the other proposal was made by
Mr. Carl J. Seneker II in an article which appeared in the California
Law Review.33
Although the three proposals differ in important respects, they are
basically similar. In general, all three proposals seek to establish an
exclusive procedure for the pretrial determination of search and seizure
issues. In cases where a felony prosecution is initiated by complaint the
Deukmejian proposal would require the issue to be raised by motion
prior to the preliminary examination; the Younger and Seneker pro-
posals would require the motion to be made at the preliminary exam-
ination. All three proposals would require the motion to be made in the
trial court prior to trial in misdemeanor cases and felony prosecutions
initiated by indictment.
Each of the suggested revisions would limit the defendant's right
to raise search and seizure questions for the first time in the trial court.
The Younger and Deukmejian proposals would allow the issue to be
raised for the first time at trial only if (1) the defendant was not
aware of the grounds for the motion at the time he should have made
it, or (2) the opportunity for the motion did not exist at the time it
should have been made. Seneker suggests that in addition to allowing
the motion to be made under those circumstances the judge should
have discretion to hear the motion for the first time at trial if it ap-
pears that the defendant's failure to make it earlier is excusable.
All three proposals would permit both the defendant and the prose-
cution to seek appellate review of an adverse decision.
These three proposals pertain only to the pretrial determination of
search and seizure issues. Two witnesses who appeared before the com-
mittee, Mr. Warren Ettinger and Judge Arthur L. Alarcon, endorsed
the general approach taken in the Deukmejian, Younger, and Seneker
proposals but suggested that there is a need to establish a pretrial
procedure for the determination of other questions concerning the ad-
missibility of evidence. They pointed out that the new Evidence Code
S3 Comment, 54 Calif. L. Rev., supra note 5. Assembly Bill 1651 and the draft statutes
proposed by District Attorney Younger and Mr. Seneker are included as appendices
to this report.
SEARCH AND SEIZURE 17
requires that the court, cat the request of any party to a criminal
proceeding, determine the admissibility of a defendant's confession or
admission out of the presence of the jury.34
Judge Alarcon indicated that since the United States Supreme
Court's decision in the case of Jackson v. Denno 35 most judges hear
arguments outside the presence of the jury on such questions as the
admissibility of a confession or the reasonableness of a search and
seizure. This factor coupled with the effect of recent Supreme Court
decisions dealing with confessions has resulted in prolonging the trial
of criminal cases.
Judge Alarcon : Since Escobedo 36 we have found in Los Angeles
that the average jury trial now lasts at least half a day longer
because of the necessity for a hearing outside the presence of
the jury to lay a foundation for the admission of each of the de-
fendant's statements. I have even had some trials where we have
had the necessity of having a hearing which lasted from two to
three days solely on the question of admissibility and this hearing
had to take place outside the presence of the jury.
Judge Alarcon suggests that all questions concerning the admis-
sibility of evidence should be decided prior to the trial of a case.
He outlined the following procedure to implement this suggestion :
1. A hearing on admissibility of evidence should be held by the
trial judge prior to the selection of a jury. In effect, this would
be the first step in the trial of a criminal case.
2. At this hearing the prosecution would be required to estab-
lish the foundation for the admission of the evidence involved,
e.g., that a search was reasonable or that a confession was volun-
tary and obtained in full compliance with the defendant's con-
stitutional rights.
3. The defendant should have the right to cross-examine the
prosecution 's witnesses and present his own evidence to controvert
the foundation laid by the state.
4. The decisions rendered by the judge at this hearing would
be the law of the case and the issues involved could not be litigated
again at trial unless in the court's discretion the interests of
justice require it.
5. Both the prosecution and the defendant should have the
right to take an appeal from an adverse decision at this hearing.
6. At trial the defendant should be allowed to exercise a per-
emptory challenge against the judge who ruled in favor of ad-
mitting evidence. At the pretrial hearing on admissibility the
judge may be required to make a judgment of the defendant's,,
credibility and he would be likely to carry that judgment over j
into the trial of the case. The defendant could be protected from I
this possibility if he were allowed a peremptory challenge at
trial.
34 Cal. Evid. Code sec 402(b).
35378 U.S. 368 (1964).
36 Escobedo v. Illinois, 378 U.S. 478 (1963),
18 COMMITTEE ON CRIMINAL PROCEDURE
COMMITTEE RECOMMENDATIONS
1. Search and seizure
The committee recommends that the procedure for challenging the
legality of a search and seizure be changed (1) to provide for final
determination of these questions prior to trial and (2) to allow the
prosecution greater latitude in initiating appellate review of an ad-
verse decision on a search and seizure issue.
The committee approves the concept embodied in Assembly Bill 1651
and the draft statutes proposed by District Attorney Younger and
Mr. Seneker. The law is in need of legislative revision to provide a
more orderly procedure for challenging searches and seizures. However,
it must not be forgotten that we are dealing here with a procedure
for implementing a constitutional right and every effort must be made
to maintain the fullest possible measure of protection of that right
for criminal defendants.
In recommending a change in the present law and approving the
broad outlines of a statute the committee is not unmindful of the
difficulties involved in developing legislation in this area. To assist
in the drafting of legislation we make the following comments and
recommendations.
A. Nature of the procedure. If a new procedure is to be established
it should be available to attack seizures made with or without a war-
rant. The same procedure should also be capable of being used to effect
the return of property wrongfully seized, if it is not contraband, and
to suppress seized property as evidence in a case. Therefore, the basic
procedural device should be a motion to return property or suppress
it as evidence.
B. Timing of the motion. It is the committee's view that the pre-
trial determination of search and seizure issues should be encouraged.
But the time at which the defendant is required to make his attack
on a search and seizure may have an important bearing upon his
chances for success or the operation of his business if the seized prop-
erty is part of his inventory or consists of business records.
In felony prosecutions initiated by complaint Assembly Bill 1651
would require the defendant to challenge a search and seizure by
motion prior to the preliminary examination ; the Younger and Seneker
proposals provide for the motion to be made at the preliminary hear-
ing. However, there is a major problem involved in requiring the
motion to be made at either of these points in the proceedings.
In many instances the defense attorney does not have sufficient
knowledge of the case to challenge a search and seizure either before
or at the preliminary examination. In public defenders' offices that
have a particularly heavy workload it may be impossible to do the
investigation necessary to determine all of the issues in a case prior
to the preliminary examination. Moreover, the preliminary examina-
tion itself may not produce enough information to warrant making
the motion at that time. Mr. William B. Enright of San Diego pointed
out this problem to the committee.
SEARCH AND SEIZURE 19
Mr. Enright : For example, when I was a prosecutor I at-
tempted to limit the evidence I presented at the preliminary hear-
ing as much as possible. In my judgment, a prosecutor should try
as much as he can to present only a minimum case at the pre-
liminary hearing, not only for the convenience of the court, but
also for the better presentation of his case in superior court. I
don't think that he would necessarily present all of the evidence
bearing on the question of admissibility of evidence and so I
don't think you would get the whole case at the preliminary
hearing.
Thus, it would appear that the best place for the motion to be made
would be in the trial court prior to the trial of the case. It would be
at that point in the proceedings that the defendant would be in the
best position to challenge the validity of a search and seizure.
However, a defendant should not be precluded from making the
motion at the preliminary examination. If the defendant has sufficient
information at his disposal to raise the issue at the preliminary ex-
amination he should not be required to wait until the case reaches
the trial court. The purpose of the preliminary examination is to
determine if there is probable cause to bind an accused over to trial.
If vital evidence has been obtained through an illegal search, and the
defendant can prove that, then it is likely that there can be no find-
ing of probable cause. In such a situation it would be ridiculous not
to allow him to end the case at the preliminary examination stage.
It should also be possible for a defendant to move for the^ return of
property at a very early point in the proceedings. If the seized prop-
erty is not contraband its continued possession by the police may have
an adverse effect upon the operation of the defendant's business. For
example, if the property consists of business records the defendant may
be irreparably harmed if he cannot secure its quick return. Therefore,
he should be permitted to move for the return of property soon after
its seizure.
C. Who should hear the motion? Assembly Bill 1651 and the draft
statute proposed by District Attorney Younger would require an attack
upon the validity of a search made pursuant to a warrant to be made,
when possible, before the magistrate who issued the warrant. The
Seneker proposal, on the other hand, would allow the motion to be
made before a magistrate other than the one who issued the warrant.
His reasoning is that the issuing magistrate may be unlikely to over-
rule himself and hold that there was no probable cause for the issuance
of the warrant in the first place. The counterargument is that magis-
trates do in fact overrule themselves when they are presented with
additional facts and there is no need to, in effect, place two judicial
officers between the defendant and the police.
It is the committee 's opinion that a challenge of a search and seizure
should be heard in the trial court prior to trial. The matter of who
should hear the motion seems rather unimportant. However, to assure
defendants maximum protection of their constitutional right to have
illegally obtained evidence excluded it might be wise to permit a pre-
emptory challenge of the judge who hears the motion if it develops
that he is the magistrate who issued the search warrant.
20 COMMITTEE ON CRIMINAL PROCEDURE
D. Burden of proof. It was suggested to the committee that the
burden of proving that a search was reasonable should always be on
the people regardless of whether the search was made with or without
a warrant. Under the present law the prosecution has the burden of
proving reasonableness of a search when it is made without a war-
rant 37 and the burden is on the defense when the search is pursuant
to a warrant.38 Changing this aspect of the law to place the burden of
proof on the prosecution in all cases might decrease the use of search
warrants. If the police are required to justify the issuance of a war-
rant twice — once before the issuing magistrate and again in court when
the search is challenged — they may not bother with obtaining a war-
rant in the first place.
E. Raising the issue at trial. Assembly Bill 1651 and the draft
statute proposed by District Attorney Younger would both permit a
motion to suppress to be made during trial only if the opportunity for
making it did not exist earlier or the defendant was not aware of the
grounds for the motion at the time he should have made it. On the
other hand, the Seneker proposal, in addition to permitting the motion
under these two conditions, would give the court discretion to enter-
tain the motion during trial if the interests of justice require it. In
this respect the latter proposal is similar to the procedure followed
in the federal courts.39
While the right to raise search and seizure issues for the first time
at trial should be limited, the committee feels that the conditions set
out in Assembly Bill 1651 and the Younger proposal are too restric-
tive. Under those proposals a defendant could have an excusable reason
for not raising the issue earlier and yet be precluded from making a
motion to suppress at trial because he could not show that he lacked
the opportunity for making it earlier or was unaware of the grounds
for the motion. This result could be avoided if the court is given dis-
cretion to hear the motion even though the defendant cannot meet the
two express conditions for raising the issue during trial. A due regard
for the constitutional nature of the right involved would seem to re-
quire that the court have such discretionary power.
F. Appeal. We have already stated our recommendation that both
the defendant and the people should be permitted an appeal from an
adverse decision on a pretrial motion to suppress evidence or return
property. However, there are a number of details concerning the ap-
pellate procedure which require consideration.
It is our view that the preferred place for exercising a challenge of
a search is in the trial court just prior to trial. However, as we have
indicated, we can see the necessity in felony cases initiated by complaint
of also allowing the motion to be made at the preliminary examination ;
and, there is a need to permit a motion for the return of property to be
made soon after it is seized. In these instances, and in misdemeanor
prosecutions, where the motion would be made in the municipal or
justice court any appeal should be taken to the appellate depart-
ment of the superior court. When the motion is made in superior
37Badillo v. Superior Court, 46 Cal. 2d 269, 294 P.2d 23 (1956).
38 People v. Phillips, 163 Cal. App. 2d 541, 329 P.2d 621 (1958).
39 Fed. R. Crim. P. 41(e).
SEARCH AND SEIZURE 21
court prior to the trial of a felony the appeal should be taken to the
district court of appeal. Thus, appeals from a decision on a motion
to return property or suppress evidence would conform to the rules
governing appeals in general.
In some cases a preliminary appeal — that is, an appeal prior to a
judgment of conviction — might work a hardship on the defendant.
For example, he might not be able to bear the additional expense or,
if the case is handled by the public defender, there may not be suffi-
cient staff to adequately provide for preliminary appeals. Therefore,
an appeal from the pretrial motion should be optional. If a prelimi-
nary appeal is not taken the defendant should be required to object
to the introduction of the disputed evidence at trial and thereby pre-
serve the issue for appeal from the judgment of conviction.
The suggestion made here would mean that at least in some cases
there would not be a final determination of search and seizure issues
prior to trial. However, the right of the prosecution to appeal an ad-
verse decision on a pretrial motion would not be affected by this sug-
gestion and a mandatory preliminary appeal could place an unwar-
ranted burden on criminal defendants or those who represent them.
Consideration should also be given to the question of whether a de-
fendant should be bound by an adverse ruling on a preliminary appeal.
The Seneker proposal specifically provides that a preliminary appeal
would not be binding and that the defendant could raise the issue
again in an appeal from a judgment of conviction. Assembly Bill 1651
and the Younger proposal also appear to permit a second appeal by
the use of language which states that the proceedings they authorize
shall constitute a sole and exclusive remedy * ' and further review can be
had only on appeal from a conviction in the criminal case." Such a
second appeal would enable the appellate court to consider the search
and seizure issue in the context of the entire case and ensure the
defendant of maximum protection for his constitutional rights.
If the prosecution elects to seek appellate review the defendant
should be released from custody without the necessity of providing
any form of security for a later appearance. Moreover, to protect
the defendant's right to a speedy trial the prosecution should be re-
quired to file its appeal within a short time after an adverse decision
on the pretrial motion. If they are successful on appeal then they
should reinstitute the criminal proceedings within a specified period
of time. These requirements would tend to mitigate the impact of the
prosecution 's appeal upon the defendant.
2. Feasibility of pretrial procedure for all questions of admissibility.
The committee recommends that a study be undertaken to determine
the feasibility of establishing a pretrial procedure for the resolution
of all questions concerning the admission of evidence in criminal cases.
One of the major defects in the present law is that it permits, if
not encourages, search and seizure issues to be raised during the trial
of a criminal case. As we have pointed out, the determination of these
questions during trial breaks the continuity of the proceedings and re-
sults in lost jury time. The same thing may be said about the resolu-
tion of questions concerning the admissibility of other forms of evi-
22 COMMITTEE ON CRIMINAL PROCEDURE
dence, e.g., confessions, admissions, and dying declarations, during
trial.
Judge Alarcon pointed out to the committee that the new Evidence
Code requires questions concerning the admissibility of a confession
or admission to be decided by the court outside the presence of the
jury 40 and that these proceedings can result in a significant interrup-
tion in the trial process. He suggested that the proposed procedure
for resolving search and seizure issues be expanded to cover these
and other questions pertaining to admissibility of evidence.
The committee believes that this suggestion has merit and that it
should be studied to determine what impact its implementation would
have on the administration of criminal justice. Such study should
cover the following points :
A. How much time is spent in the resolution of questions per-
taining to admissibility of evidence ?
B. How would the suggested procedure affect the operation
of district attorney 's and public defenders ' offices ?
C. What are the views of the bench and bar concerning such a
procedure ?
D. If the prosecution is permitted to take an appeal from these
proceedings would that result in a significant delay in the final
determination of criminal cases ?
Mr. Beilenson concurs in part.
*°Cal. Evid. Code sees. 310, 402.
APPENDICES
ASSEMBLY BILL 1651
YOUNGER DRAFT STATUTE
SENEKER DRAFT STATUTE
54 CALIF. L REV. 1070
AMENDED IN ASSEMBLY MAY 11, 1965
CALIFORNIA LEGISLATURE— 1965 REGULAR (GENERAL) SESSION
ASSEMBLY BILL No. 1651
Introduced by Assemblyman Deukmejian
March 8, 1965
REFERRED TO COMMITTEE ON CRIMINAL PROCEDURE
An act to add Section 1538.5 to, and to amend Section 1539 of,
the Penal Code, relating to unreasonable searches and sei-
zures.
The people of the State of California do enact as follows:
1 Section 1. Section 1538.5 is added to the Penal Code, to
2 read :
3 1538.5. (a) A defendant aggrieved by an unreasonable
4 search or seizure conducted by a government agent may move
5 for the return of property or to suppress as evidence anything
6 so obtained on the ground that :
7 (1) The search and seizure without a warrant was unrea-
8 sonable ; or
9 (2) The search and seizure with a warrant was unreasonable
10 because the warrant is insufficient on its face; the evidence
11 seized is not that described in the warrant; of there was not
12 probable cause for the issuance of the warrant ; or the method
13 of execution of the warrant violated federal or state constitu-
14 tional standards .
15 (b) The motion shall be in writing and state facts showing
16 wherein the search and seizure was u«law#ftl unreasonable .
17 When possible, the motion should be heard by the magistrate
18 who issued the search warrant if there is a warrant. The judge
19 or magistrate shall receive evidence on any issue of fact neces-
20 sary to determine the motion. The burden of proving that the
21 search and seizure was unlawful unreasonable shall be on the
22 defendant if the search is by warrant and the burden of
23 proving that the search and seizure was lawful reasonable
24 shall be on the people where the search is without warrant.
25 If the motion is granted, the property shall be restored, unless
(25)
AB 1651 — 2 —
1 otherwise subject to lawful detention, and it shall not be ad-
2 missible in evidence against the movant at any trial. Such
3 return shall not be made until available appellate remedies
4 have been exhausted or the time for such proceedings has
5 passed.
6 (c) If the property seized relates to a felony offense ini-
7 tiated by a complaint, the motion shall be made in the mu-
8 nicipal or justice court before preliminary hearing except that
9 if opportunity for this motion did not exist or the defendant
10 was not aware of the grounds for the motion prior to pre-
11 liminary hearing, the defendant shall have the right to make
12 this motion for the first time during the course of trial. If
13 the property seized relates to a felony offense initiated by an
14 indictment, the motion shall be made in the superior court be-
15 fore trial except that if opportunity for this motion did not
16 exist or the defendant was not aware of the grounds for the
17 motion prior to trial, the defendant shall have the right to
13 make this motion for the first time during the course of trial.
19 If the property seized relates to a misdemeanor offense, -the
20 motion shall be made in the municipal or justice court before
2i trial except that if opportunity for this motion did not exist
22 or the defendant was not aware of the grounds for the motion
23 prior to trial, the defendant shall have the right to make this
24 motion for the first time during the course of trial.
25 (d) If the property seized relates to a felony offense ini-
26 tiated by a complaint or to a misdemeanor offense and the
27 defendant made a motion for the return of the property or its
2g suppression as evidence in the municipal or justice court prior
29 to preliminary hearing or misdemeanor trial, both the people
30
and the defendant shall have the right to appeal any decision
oi of that court to the superior court of the county in which such
oo inferior court is located, in accordance with the California
qq Kules of Court provisions governing appeals from municipal
cm and justice courts in criminal cases. If the property seized
35 relates to a felony initiated by an indictment and the de-
gg fendant made a motion for the return of property or its sup-
37 pression as evidence in the superior court prior to trial, both
3g the people and defendant shall have the right to appeal any
39 decision of that court to the appellate courts of California by
aq means of an extraordinary writ of mandate or prohibition.
41 (e) All proceedings in a criminal case relating to the mate-
42 rial seized shall be stayed pending the termination of these
aq proceedings and of any appeal therefrom.
44 (f) These proceedings shall constitute the sole and exclu-
45 sive remedy to test the validity of a search and seizure in a
46 criminal case , and further review can be had only on an
47 appeal from a conviction in the criminal case.
48 (d) Nothing contained in this section is applicable to, or
49 shall prohibit a person from making, a motion to return prop-
50 erty brought on the ground that the property held in the pos-
51 session of a government agent is not obscene as defined in
p. o Penal Code Section 311.
1 ( 26 )
— 3— AB 1651
1 Sec. 2. Section 1539 of said code is amended to read :
2 1539. If a hearing be held pursuant to Section 1358.5, the
3 judge or magistrate must proceed to take testimony in rela-
4 tion thereto, and the testimony of each witness must be re-
5 duced to writing and authenticated in the manner prescribed
6 in Section 869.
(27)
DRAFT STATUTE PROPOSED BY EVELLE YOUNGER
The people of the State of California do enact as follows:
Section 1. Section 1538.5 is added to the Penal Code, to read:
1538.5. (a) A defendant aggrieved by a search or seizure con-
ducted by a government agent may move for the return of property
or to suppress as evidence anything so obtained on the ground that :
( 1 ) The search or seizure without a warrant was unreasonable ; or
(2) The search or seizure with a warrant was unreasonable because
the warrant is insufficient on its face ; the evidence seized in not that
described in the warrant; there was not probable cause for the issuance
of the warrant; or the method of execution of the warrant violated
federal or state constitutional standards.
(b) When possible and consistent with the procedures set forth in
this section, the motion should first be heard by the magistrate who
issued the search warrant if there is a warrant.
(c) Whenever a motion is made in the municipal, justice or superior
court as provided in this section, the judge or magistrate shall receive
evidence on any issue of fact necessary to determine the motion. The
burden of proving that the search or seizure was unreasonable shall
be on the defendant if the search is by warrant and the burden of
proving that the search or seizure was reasonable shall be on the people
where the search is without warrant. If the motion is granted, the
property shall be restored, unless otherwise subject to lawful detention,
and it shall not be admissible in evidence against the movant at any
trial unless further proceedings authorized by law are utilized by the
people. Such return shall not be made until such proceedings have
been exhausted or until 10 clays after defendant's motion is granted,
whichever occurs last.
(d) If the property seized relates to a felony offense initiated by
a complaint, the motion shall be made in the municipal court or justice
court at the preliminary hearing, except that if opportunity for this
motion did not exist or the defendant was not aware of the grounds
for the motion at the preliminary hearing, the defendant shall have
the right to make this motion for the first time in the superior court
prior to trial as provided in subsection (e) hereof. If the property
seized relates to a felony offense initiated by a complaint, and if op-
portunity for this motion did not exist or the defendant was not aware
of the grounds for the motion prior to trial, the defendant shall have
the right to make this motion for the first time during the course of
the trial. If the property seized relates to a felony offense initiated by
an indictment, the motion shall be made in the superior court either
as part of any motion that may be made pursuant to Penal Code Sec-
tion 995 or at a special hearing relating to the validity of the search
or seizure held prior to trial, except that if opportunity for this motion
did not exist or the defendant was not aware of the grounds for the
motion prior to trial, the defendant shall have the right to make this
motion for the first time during the course of trial. If the property
seized relates to a misdemeanor offense, the motion shall be made in
the municipal or justice court before trial except that if opportunity
for this motion did not exist or the defendant was not aware of the
grounds for the motion prior to trial, the defendant shall have the
right to make this motion for the first time during the course of trial.
(28)
SEARCH AND SEIZURE 29
(e) If the property seized relates to a felony offense initiated by
complaint and the defendant made a motion for the return or sup-
pression of the property at the preliminary hearing at which he was
held to answer, or if opportunity for this motion did not exist or he
was not aware of the grounds for the motion at the preliminary hear-
ing at which he was held to answer, or if the property seized relates
to a felony offense initiated by indictment, the defendant shall have
the right to renew or make the motion in the superior court either as
a part of any motion that he may make pursuant to Penal Code Sec-
tion 995 or at a special hearing relating to the validity of the search
or seizure held prior to trial. After either of these proceedings is held
in the superior court, any review thereafter desired by the defendant
prior to trial shall be by means of an extraordinary writ of mandate
or prohibition. If the property seized relates to a felony offense initi-
ated by complaint and the defendant's motion for the return or sup-
pression of the property at the preliminary hearing is granted, the
people may file a new complaint or seek an indictment within 10 days
after the preliminary hearing, and the ruling at the prior hearing
shall not be binding in any subsequent proceeding if a new complaint
is filed or an indictment sought within such period of time. If the
property seized relates to a felony offense initiated by complaint or
by indictment, and the defendant's motion in the superior court is
granted prior to trial, the people shall have the right to appeal such
a ruling in accordance with Penal Code Section 1238, or may initiate
a new complaint or seek a new indictment within 10 days after the
granting of defendant's motion. If a new complaint is filed or a new
indictment is sought within such period of time, the ruling at the
earlier hearing held pursuant to Penal Code Section 995 or at the
special hearing in the superior court shall not be binding in any sub-
sequent proceeding. If the property seized relates to a misdemeanor
offense, and the defendant made a motion for the return of property,
or its suppression as evidence, in the municipal court or justice court
prior to trial, both the people and defendant shall have the right to
appeal any decision of that court to the superior court of the county
in which such inferior court is located, in accordance with the Cali-
fornia rules of court provisions governing appeals from municipal
and justice courts in criminal cases.
(f) If the defendant's motion to return property or suppress evi-
dence is granted, the defendant shall be released from custody pending
the outcome of any review sought by the people in an appellate court
unless the people elect to continue the criminal proceedings, or initiate
new proceedings, without seeking appellate review.
(g) All proceedings in a criminal case relating to the material
seized shall be stayed pending the termination in the courts of the
State of California of the proceedings provided for in this section and
of any appeal therefrom.
(h) The proceedings provided for in this section shall constitute
the sole and exclusive remedies to test the validity of a search or
seizure when the person aggrieved is a defendant in a criminal case
at the time the motion for the return of property or the suppression of
evidence is heard, and further review can be had only on an appeal
from a conviction in the criminal case.
30 COMMITTEE ON CRIMINAL PROCEDURE
(i) Nothing contained in this section is applicable to, or shall pro-
hibit a person from making, a motion to return property brought on
the ground that the property held in the possession of a government
agent is not obscene as denned in Penal Code Section 311.
Sec 2. Section 1539 of said code is amended to read :
1539. £1 the grounds era which the warrant was issued be contro
verted; he If a hearing be held pursuant to Section 1538.5, or if the
grounds on which the warrant was issued be controverted by a person
aggrieved by a search or seizure who is not a defendant in a criminal
action at the time the hearing is held, the judge or magistrate must
proceed to take testimony in relation thereto, and the testimony of
each witness must be reduced to writing and authenticated in the
manner prescribed in Section 869.
Sec 3. Section 1238 of said code is amended to read :
1238. An appeal may be taken by the people :
1. From an order setting aside the indictment, information, or com-
plaint ;
2. From a judgment for the defendant on a demurrer to the indict-
ment, accusation, or information ;
3. From an order granting a new trial ;
4. From an order arresting judgment;
5. From an order made after judgment, affecting the substantial
rights of the people ;
6. From an order modifying the verdict or finding by reducing the
degree of the offense or the punishment imposed ;
7 . From an order granting defendant's motion to return or suppress
property made at a hearing held pursuant to Penal Code Section 995
or at a special hearing as provided in this code.
DRAFT STATUTE PROPOSED BY CARL SENEKER
54 Calif. L. Kev. 1070, 1094
The people of the State of California do enact as follows:
Section 1. Section 1538.5 is added to the Penal Code, to read:
1538.5 (a) A defendant aggrieved by an unreasonable search or
seizure conducted by a government agent may move for the return
of property or to suppress as evidence anything so obtained on the
ground that :
( 1 ) The search and seizure without a warrant was unreasonable ; or
(2) The search and seizure with a warrant was unreasonable be-
cause the warrant is insufficient on its face ; the evidence seized is not
that described in the warrant; there was not probable cause for the
issuance of the warrant; or the method of execution of the warrant
violated federal or state constitutional standards.
(b) The motion shall be in writing and state facts showing wherein
the search and seizure was unreasonable. Where possible, the motion
should be heard by a magistrate other than the magistrate who issued
the search warrant if there is a warrant. The judge or magistrate
shall receive evidence on any issue of fact necessary to determine the
motion. The burden of proving that the search and seizure was un-
reasonable shall be on the defendant if the search is by warrant and
the burden of proving that the search and seizure was reasonable shall
be on the people where the search is without a warrant. If the motion
is granted, the property shall be restored, unless otherwise subject to
lawful detention, and it shall not be admissible in evidence against
the movant at any trial. Such return shall not be made until available
appellate remedies have been exhausted or the time for such proceed-
ings has passed.
(c) If the property seized relates to a felony offense where prosecu-
tion is initiated by a complaint, the motion shall be made in the munici-
pal or justice court at the preliminary examination. At the prelimi-
nary examination the magistrate shall inform the defendant that
he may challenge the legality of a search and seizure on any of the
grounds set out in subsection (2) of this section. And if the defendant
is not then prepared to make a motion under this section, but he
indicates a desire to do so, the magistrate shall order a continuance of
the preliminary examination to allow the defendant a suitable time to
prepare his motion.
(d) If the property seized relates to a felony offense where prose-
cution is initiated by an indictment, or to a misdemeanor offense, the
motion shall be made in the superior court, or in the justice or munici-
pal court if a misdemeanor offense, before the trial. At the arraign-
ment the judge or magistrate shall inform the defendant that he may,
before the trial, challenge the legality of any search and seizure on
the grounds set out in subsection (a) of this section.
(e) But in any case under this section the trial court must entertain
the motion for the first time at trial :
(1) If it appears that opportunity for the motion did not exist or
the defendant was not aware of the grounds for the motion at the
preliminary examination if a felony offense where prosecution is initi-
ated by a complaint, or prior to the trial if the prosecution is by
indictment or if the offense is a misdemeanor; or
(31)
32 COMMITTEE ON CRIMINAL PROCEDURE
(2) If, in the exercise of sound judicial discretion, taking account
of the interests of justice to the defendant and the orderly administra-
tion of criminal procedure, the trial court finds that the defendant's
failure to make the motion earlier is excusable.
(f ) If the defendant makes a motion as provided for in subsections
(c) or (d), the municipal or justice court magistrate at the prelimi-
nary examination or before the trial if the offense is a misdemeanor,
or the superior court judge before the trial, may rule on the motion
when it is made or may require the defendant to postpone his motion
until the trial if the magistrate believes that the motion is frivolous,
is being made solely for dilatory purposes, or can be fairly determined
only after all the relevant facts have been exposed at the trial. If the
magistrate or judge determines that the motion should be postponed
until trial, neither the people nor the defendant may appeal that
ruling.
(g) Appellate review.
(1) If the property seized relates to a felony offense where prose-
cution is initiated by a complaint or to a misdemeanor offense and the
defendant made a motion for the return of the property or its sup-
pression as evidence in the municipal or justice court at the pre-
liminary hearing or prior to a misdemeanor trial, both the people and
the defendant shall have the right to appeal any decision of that court
to the superior court of the county in which such inferior court is
located, and from there to the appellate courts of California, in ac-
cordance with the California Rules of Court provisions governing ap-
peals from municipal and justice courts in criminal cases. In the case
of a felony offense where prosecution is initiated by indictment, if the
defendant made a motion for the return of property or its suppression
as evidence in the superior court prior to trial, both the people and
the defendant shall have the right to appeal any decision of that court
to the appellate courts of California by means of an extraordinary
writ of mandate or prohibition.
(2) The appeal provided in (1) above is not mandatory and if the
defendant does not take an appeal, he may preserve his right to raise
the issue on appeal from a judgment of conviction by objecting to the
admission of the evidence that was the subject of his pretrial motion
when that evidence is sought to be introduced at the trial and the
trial judge shall determine the motion on its merits. If an appeal
is taken, and the appellate court's judgment is in favor of the prosecu-
tion, the ruling is not final and the defendant may urge error on an
appeal from a judgment of conviction. The trial judge, however, may
rule on an objection made at the trial to the admission of the same
evidence that was the subject of the pretrial motion only if at the
trial new facts regarding the search and seizure appear which were
not presented or available to the appellate court in the earlier appeal.
(3) If an appeal is taken to the appellate department of the superior
court under (1) above, the procedure for and presentation at such an
appeal shall be as informal as possible while still insuring a full and
comprehensive review of the municipal or justice court's determina-
tion. Written briefs or memorandums of points and authorities may
be required at the option of the individual appellate department.
SEARCH AND SEIZURE 33
(h) These proceedings shall constitute the sole and exclusive remedy
to test the validity of a search and seizure in a criminal case. All pro-
ceedings in a criminal case relating to the material seized shall be
stayed pending the termination of these proceedings and of any appeal
therefrom.
Sec. 2. Section 1539 of said code is amended to read :
1539. 14 the grounds e» wfeieh- the warrant was issued he contro
verted, he If a hearing be held pursuant to Section 1538.5, the judge or
magistrate must proceed to take testimony in relation thereto, and
the testimony of each witness must be reduced to writing and authenti-
cated in the manner prescribed in Section 869.
II
PREEMPTION
STATE PREEMPTION IN THE FIELD OF CRIMINAL LAW
STATE PREEMPTION IN THE FIELD OF CRIMINAL LAW
INTRODUCTION
During the 1965-1967 interim period the Assembly Interim Com-
mittee on Criminal Procedure conducted a study into the problems
posed by the concept of state preemption as it applies to the field
of criminal law. As part of its study the committee held public hear-
ings in both the northern and southern portions of the state. Tran-
scripts of those hearings are available through the office of the Assem-
bly Committee on Rules.
The law of preemption deals with the extent to which local govern-
ments may exercise legislative powers. In general, the powers of local
lawmaking bodies are restricted by the terms of Article XI, Section
11, of the California Constitution, which provides that "any county,
city, town, or township may make and enforce within its limits all
such local, police, sanitary, and other regulations as are not in con-
flict with the general laws. " The present controversy over preemption
centers primarily upon the interpretation of the word "conflict"
in that constitutional provision. When it is determined that a con-
flict exists between a state statute and a local ordinance then the state
regulation prevails and the local ordinance is void.
The courts have established that a conflict exists between a state
statute and a local ordinance when the statute expressly allows that
which the ordinance prohibits or expressly prohibits that which the
ordinance allows. The courts have also found a conflict where an ordi-
nance duplicates state law. Moreover, when the Legislature has ex-
pressly stated its intention to occupy a given field of law to the ex-
clusion of additional local regulation the courts have upheld this in-
tention and found a conflict where local government seeks to legislate
in that field. Generally speaking, the judicial development of these
concepts has not been particularly controversial.
COMMITTEE FINDINGS
The problems in this area of law revolve around the concept of
implied preemption under which the courts may find a legislative in-
tent to prohibit local regulation in a given field even though there is
no direct conflict and the Legislature has not expressly stated an in-
tention to preempt or occupy the field. The leading case on the subject
is In re Lane, 58 Cal. 2d 99 (1962). There the California Supreme
Court held that a Los Angeles city ordinance was void because
the state had impliedly preempted the law pertaining to the regula-
tion of sexual activity. That decision appears to rest upon the exten-
siveness of state regulation of sexual activity and the need for uni-
form statewide application of the law governing sexual relations.
The committee has found that local lawmaking bodies and their
legal advisors are confused by the doctrine of preemption by implica-
tion. They point out that under the doctrine they are unable to de-
termine when a given area of law is or is not preempted. Therefore,
they are unable to enact legislation with any assurance that it will be
valid. However, it is the committee's view that local governmental
(37)
38 COMMITTEE ON CRIMINAL PROCEDURE
officials are primarily concerned with the development of effective laws
to deal with the problems they perceive and it is immaterial whether
these laws are enacted at the state or the local level. Therefore, favor-
able legislative response to local governments ' requests for legislation,
coupled with an expression of legislative intent to preempt or not to
preempt the field, would solve the problem now confronting local law-
makers.
COMMITTEE RECOMMENDATION
We are convinced that it is the Legislature's responsibility to deter-
mine whether an area of law should be preempted by the state and
to make that determination known through the expression of its intent.
This should be done on an area by area approach as bills in various
areas of law are presented for its consideration. We believe that there
is no satisfactory way to achieve an overall solution to the preemption
problem. Rather, each area of law must be considered separately in
light of the factors peculiar to the activity involved to determine
whether the state should preempt the field to the exclusion of local
regulation.
Mr. Thelin dissents.
WATTS
LAW ENFORCEMENT AND CRIMINAL LAW ASPECTS
OF THE LOS ANGELES RIOT
LAW ENFORCEMENT AND CRIMINAL LAW ASPECTS
OF THE LOS ANGELES RIOT
INTRODUCTION
In a paper entitled "Proposals for State Action — A Response to
the Los Angeles Riots," Assembly Speaker Jesse M. Unruh outlined
new programs in the fields of education, housing, employment, and
law enforcement to alleviate the conditions which breed social unrest.
The paper, issued approximately one month after the riot in Watts,
suggested that these proposed programs should be implemented hi^
those "priority areas" of California where high rates of unemployed
ment, substandard housing, illiteracy, school dropouts, and criminal!
activity are the indicia of serious social malfunction.
As the first step toward conversion of his proposals into legislation
the Speaker asked a number of Assembly committees to study them
and make recommendations to him. He called upon the Interim Com-
mittee on Criminal Procedure to consider the proposals pertaining to
improvement in law enforcement and changes in the criminal law.
Pursuant to this request the committee held hearings in Los Angeles
on November 5, 1965, and again on November 18-19. 1965.1 At those
hearings the committee took testimony on the following proposals :
(1) To improve community surveillance and rehabilitation efforts,
the number of parole officers should be increased in communities which
have a high incidence of criminal activity.
(2) Gun and ammunition laws should be reviewed to determine the
need for greater control over dangerous weapons.
(3) Rifles and shotguns should be required to be broken down when
transported in a vehicle.
(4) Additional Highway Patrol officers should be assigned to areas
which have high crime rates so that local policemen may be freed from
traffic duties to spend more time "walking the beat" and familiariz-
ing themselves with the people and problems in the community.
(5) The number of minority group police officers should be in-
creased in minority group neighborhoods.
(6) Needy students should be provided with subsistence pay while
they are pursuing an approved program of peace officer vocational
training.
(7) The penalty for the crime of arson should be increased to a
minimum of three years in prison.
COMMITTEE ACTION
This committee did not undertake a general inquiry into the causes
of the Los Angeles riot. On the contrary, the scope of our study was
limited to assessing the need for the Speaker's proposals and testing
their feasibility. Testimony was taken from many witnesses including
law enforcement officers, interested citizens, civil rights leaders, and
representatives of both state and local goverment.2 While the primary
1 Copies of the hearing transcripts are available through the Assembly Rules Committee.
2 See the appendix to this report for a list of witnesses who appeared before the
committee.
(41)
42 COMMITTEE ON CRIMINAL PROCEDURE
focus of the hearings was upon the Unruh proposals, the committee
also heard and considered many other worthwhile suggestions directed
toward strengthening and improving criminal justice in California.
In January 1966, the committee chairman submitted his personal
recommendations to Speaker Unruh in a report entitled "Riot and the
Criminal Law/ ' 3 It should be emphasized that this report represented
Chairman Young's personal evaluation of the testimony taken by the
committee and the recommendations contained in the report were not
those of the full committee. This departure from normal committee
procedure was necessitated by Speaker Unruh 's request that a report
be submitted prior to the 1966 First Extraordinary Session of the
Legislature. However, copies of the report were made available to
each member of the committee, and their statements and recommenda-
tions were forwarded to the Speaker.
Two bills which originated in the committee's hearings on the Unruh
proposals were enacted during the 1966 First Extraordinary Session
of the Legislature. One measure sought to protect firemen from attack
jor interference and the other dealt with "Molotov cocktails" and
/various arson crimes.
Protection of firemen from attack or interference.
During the Los Angeles riot there were instances where mob action
prevented firemen from performing their duty. A representative of
the Los Angeles Fire Department told the committee of one situation
where firemen were driven from the scene of a fire four times and as
a result most of the buildings in an entire block were destroyed. That
official felt that the fire could have been contained and a substantial
portion of the property loss prevented were it not for the harassment
by the mob.
Assembly Bill 8 (Stats. 1st Ex. Sess. 1966, Ch. 21) by Assemblyman
Young, was intended to deter such interference with firemen engaged
in the performance of their duties. The measure added Section 148.2
to the Penal Code to provide that the following acts are misdemeanors
when they are willfully committed at a place where firemen are dis-
charging or attempting to discharge an official duty: (1) interference
with the lawful efforts of firemen to discharge their duty; (2) dis-
obeying the lawful orders of a fireman; (3) engaging in disorderly
conduct which prevents a fire from being extinguished; (4) forbidding,
preventing, or encouraging others, as to whom one has no legal
right or obligation to protect or control, from assisting in extinguish-
ment of a fire.
The legislation also amended Penal Code Sections 241, 243, and 245
to provide increased penalties for those who commit assault, battery,
or aggravated assault upon firemen engaged in the performance of
duty. Assault on a fireman was increased from a misdemeanor to a
felony punishable by a maximum of two years in prison. Battery on
a fireman was raised to a felony and made punishable by a term of 1
to 10 years in prison. Under this legislation an aggravated assault
upon a fireman is punishable by a term of 15 years in prison and
if the defendant has a prior felony conviction he may be sentenced
to life imprisonment. The previous law provided a maximum penalty of
8 See the appendix to this report for a copy of Chairman Young's report.
WATTS 43
10 years in prison and allowed imprisonment for 15 years when the
defendant had a prior felony conviction.
Arson and "Molotov cocktails."
Assembly Bill 9 (Stats. 1st Ex. Sess. 1966, Ch. 58) also authored
by Asssemblyman Young, increased the penalties for various crimes of
arson and sought to control the possession of devices used by arson-
ists. The bill contained the following major provisions.
(1) The possession, manufacture, or disposal of a "Molotov cock-
tail" was made a felony punishable by a term of six months to five
years in prison. Prior to enactment of this legislation the possession
of a "Molotov cocktail" was only a misdemeanor and their manufac-
ture or disposal was not specifically designated a crime.
(2) Arson committed during and within the area of a riot was made
punishable by a term of five years to life in prison. The increased
penalty becomes applicable only after the Governor has recognized
the existence of a riot by proclaiming a state of insurrection, disaster,
or extreme emergency.
(3) The bill created the crime of possessing any flammable, explo-
sive, or combustible material or device with the willful and malicious
intent to use it for the purpose of burning any building or property
mentioned in the arson chapter of the Penal Code. This crime is pun-
ishable by imprisonment in state prison for a maximum of five years
or in the county jail for not more than one year.
(4) The penalty for burning any commercial or other nondwelling
building or structure was increased from 1 to 10 years in prison to 2
to 20 years in prison. Thus, the penalty for the burning of commercial
buildings was made equal to the penalty for burning a dwelling.
(5) The punishment for attempted arson was changed from one to
two years in prison or a fine of $1,000 to a straight felony. Thus, the
penalty for attempted arson is now imprisonment for not less than
six months nor more than five years.
CONCLUSION
The committee believes that its hearings thoroughly tested Speaker
Unruh's proposals and the many other ideas presented to it in testi-
mony. Our views were made known to the Speaker prior to the 1966
First Extraordinary Session of the Legislature through the chairman's
report and the comments and recommendations expressed by the indi-
vidual members in response thereto. Moreover, two bills authored by
the chairman were approved by the committee during the legislative
session and enacted into law.
IV
FIREARM CONTROL
CONTROL OF ARMS AND AMMUNITION
CONTROL OF ARMS AND AMMUNITION
SUMMARY OF COMMITTEE RECOMMENDATIONS
The Assembly Interim Committee on Criminal Procedure makes the
following recommendations for legislation pertaining to the control of
arms and ammunition.
1. That the sale, possession, or transportation of "destructive de-
vices " such as explosive or incendiary shells, bombs, grenades, rockets,
missiles, and large caliber arms and ammunition be prohibited.
2. That the regulations applicable to the sale of concealable firearms
in California be applied to weapons purchased by mail from an out-of-
state seller or imported into this state from another state or country.
3. That hand-held rocket launchers and pistols which fire a projectile
through the operation of compressed gas, other than gas compressed
by hand, be included with the definition of a concealable firearm.
4. That the possession of machinegun parts be made unlawful and
that machineguns or their parts possessed in violation of the law be
subject to destruction on the ground that they constitute a public
nuisance.
(47)
INTRODUCTION
BACKGROUND OF THE REPORT
This committee did not undertake a general study of the subject
of firearms control during the 1965-1967 interim period.1 However,
in the course of the committee's hearings on the Los Angeles riot the
Attorney General of California and officers of the Los Angeles Police
Department pointed out certain defects in the law governing the con-
trol of weapons. The committee felt that the problems pointed out by
these officials were sufficiently serious to warrant holding a hearing for
the purpose of taking additional testimony on the subject.
On October 13, 1966, the committee attended a demonstration firing,
arranged by the Attorney General, to observe the operation and effect
of certain military-type weapons and new firearms now generally avail-
able to private citizens in California. The following day, October 14,
1966, the committee convened in Los Angeles to take testimony from
Attorney General Lynch, officials of the Los Angeles Police Depart-
ment, and private citizens interested in weapons control.2
1 The committee conducted a general study of the subject during the 1963-1965
interim period. See : "Regulation and Control of Firearms", Interim Committee on
Criminal Procedure, Assembly Committee Reports, 1963-1965, Vol. 22, No. 6,
January 1965.
2 The transcript of this hearing is on file in the office of the committee chairman.
(48)
COMMITTEE RECOMMENDATIONS
1. "Destructive devices." The committee is concerned over the
availability in California of antitank guns, land mines, hand grenades,
mortars, and other military-type weapons. The tremendous destruc-
tive potential of these weapons makes them unfit for use outside the
confines of a military reservation but they are nevertheless readily
available through mail order houses and retail oiit1ftts_^Tniirnrl the state.
Iiile we have extensive provisions in the Penal Code~reguTating tTTe\
/sale and possession of concealable weapons there are no statutes regu-
lating the sale or possession of military armaments. Therefore, a person
who purchases a .22-caliber pistol from a firearms dealer must provide
his name, address, occupation, and a physical description of himself,
and then wait five days to take delivery of the weapon while the infor-
mation is checked through the files of the Bureau of Criminal Identi-7
fication and Investigation in Sacramento^ On the other hand, if he
iEts"Txf"buy a 20-mm. antitank gun all he need do is walk into a
dealer and make the purchase.
Attorney General Lynch informed the committee that over the past
two years law enforcement officers have discovered some 16 caches of
military weapons in the Los Angeles area alone. These caches have
included antitank guns, hand grenades, land mines, bazookas, rifle
grenades, many different types of military rifles, and millions of
rounds of ammunition. In many instances the officers have had to
return the weapons to the owners because there is no law prohibiting
the sale or possession of these armaments.
There is evidence that persons associated with various paramilitary
organizations are in possession of military arms and are training with
them in neighboring states. Since the enactment of Penal Code Section
11460 in 1965 these private armies have been prohibited from as-
sembling in California to practice with weapons and engage in instruc-
tion in guerrilla warfare or sabotage. Some of these groups now hold
their training sessions in other states to avoid the California law.
The Attorney General presented to the committee photographs show-
ing members of a California based paramilitary organization practicing
in the Arizona desert with a Finnish-made antitank gun which can be
purchased over the counter in California for approximately $125. Some
of the members of this group were stopped in California for a minor
traffic violation. The police officer observed the antitank gun in their
automobile but they were allowed to proceed on their way to the train-
ing session since possession of the weapon was not a violation of law.
The committee sees no legitimate reason why antitank guns, cannons,
mortars, and similar highly destructive devices should be available to
private citizens in an increasingly urbanized state such as California.
Their range and power renders them unfit for hunting or target shoot-
ing even in remote places. Moreover, their possession by persons asso-
ciated with private armies or those bent upon fomenting social disorder
or committing crime threatens the rule of law in our society. For these
reasons we recommend legislation prohibiting the sale, possession, or
transportation of these devices. However, it is not the committee's
intention to prohibit the collecting or keeping of these weapons so long
as they are rendered inoperative.
(49)
50 COMMITTEE ON CRIMINAL PROCEDURE
The recommended legislation would prohibit the sale, possession, or
transportation of all weapons and ammunition which fall within the
definition of a "destructive device/ ' That term is denned to include:
(1) shells or other projectiles containing explosive, incendiary, or other
chemical substances; (2) bombs, grenades, rockets, missiles, or similar
devices and the launching devices therefor; (3) fixed ammunition of
more than .60 caliber and firearms of more than .60 caliber which fire
fixed ammunition. Shotguns and shotgun ammunition are specifically
excluded from the proposed statute.
Since the definition of a "destructive device" is written in terms
of fixed ammunition of more than .60 caliber and firearms of more
than .60 caliber which fire such ammunition, it will not restrict the
activities of those who collect or target shoot with large caliber antique
weapons. The term "fixed ammunition" refers to ammunition which
contains the explosive charge and the ball within the same casing.
Powder and ball are loaded separately into antique muskets and rifles.
Therefore, these weapons and their ammunition would not be included
within the proposed legislation.
By limiting the definition of a "destructive device" to firearms and
ammunition of more than .60 caliber and excluding shotguns and their
ammunition the committee intends that the recommended legislation
not restrict the sale or use of firearms used for hunting or target
shooting. The .60-caliber limitation appears to be a reasonable divid-
ing line since that is the distinction which the United States Army
draws between small and heavy arms.
The committee does not intend to restrict the lawful business activi-
ties of those who may deal in weapons falling within the definition of
a "destructive device." For that reason we recommend that the Chief
of the Bureau of Criminal Identification and Investigation be given
authority to issue a permit, upon a showing of good cause, for the
conduct of such a business enterprise. We also recommend that the
chief of the bureau be empowered to issue a similar permit to those
who may have a legitimate reason for possessing or transporting de-
structive devices.
COMMITTEE-RECOMMENDED LEGISLATION
An act to add Chapter 2.5 (commencing with Section 12301) to Title
2 of Part 4 of the Penal Code, relating to destructive devices.
The people of the State of California do enact as follows:
Section 1. Chapter 2.5 (commencing with Section 12301) is added
to Title 2 of Part 4 of the Penal Code, to read :
Chapter 2.5. Destructive Devices
12301. The term "destructive device,'' as used in this chapter,
shall include the following :
(1) Any shell or other projectile containing any explosive or in-
cendiary material or any other chemical substance ;
(2) Any bomb, grenade, rocket, missile, or similar device or any
launching device therefor ;
(3) Any weapon of a caliber greater than .60 caliber which fires
fixed ammunition, or any ammunition therefor, other than a shotgun
or shotgun ammunition.
12302. Nothing in this chapter shall prohibit the sale to, purchase
by, or possession of destructive devices by :
(a) Any sheriff, constable, marshal, policeman, member of the Cali-
fornia Highway Patrol, or other duly appointed peace officer.
(b) Any member of the Army, Navy, or Marine Corps of the United
States, or the National Guard, when on duty.
12303. Any person, firm or corporation who, within this state, sells,
offers for sale, possesses or knowingly transports any destructive de-
vice, other than fixed ammunition of a caliber greater than .60 caliber,
except as provided by this chapter, is guilty of a public offense and
upon conviction thereof shall be punished by imprisonment in the
county jail for a term not to exceed one year, or in state prison for a
term not to exceed three years, or by a fine not to exceed five thou-
sand dollars ($5,000) , or by both such fine and imprisonment.
12304. Any person, firm or corporation who, within this state, sells,
offers for sale, possesses or knowingly transports any fixed ammunition
of a caliber greater than .60 caliber, except as provided in this chap-
ter, is guilty of a public offense and upon conviction thereof shall be
punished by imprisonment in the county jail for a term not to exceed
six months or by a fine not to exceed one thousand dollars ($1,000),
or by both such fine and imprisonment.
A second or subsequent conviction shall be punished by imprison-
ment in the county jail, not exceeding one year or in the state prison
not exceeding three years. In addition to such imprisonment a fine
not to exceed three thousand dollars ($3,000) by both such fine and
imprisonment.
12305. Every dealer, manufacturer, importer, and exporter of any
destructive device shall obtain a permit for the conduct of such busi-
ness from the Chief of the Bureau of Criminal Identification and In-
vestigation. Such permit shall be issued upon a satisfactory showing
to him that good cause exists for the issuance thereof and after the
payment of a fee of fifty dollars ($50). Such permit shall be valid for
a period of one year only. , -^
12306. Any person, firm or corporation, other than those includeaN
in Section 12305, shall obtain a permit from the Chief of the Bureau)
(51) ^
52 COMMITTEE ON CRIMINAL PROCEDURE
CbTCriminal Identification and Investigation before possessing or trans-
porting any destructive device. The chief may issue such a permit
upon a satisfactory showing that good cause exists for the issue of
such license, and after the payment of a fee of ten dollars ($10). Such
permit shall be valid for a period of one year only.
2. Out-of-state purchases of concealable firearms. California law
provides rather extensive regulation of retail sales of concealable fire-
arms. Dealers are required to maintain a register wherein information
relative to all transactions concerning such weapons is recorded. This
record must contain such infornation as the time of sale, the date of
sale, the name of the seller, the place of sale, the make, model, manu-
facturer's number, caliber and other identification marks of the fire-
arm, and detailed information as to the name, address, and description
of the purchaser and the salesman. A report of the information re-
corded in the register must be forwarded on the day of sale to the
Bureau of Criminal Identification and Investigation, and to the
principal law enforcement officer in the city or county wherein the
sale is made. ^______ ' -^ .
It IfTunlawf uiTor a "dealeFTo deliver a concealable firearm to a per
son he has reason to believe has been convicted of a felony, or is an
falien, a narcotic addict, or under 18 years of age. Moreover, a dealer
may not deliver a concealable firearm to a purchaser until five days
after the information concerning the sale has been mailed to the local /
police authorities and the Bureau of Criminal Identification and Inves- /
tigation in Sacramento. This five-day waiting period allows time for a J
record check to determine if the prospective purchaser of a concealable J
firearm is a person to whom a sale^may no_t_be_joiade_^.__- ^
re of the regulatory provisions applicable to sales by California
firearms' dealers cover mail order sales by out-of-state dealers to Cali-
fornia citizens or situations where a person buys a concealable firearm
in another state and imports it into California. Therefore, a consider-
able gap exists in our regulatory scheme.
To close this gap the committee recommends that those who purchase
concealable firearms from out-of-state sellers, either through mail order
sales or person-to-person transactions, be required to furnish law en-
forcement agencies with information similar to that required on in-state
sales of such weapons. This information would include the importer's
name, address, date of birth, physical description, his occupation, the
Lame and address of the seller, a description of the weapon, its maker,
Lumber, and caliber. The proposed legislation would not apply to manu-
iacturers, wholesalers, or retailers of concealable firearms.
The purpose of the recommended legislation is to prohibit the pos-
session of concealable firearms by those now denied them under pro-
visions of California law. The regulation of in-state sales of concealable
firearms has been criticized as "useless red tape." However, the com-
mittee feels that the present law has provided at least a minjj_njim_degree
of effective_regu1ation over the— sale— oiL-su^h weapons. /For example
( 'Attorney~(jfeneral Lynch reported to the committee that during 1965
( law enforcement authorities were able to prevent 806 sales of conceal-
\ able firearms on the grounds that the prospective purchaser was a
\ convicted felon, a narcotic addict, an alien, or under ,__h£j_egal age tov
purchase the weapon. /The legislation we now recommend will expend
Hfee-efCectiveness uf tire existing law by bringing out-of-state purchases
within the scope of regulation.
COMMITTEE-RECOMMENDED LEGISLATION
An act to add Section 12079 to the Penal Code, relating to weapons.
The people of the State of California do enact as follows:
Section 1. Section 12079 is added to the Penal Code, to read:
12079. Any person, firm, or corporation, other than a dealer li-
censed nnder the provisions of Section 12071, or a manufacturer or
wholesaler of weapons, who brings or causes to be brought into this
state any pistol, revolver, or firearm capable of being concealed upon
the person shall, within 14 days of the importation of such weapon,
file with the chief of police, or other head of the police department of
the city, county, or city and county wherein such person, firm, or
corporation maintains his residence or principal place of business, a
record in duplicate of such importation. When the importer resides or
has his principal place of business where there is no municipal police
department, then such record, in duplicate, shall be filed with the
sheriff of the county where the importer of such weapon resides or
maintains his principal place of business. Such record shall be substan-
tially in the following form :
Record of Importation of Concealable Firearm
Name importer Date of birth
Permanent address
Height feet inches. Occupation
Color , skin , eyes , hair
Description of arm (state whether revolver or pistol)
Maker , number , caliber
Where purchased or obtained (give name and address of seller)
Signature of importer
The city, county, or city and county may charge a fee not exceeding
one dollar ($1) for filing such record and shall send the duplicate
of such record to the Bureau of Criminal Identification and Inves-
tigation at Sacramento.
3. Definition of a concealable firearm. In the course of its study
leading to this report the committee identified two problems pertain-
ing to the definition of concealable firearms. One defect in the present
definition of these weapons centers upon the availability of a new
weapon which is essentially a handheld rocket launcher. The other
area of concern involves the use of gas operated weapons such as
C02 pistols.
Within the last two years a new rocket weapon has been developed
and offered for sale in California. The weapon itself is a 13-mm.
solid-fuel rocket which may be fired from a handheld launcher
about the size of a .45-caliber automatic pistol. The launcher is
simple in design and it is estimated that it could be mass-produced
for as little as 87 cents. Conceivably the rocket projectile could be
launched from a piece of tubing or pipe equipped with a simple
firing mechanism.
(53)
54 COMMITTEE ON CRIMINAL PROCEDURE
Penal Code Section 12001 defines a concealable firearm in terms of
a " firearm' ' which has a barrel length of less than 12 inches. The
Attorney General has ruled that the hand launcher for this new
rocket weapon is a "firearm" within the meaning of the section since
the rapid combustion of the rocket propellant is comparable to the
force generated by exploding gunpowder in a conventional pistol or
revolver. However, the committee recommends that Section 12001 be
amended to make absolutely clear that any handheld rocket launchers
are included within the definition of a concealable firearm.
The committee also recommends amendment of Penal Code Section
12001 to bring CO2 pistols within the provisions of the Dangerous
Weapons Control Law so that they may be regulated in the same
manner as concealable firearms. Some CO2 pistols cannot be distin-
guished from a conventional pistol except upon close examination.
Furthermore, they may be as deadly as a conventional firearm, espe-
cially when fired at close range. In light of these factors there appears
to be no sound reason why these weapons should not be subject to the
same controls as concealable firearms.
However, the committee does not intend to restrict the sale or pos-
session of "air" or "pump" guns. The suggested amendment to
Penal Code Section 12001 is designed to reach those weapons which
operate through the release of C02 or other gas from a pressurized
cartridge. Therefore, the proposed amendment would not apply to
pistols which are fired by means of air compressed by the operation
of a hand pump attached to the weapon.
COMMITTEE-RECOMMENDED LEGISLATION
An act to amend Section 12001 of the Penal Code, relating to
concealed weapons.
The people of the State of California do enact as follows:
Section 1. Section 12001 of the Penal Code is amended to read :
12001. "Pistol," "revolver," and " firearms firearm capable
of being concealed upon the person" as used in this chapter apply to
and include aH firearms any device, designed to be used as a weapon,
from which is expelled a projectile by the fore of any explosion, or
other form of combustion, or the action of any gas compressed by
any means other than by hand, ha^4*i<* and which has a barrel less than
12 inches in length , and the frame or receiver of any such weapon .
4. Machineguns and machinegun parts. Penal Code Section 12200
defines a "machinegun" for purposes of the laws regulating their
sale, possession, or transportation. However, that definition does not
include the vital parts of a machinegun within its terms. Thus, two
or more persons may distribute the parts of a machinegun between
themselves and there is no violation of law until such time as the
weapon is assembled. The only possible legal control in such a case is
to proceed on the theory that a conspiracy is involved. But conspiracy
is difficult to prove and conspiracy prosecutions are no substitute for
tight control over the weapons themselves.
To remedy this defect in the law the committee recommends 1 that
Penal Code Section 12200 be amended to include machinegun frames
and receivers within the definition of ' ' machinegun. ' '
We also recommend that machineguns or the parts thereof possessed
in violation of the law be subject to destruction on the ground that
they constitute a public nuisance. In one recent case in southern
California law enforcement officers seized several hundred illegally
manufactured machineguns. After pleading guilty and being sen-
tenced, the manufacturer demanded the return of the weapons. The
authorities are resisting his demand in the courts and in all likelihood
they will be successful. But a statute providing for destruction of
machineguns determined to be unlawfully possessed would prevent
the recurrence of such a situation.
1 See below. Mr. Barnes has submitted a separate report.
(55)
COMMITTEE-RECOMMENDED LEGISLATION
An act to amend Section 12200 of, and to add Section 12251 to, the
Penal Code, relating to machineguns.
The people of the State of California do enact as follows:
Section 1. Section 12200 of the Penal Code is amended to read:
12200. The term "machinegun'' as used in this chapter means any
weapon which shoots, or is designed to shoot, automatically or semi-
automatically, more than one shot, without manual reloading, by a
single function of the trigger , the machinegun frame, or the receiver
of any such weapon .
Sec. 2. Section 12251 is added to the Penal Code, to read :
12251. It shall be a public nuisance to possess any machinegun in
violation of this chapter, and the Attorney General, any district at-
torney or any city attorney may bring an action before the superior
court to enjoin the possession of any such machinegun.
Any such machinegun found to be in violation of this chapter shall
be surrendered to the Bureau of Criminal Identification and Investiga-
tion, and the bureau shall destroy such machinegun so as to render it
unusable and unrepairable as a machinegun, except upon the filing
of a certificate with the bureau by a judge or district attorney stating
that the preservation of such machinegun is necessary to serve the
ends of justice.
Comments by Assemblyman E. Richard Barnes on
control of arms and ammunition
These comments are not a dissent, inasmuch as I believe that the
purpose behind each recommendation is sound. However, one follow-
ing technical difficulty may arise in legislation activating these commit-
tee recommendations.
Question on Recommendation No. 4: As to parts of machineguns. I
believe it is a fact that many types of guns used for sporting purposes
are identical to those used in the military service. For example, the M-l
carbine is legal under the existing California codes. The same rifle, when
it has a device within the connector mechanism, makes it fully auto-
matic, technically known as the M-2. This M-2 rifle would be illegal
and properly so.
However, it is true that 90 percent of the parts of these two guns
are interchangeable. I am suggesting that, because of these identical
parts, the proposed legislation without further modification would be
most difficult to administer, and would include a gun in the proscribed
area which is now properly legal.
The above example is only one of several used for sporting purposes
by law-abiding individuals which would create a very real and undue
hardship problem.
I recommend that this area of proscribing "parts" be thoroughly
researched for a satisfactory solution before the proposed legislation is
introduced.
E. Richard Barnes
(56)
APPENDICES
FIREARM CONTROL
59
WITNESSES
The following witnesses appeared before the Criminal Procedure
Committee in Los Angeles to discuss problems relating to the law en-
forcement and criminal law aspects of the Los Angeles riots:
Hearing on
November 5, 1965
Hon. F. Douglas Ferrell
Assemblyman, 55th District
Mr. Don R. Sanson, Chairman
California Probation, Parole and
Correctional Association
Mr. Richard A. McGee, Administrator
Youth and Adult Corrections Agency
Mr. Heman Stark, Director
Department of Youth Authority
Mr. Milton Burdman, Chief
Parole Division,
Department of Corrections
Mr. Walter Dunbar, Director
Department of Corrections
Mr. Mark Woodward, Parole Agency
Huntington Park District Office
Mr. Charles E. Casey
Assistant Director,
Department of Corrections
Mr. C. H. McFarlan, Chief
Division of Parole,
Department of Youth Authority
Hon. Thomas C. Lynch
Attorney General,
State of California
Mr. Allen Gilmore, Criminalist
Bureau of Criminal Identification
and Investigation
Mr. Charles W. Rumph
Deputy Attorney General,
State of California
Inspector Henry Kerr
Los Angeles Police Department
Sergeant Gonsalez
Los Angeles Police Department
Captain Antone P. Jasich
Los Angeles Fire Department
Mr. Harvey Sharrar
American Wholesale Hardware
Company, Long Beach, California
Mr. William T. Harrison
Pachmayr Gun Works
Los Angeles, California
Mr. D. E. Schell
Southern Council of Conservation
Clubs, Lynwood, California
Mr. Robert M. Modisette
California Rifle and Pistol
Association
Mr. Don Flournoy, President
California Wildlife Federation
Colonel E. F. "Tod" Sloan
National Rifle Association
60
COMMITTEE ON CRIMINAL PROCEDURE
WITNESSES
The following witnesses appeared before the Criminal Procedure
Committee in Los Angeles to discuss the control of arms and ammuni-
tion.
Hearing on
November 18-19, 1965
Mr. Arlo Smith, Chief Assistant
Attorney General of California
Mr. Charles W. Humph,
Deputy Attorney General of
California
Mr. Noel A. McQuown, Deputy Chief
Los Angeles Police Department
Mr. John Peper, Supervisor
Peace Officer Training
Department of Education
Mr. Leland P. Baldwin, Chief
Junior College Vocational Technical
Education, Department of Education
Mr. Robert E. Harvey,
Assistant Supervisor
Peace Officer Training
Department of Education
Mr. Herbert Carter, Consultant
Los Angeles County Commission
on Human Relations
Testimony by Mr. Norman B. Houston
President of the Los Angeles Branch
of NAACP
Read into the record by Chairman
Young
Dr. Lewis G. Watts, Chief
Division of Planning and Methods
Department of Social Welfare
LAWS PERTAINING TO RIOT
Mr. Raymond Momboisse
Deputy Attorney General
State of California
DISPOSITION OF HIGHWAY PATROL FORCES
Inspector Harold Jacobs Mr. Don B. Shields
California Highway Patrol Managing Director
Chief H. W. Sullivan Highway Carriers Association
Deputy Chief of Police
City of Los Angeles
INCREASED PENALTIES FOR THE CRIME OF ARSON
Mr. George H. Puddy, Executive Officer
Commission on Peace
Officer Standards and Training
Mr. William Danielson
Director of Personnel
City of Berkeley
Professor Paul B. Weston
Associate Professor of Government
and Police Science and Administration
Sacramento State College
Professor Douglas Gourley
Professor and Chairman of the
Department of Police Science and
Administration
California State College at
Los Angeles
Mr. C. A. Pantaleoni
Coordinator of Police Science at
Rio Hondo Junior College
Officer Daniel Campos
Police Office, City of San Jose
Sergeant Ernest F. Vasquez
Sergeant, Juvenile Unit
San Jose Police Department
Mr. Arnett L. Hartsfield, Jr.
United Civil Rights Committee
Captain Antone P. Jasich
Captain, Arson Unit
Los Angeles Fire Department
Mr. Deane L. Bennett
Law Enforcement Coordinator
California Division of Forestry
Mr. C. W. Holmes, Jr.
Law Enforcement Officer
Coordination of Law Enforcement and
Fire Control for Southern California
Mr. J. S. Sacco
Office of the State Fire Marshal
printed in California office of state printing
878—100 10-67 1M
ASSEMBLY INTERIM COMMITTEE REPORTS
1965-1966
VOLUME 23 NUMBER 8
FINAL REPORT OF THE SUBCOMMITTEE ON
FREE PRESS— FAIR TRIAL
A Subcommittee of the
ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
GEORGE A. WILLSON, Chairman
MEMBERS OF THE SUBCOMMITTEE
GEORGE A. WILLSON, Chairman
WILLIAM T. BAGLEY JOHN F. FORAN
RICHARD J. DONOVAN HARVEY JOHNSON
JAMES E. WHETMORE
JOE FOX, Special Consultant and Study Director
ERMA OAKLEY, Committee Secretary
Published by the
ASSEMBLY
OF THE STATE OF CALIFORNIA
HON. JESSE M. UNRUH HON. CARLOS BEE
Speaker Speaker pro Tempore
HON. GEORGE N. ZENOVICH HON. ROBERT T. MONAGAN
Majority Floor Leader Minority Floor Leader
JAMES D. DRISCOLL
Chief Clerk
LETTER OF TRANSMITTAL
Assembly Interim Committee on Judiciary
January 5, 1967
Honorable Jesse M. Unruh
Speaker of the Assembly,
and Members of the Assembly
State Capitol
Sacramento, California
Gentlemen :
In accordance with the provisions of House Resolution No. 710 of
the 1965 Regular Session, the Assembly Interim Committee on Judi-
ciary herewith submits a final report of its Subcommittee on Free
Press — Fair Trial.
Respectfully submitted,
George A. Willson, Chairman
Members Subcommittee
Free Press — Fair Trial
William T. Bagley
Richard J. Donovan
John F. Foran
Harvey Johnson
James E. Whetmore
(3)
TABLE OF CONTENTS
Page
Purpose and Objectives 7
Conclusions 8
Eecommendations 11
The Colorado Plan 12
House Resolution No. 373 14
House Resolution No. 523 16
The Plan for California 17
Judicial Council Resolution — May 7, 1966 18
Hearings in Los Angeles — December 6-7, 1965 19
Spokesman for the Bar 21
Broadcast Industry Spokesmen 27
For the Print Media, Wire Services and Publishers Association 29
For Sigma Delta Chi and Photographers Associations 34
Views of an Educator 36
Hearing in San Diego — January 31, 1966 37
Spokesmen for Sigma Delta Chi/National and Regional 38
Views of Elected Public Officials 40
Judges' Recommendations 42
Justice Otto Moore's Video-Taped Statement 43
Judge Roberta Butzbach's Statement 45
Judge George Crawford's Statement , 45
Luther Hussy's Statement 46
Spokesmen for the Broadcast Industry 47
(5)
ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
HOUSE RESOLUTION NO. 710
(ASSEMBLY JOURNAL, JUNE 14, 1965, PAGE 5671)
Relative to constituting certain standing committees
of the Assembly as interim committees
Resolved by the Assembly of the State of California as follows:
1. The following standing committees of the Assembly are hereby
constituted Assembly interim committees and are authorized and di-
rected to ascertain, study and analyze all facts relating to (1) the
subjects and matters assigned to them by this resolution; (2) any
subjects or matters referred to them by the Assembly; (3) any sub-
jects or matters related to (1) or (2) which the Committee on Rules
shall assign to them upon request of the Assembly or upon its own
initiative :
(1) The Committee on Judiciary is assigned the subject matter in
the Civil Code, the Code of Civil Procedure and the Probate Code, un-
codified laws relating to civil matters, and other matters relating to the
civil law and procedure of the state.
FINAL REPORT ON FREE PRESS FAIR TRIAL
PURPOSE AND OBJECTIVES
The purpose and objectives of the interim hearings on the presumed
and possible conflict involving the constitutional guarantees of free
press and fair trial are fully delineated in House Resolution No. 373
and House Resolution No. 523, both authored by Assemblyman George
A. Willson, Chairman of the Committee on Judiciary.
Assemblyman Willson, a member of the State Judicial Council, was
designated by the Speaker of the Assembly to serve as chairman of the
select Free Press — Fair Trial Judiciary Subcommittee. -^
On Friday, November 26, 1965, the California Judicial Council voted \
to bar all photographers and broadcasters from courtrooms while courts
are in session or in recess. This restriction, classified as Rule 980, was /
approved by a 17-to-l majority; Assemblyman Willson cast the dis-J
senting vote. -^
The reason for his negative vote, Assemblyman Willson declared, was
his "lack of conviction that Rule 980 and the restrictions it imposes is
truly needed at this time. It has not been demonstrated to me that suffi-
cient news media abuses have occurred to justify this abridgment of
press * freedom. '
"Also, " Willson added, "the regulation of news media activity in
courtrooms has invariably and historically been the sole responsibility
of the presiding judge in each courtroom.
"The advocates of Rule 980," Willson concluded, "should have full
opportunity to establish by clear and convincing evidence that repre-
sentatives of news media in California have interfered with the con-
stitutional guarantees of fair trial."
8 ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
CONCLUSIONS
The witnesses who testified before this committee were virtually
unanimous in their concern for preservation of dignity and decorum in
the courtroom and in their insistence on the right of any litigant to a
fair trial. They were equally outspoken, however, in their condemnation
of Rule 980 — and all other attempts to limit by statute the news media's
access to information of interest to the general public.
Based on the testimony of these 38 witnesses and several experiments
and keeping in mind the need for further studies of this issue (see
''Recommendations"), the committee has reached the following con-
clusions :
1. Many prejudices against the presence of photographic and record-
ing equipment in the courtroom stem from stereotyped concepts of
this equipment — concepts retained from the days when exploding
flashbulbs, mazes of wire and loudly whirring cameras were right-
fully thought to disrupt any organized proceeding.
2. Modern equipment may be operated unobtrusively by trained per-
sonnel— so unobtrusively that participants in litigation are oblivi-
ous to their presence and are in no way affected by this. When the
equipment is operated from soundproof booths adjacent to the pro-
ceedings, noise is not just unobtrusive — it is nonexistent.
3. Many judges feel their discretionary powers — which still include
the right to make rulings affecting the lives of litigants — have been
unduly abridged by Rule 980.
4. Some attorneys, jurors and witnesses may, indeed, indulge in
theatrics for the benefit of television or may be rendered less effec-
tive or more nervous by the presence of cameras. The vast majority
of persons involved in litigation will either be unaffected by the
cameras or, if anything, will act more properly, speak more clearly
and operate more effectively if they know their actions are being
recorded.
5. Televising courtroom proceedings would have the dual beneficial
effects of more directly involving the average American citizen
with the legal system of his country and of educating him on
jurisprudence.
6. Restriction of the photographer or broadcaster in the courtroom
could give court proceedings a cloak of secrecy that, however fair
and just they were, would leave most citizens feeling something
evil was being concealed.
7. Television coverage of the courts could eventually act as a deter-
rent to crime by showing all Americans — including the potential
criminal — the inexorable, inevitable toll justice extracts from law-
breakers.
8. To prohibit cameras and recording equipment from the courtroom
is to discriminate unfairly against the audiovisual medium. If the
newspaperman is to be allowed in the court with the tools of his
trade — pencil and paper — the television and radio newsman must
be allowed inside with the tools of his trade — cameras and tape
recorders. To do otherwise is to deprive the audiovisual medium
of its right to compete with the printed medium.
FINAL REPORT ON FREE PRESS FAIR TRIAL 9
9. The single most important finding of this committee — and the
single point stressed most often by witnesses from every field in-
volved— is :
The conflict between fair trial and free press, particularly as
this conflict relates to Rule 980, is not a conflict at all. Far
from mutually excluding each other, they cannot exist without
each other. A fair trial must, of necessity and according to
the Sixth Amendment to the united States Constitution, hft a
public trial. In mid-^Utn-century America, where sprawling
urbanism has replaced concentrated ruralism and where no
courtroom in the land could hold even a minute fraction of
the people interested in specific cases, a trial is not truly pub-
lic unless news media are free to bring it to the home of the
citizens by newspaper, magazine, radio, television or what-
ever device they have.
These nine conclusions were arrived at after careful consideration of
all testimony offered by the 38 witnesses who voluntarily appeared at
the hearings. It must be admitted, however, that the committee was
more impressed with practical applications of courtroom coverage than
with theoretical defenses of that coverage — no matter how eloquent and
logical those defenses were.
The practical applications to which the committee was exposed —
either firsthand or by reliable account — were five. The most signifi-
cant by far was the demonstration of unobtrusive radio, newspaper
and television coverage of committee hearings themselves in San
Diego. Most people present in the hearing room — and there were sev-
eral dozen there at the time — did not know the proceedings were be-
ing filmed and recorded until the sixth witness of the day stepped for-
ward. Said George Whitney, vice president,, Columbia Broadcasting
System, and general manager, KFMB radio and television stations :
"The great complaint has been that reporters with their cam-
eras and lights are obtrusive and interfere with the normal con-
duct of a trial or hearing. This need not be the case. In these
chambers, you have not seen a single light glaring iu your faces,
or the faces of the witnesses. No cumbersome cables or wires. No
bulk of equipment. No reporters running around. In a word, we
of the press have been unobtrusive. And yet, gentlemen, we
have been here, covering every second of these proceedings. I'd
like to prove it to you. ' '
At that point, Mr. Whitney directed a video tape playback of ex- I
cerpts from testimony that morning. The film was made, he said,
by two cameras in booths at the back of the room. Still pictures were
also taken without flashbulbs. His statement that "this demonstration
has proven what news media and broadcasters have contended — that
court proceedings can be televised without jeopardizing justice or de-
corum ' ' certainly rang true with the committee.
The four other experiments in courtroom coverage to which the com-
mittee was exposed are described in the excerpted testimony given
elsewhere in this report. They included :
2 — L-1853
?
10 ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
— A report by Supreme Court Justice Otto Moore of Colorado on
his state 's plan for courtroom coverage.
— An explanation of television and broadcast coverage of United
Nations session.
— A report by Municipal Court Judge Roberta Butzbach on the
videotape recording of a two-day trial in her court made at the re-
quest of Assemblyman Willson, committee chairman.
— A defense of television coverage in Los Angeles Traffic Court
by Judge Noel Cannon.
These practical applications of television, newspaper and radio court-
room coverage, combined with the expert testimony of more than three
dozen witnesses, formed the foundation on which the committee built
its nine conclusions and the recommendations presented on the next
page.
FINAL REPORT ON FREE PRESS FAIR TRIAL 11
RECOMMENDATIONS
1 — That the Assembly, during the 1967 Regular Session, urge the
Judicial Council to extend Rule 981 for a 12-month period.
2 — That the Assembly, in the event that the Judicial Council does
not extend Rule 981, enact legislation designed to amend Rule 980 in
a manner that will resore to each presiding judge the authority he
formerly possessed to regulate the conduct of news media along with
other matters pertaining to the conduct of a trial over which he pre-
sides.
3 — That the Assembly, with the concurrence of the Senate, initiate
a proposal for a joint legislative study of the most appropriate manner
to test the "Colorado Plan" in a single California judicial district
deemed receptive and conducive by an advisory committee representing
members of the bar, bench, news media and the public.
4 — That the Assembly appropriate the funds required to maintain
continuing studies of the presumed areas of conflict that may exist
between free press and fair trial constitutional guarantees.
5 — That the Assembly advocate the establishment of a permanent
Constitutional Rights Committee in California that will contain rep-
resentatives of news media, the Bar of California, members of the
State Judiciary, civilian public officials, law enforcement, prosecution
and the citizenry at large.
6 — That representatives of the broadcast industry and the news I
media relating to photography, the principal objects of Rule 980,
be encouraged to continue their efforts to develop the most effective
tools and techniques for unobtrusive coverage of news events other
than courtroom matters in order to achieve more universal acceptance
of their unique and distinctive contributions to the areas of public
enlightment in a free society.
12 ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
AN AIRLINE BOMBING IS NATIONAL "NEWS"
AND THE "COLORADO PLAN" EVOLVES
Question: ''Justice Moore, as the referee in the hearing of the Su-
preme Court of Colorado and Canon 35, would you tell us your reac-
tions to the demonstrations of courtroom photography and radio re-
cording as presented to the court. ' '
Answer : "Frankly, I was very much surprised that courtroom pho-
tography, radio and television cameras could operate in the courtroom
and create so little, practically no distraction whatever."
Question: "Now, just as the John Gilbert Graham trial provided
the Denver area radio and television stations with their first oppor-
tunity to cover a trial following the modification of Canon 35, what
was your reaction to that coverage ? ' '
Answer: "I thought the reaction to the coverage of that trial by
radio, television, newsreel and photography was very exceptional. It
seemed to me to be proved conclusive that the findings which I reached
as a result of our hearings up here ... at the conclusion of our hear-
ings up here . . . were amply justified."
Question: "Now, the John Gilbert Graham trial was appealed to
the high court. Was the fact that the case was televised and broadcast
cited as a cause for error at the trial ? ' '
Answer: "No. No assignment of error was based upon the claim
that the right of the defendant was prejudiced in any way by photog-
raphy, radio or television coverage. ' '
Question: "Was such coverage mentioned at all in the appeal?"
Answer: "No."
Question : "May we ask you ... do you see any educational value
through the televising and broadcasting of trials ? ' '
Answer: "Yes, I have always been of the belief that the procedures
in courtrooms were, as generally understood by the public, not ac-
curate at all, and I think that some very definite benefit is to be derived
from an accurate, truthful presentation of what goes on in the court-
rooms of America. ' '
Question: "Finally, Justice Moore, do you think that radio and
television coverage of trials might conceivably serve as a deterrent to
crime ? "
Answer: "Well, I asked all the district judges of our state their
conclusions in that behalf and received a number of answers from
them. Many of them thought that it would have a definite effect upon
deterring crime. Personally, I think that if one was about to commit
some sort of offense if he were to hesitate and understand and realize
that crime doesn 't really pay and that the culprit is more often brought
to justice it would tend to have, over the years, a very definite influence
in this realm of deterring crime."
"THE COLORADO PLAN"— IT WORKS IN ONE-FIFTIETH
OF THE UNITED STATES
Since that time 10 years ago, the Colorado courts have permitted
radio and television coverage and newspaper photography of court
FINAL REPORT ON FREE PRESS FAIR TRIAL 13
cases. Last week we asked the KLZ-TV news department to contact
Supreme Court Justice Moore again, and to ask him to assess the ex-
perience of a decade in Colorado. This film statement was made by
Justice Moore just last week in Denver.
"The rule of the Supreme Court of Colorado which permits
closely supervised operation of cameras in the courtroom has been
in effect for about 10 years. The best photographers and operators
of television cameras and radio men have never created any prob-
lem whatever insofar as the decorum of the courtroom is con-
cerned. The cameras are always concealed. They are silent. Their
output is accurate. They create no false impressions. In all the
10 years in which they have been permitted to function no com-
plaint has ever been made to the Supreme Court of this state by
any lawyer, defendant, witness or juror that the use of a camera,
or a microphone by the press media of this state has in any
manner whatever prevented a fair trial, or in any way interfered
with any person in performing his duty as lawyer, judge, witness
or juror.
"Under our rule, but one concealed television camera is per-
mitted to function. Any station desiring to use the output is en-
titled to use it under a pooling arrangement voluntarily entered
into by the various stations. To my knowledge, no more than two
press photographers have ever been permitted to cover court pro-
ceedings at the same time. Their work is also subject to a pooling
agreement and is made available to papers desiring to use any
picture taken by a press photographer in the courtroom.
"In order to guard against possible reversal of cases, following
the decision of the Supreme Court of the United States in the
Billy Sol Estes case, we amended our rule. We now require that
the consent of an accused person must be shown of record before
cameras are permitted to function in any criminal case. In a civil
action, the litigants must affirmatively show by statement in the
record that they have objection to cameras in the courtroom.
"Following this change in our rule, I know of no case in which
a defendant has failed to consent to the use of cameras in his trial
where a request was made by the news media to take pictures. We
are completely satisfied that our rule is a good one. The lawyers
who practice in the trial courts will agree that cameras properly
regulated are in no way offensive, and do not in the least prevent
a fair trial. At least 90 percent of the trial judges in our state
have permitted cameras in court under our procedures, and I
don't know of one trial judge who has had an unpleasant expe-
rience in connection with the use of cameras in the courtroom.
"We believe our rule fully protects all participants in the trial
of any case, and in permitting a regulated use of cameras in court
we oniy give the same recognition to the cameramen which has
been afforded the press reporter in our courtrooms since courts
were first established in this country. Actually, our experience has
been that cameramen function with even less disturbance than do
press reporters, and their handiwork is always free from distorted
interpretations. We intend to keep our rule and are completely
satisfied that we are doing the right thing in doing so. ' '
14 ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
HOUSE RESOLUTION NO. 373
Relating to "Freedom of Information" study
Whereas, The Attorney General of the United States has an-
nounced a new policy that forbids the disclosure of pre-trial informa-
tion in federal criminal cases by all Justice Department employees,
including prosecutors and the FBI, in an attempt ' ' to strike a balance
between the constitutional guarantees of a 'Free Press' and a 'Fair
Trial' ";and
Whereas, A Los Angeles County Superior Court Judge has ruled
that "a prosecutor has the freedom to comment factually to the press
on pending criminal cases"; and
Whereas, Controversy and uncertainty prevails in the State of Cali-
fornia among the members of the judiciary, bar associations, the Leg-
islature and law enforcement agencies over the multiplicity of proposals
submitted to resolve presumed conflict between the constitutional guar-
antees of "Free Press" and "Fair Trial"; and
Whereas, In the State of California representatives of all news
media that include press associations, radio and television stations and
networks and newspapers as well as periodicals are in contention
that constitutional guarantees of "Free Press" are in danger of
serious and unwarranted abridgement ; and
Whereas, A section of the Revised Code of Evidence of the State
of California, in its pre-amended form, sought to establish that news
reporters could no longer retain established immunity from contempt
proceedings for declining to disclose sources of information; and
Whereas, The Judicial Council of California has deemed it appro-
priate to recommend that segments of the news gathering and dissem-
ination profession that are required to utilize sound recording and
photographic instruments and devices in the performance of their as-
signed tasks be denied access to courts, corridors and environs except
for "ceremonial" and "educational" purposes; and
Whereas, The First Amendment of the Constitution of the United
States establishes a continuing and undeniable "Free Press"; and
Whereas, The Sixth Amendment to the Constitution of the United
States provides a "Fair Trial" guarantee in the "Right to a Speedy
and Public Trial"; and
Whereas, Article I, Section 9 of the Constitution of the State of
California contains a "Free Press" guarantee not unlike the provi-
sion established by the First Amendment of the Constitution of the
United States ; and
Whereas, Article 1, Section 13 of the Constitution of the State of
California provides a "Fair Trial" guarantee comparable to that con-
tained in the Sixth Amendment of the Constitution of the United
States ; and
Whereas, A sub-committee of the Judiciary Committee of the Senate
of the United States has disclosed plans to make a study of the pos-
sible areas of conflict that appear to exist between the constitutional
guarantees of "Free Press" and "Fair Trial", conduct hearings on
the issue and consider the need for possible legislation; now, there-
fore, be it
FINAL REPORT ON FREE PRESS FAIR TRIAL, 15
Resolved by the Assembly of the State of California, That the Assem-
bly Committee on Rules is directed to refer for study to an appro-
priate interim committee the area of possible conflict between the
guarantees of "Free Press" and ''Fair Trial" that are established in
the constitutions of the United States and the State of California;
and be it further
Resolved, That the interim study shall also include the feasibility
of establishing a "Freedom of Information" BILL of RIGHTS for
all segments of the news gathering and dissemination industry that
shall permit unrestricted utilization of tools, implements, equipment
and devices deemed essential and appropriate for each distinct news
media in the performance of its assigned task and that such interim
committee shall report its findings and recommendations no later than
the fifth calendar day of the 1967 Regular Session.
Resolution read, and referred by the Acting Speaker to the Com-
mittee on Rules.
16 ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
HOUSE RESOLUTION NO. 523
Relative to constitutional guarantees of "Free Press" and "Fair Trial"
Whereas, The Rules Committee of the Assembly has approved
House Resolution 373 that calls for an interim study by an appropri-
ate interim committee of the Assembly of the area of conflict that
might prevail between the guarantees of "Free Press" and "Fair
Trial" that are established in the Consitutions of the United States
and the State of California ; and
Whereas, A sub-committee of the Judiciary Committee of the United
States Senate has disclosed plans to make a study of the possible
areas of conflict that appear to exist between the constitutional guar-
antees of "Free Press" and "Fair Trial," conduct hearings on the
issue, and consider the need for possible legislation; and
Whereas, The Judicial Council, the governing body of the courts
of California, recently deferred until the November session, the plan
to impose regulatory restrictions in this vital area ; and
Whereas, The District Attorney of Los Angeles County released a
series of proposed recommendations on May 20, 1965, that appear
to some news media representatives to contain unwarranted restric-
tions on their ability to secure news and information from the office
of the district attorney and law enforcement agencies in areas of
criminal matters ; and
Whereas, It is conceivable that district attorneys and law enforce-
ment officials in other counties of California might be induced to emu-
late the pattern contained in the recommendations of the District
Attorney of Los Angeles County ; and
Whereas, Constitutional guarantees establishing the provisions of
"Free Press" and "Fair Trial" appear to be in danger of unwarranted
abridgment in several cities and counties in California; now, there-
fore, be it
Resolved by the Assembly of the State of California, That until the
completion of the interim studies by an appropriate committee of
the Assembly and appropriate recommendations from the Judicial
Council it is hereby requested of all district attorneys throughout
California that no new restrictive regulations be imposed that might
conceivably violate constitutional and statutory guarantees of "Free
Press" and "Fair Trial"; and be it further
Resolved, That the Chief Clerk of the Assembly be instructed to
provide copies of this resolution to all district attorneys in the State
of California.
Resolution read, and referred by the Speaker pro Tempore to the
Committee on Rules.
FINAL REPORT ON FREE PRESS — FAIR TRIAL 17
THE PLAN FOR CALIFORNIA-IS IT NEEDED?
TITLE THREE. MISCELLANEOUS RULES
DIVISION IV. GENERAL RULES APPLICABLE TO ALL COURTS
Rule 980. Photographing, recording and broadcasting in
courtroom
(a) (Prohibition during sessions and recesses.) Photographing, re-
cording for broadcasting and broadcasting shall not be permitted within
the courtroom while court is in session or during any midmorning or
midafternoon recess except as provided in subdivision (b) hereof.
(b) (Exception for ceremonial proceedings.) Photographing, record-
ing for broadcasting and broadcasting of judicial proceedings may be
permitted by the court and under its supervision if such proceedings
are designed and carried out primarily as ceremonial proceedings.
(c) (Subject to court limitation when not prohibited.) Photograph-
ing, recording for broadcasting and broadcasting within the courtroom
when not prohibited by this rule shall be subject to such limitations as
the court may prescribe.
18 ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
AN OPPORTUNITY TO TEST THE "COLORADO
PLAN" IN CALIFORNIA
AMENDMENT TO CALIFORNIA RULES OF COURT
Adopted by the Judicial Council of the State of California
Effective June 1, 1966, through December 31, 1966
JUDICIAL COUNCIL RESOLUTION
(Adopted May 7, 1966)
Whereas, The Assembly's Committee on Fair Trial and Free Press,
a subcommittee of the Assembly Interim Committee on the Judiciary,
has indicated its desire to photograph a limited number of actual court
trials as part of its interim studies, using modern television and news
cameras ; and
Whereas, The committee has advised the Judicial Council that any
photographs and recordings made by it will be used solely for its in-
vestigation and not for broadcast or news purposes or for any commer-
cial purpose, and that photographing will be done only with the con-
sent of the court involved, the consent of the judge presiding at the trial
and the consent of all parties, attorneys, witnesses and jurors partici-
pating in the trial; and
Whereas, Rule 980 of California Rules of Court, adopted in 1965
by the Judicial Council after several years of study, now limits court-
room photography to recess periods that do not interfere with trials,
but is subject to modification or change by legislative action should the
Legislature and the Governor so decide ; and
Whereas, The Judicial Council recognizes the responsibilities of the
coordinate branches of the government in this matter and has been ad-
vised by the committee that it can complete its work by the end of
1966;
Now, therefore, he it resolved by the Judicial Council that it does
hereby adopt the following temporary rule :
Rule 981. Special photographing and recording (new)
During the period this rule is effective the provisions of Rule 980
shall not apply to the photographing or recording of court proceedings
carried on by the Assembly Committee on Fair Trial and Free Press,
provided that the court involved and the judge presiding and all the
parties, attorneys, witnesses and jurors participating in the trial give
their consent thereto, and provided further that any photographs and
recordings so made will be used solely for the wTork of the committee
and will not be used for broadcast or news purposes or for any commer-
cial purpose. This rule shall take effect on June 1, 1966, and shall con-
tinue in effect to and including December 31, 1966.
FINAL REPORT ON FREE PRESS — FAIR TRIAL 19
THE HEARINGS IN LOS ANGELES
Supreme Court Chambers, December 6-7, 1965
MEMBERS OF THE JUDICIARY TESTIFY
Two municipal court judges — both women — addressed the committee
in Los Angeles. Koberta Butzbach and Noel Cannon were two of the
most outspoken critics of Rule 980, and it is of some significance that
both have presided with television cameras present. Judge Cannon on
a regular basis in traffic court, Judge Butzbach as part of a special
experiment.
The two judges joined in an attack on the theory that televising
trials could prejudice potential jurors. Judge Cannon said it is as un-
fair to postulate this as it would be to postulate that a judge would
be prejudiced by reading newspaper accounts of a case. She said judges
and citizens "should not live in ivory towers. They must be aware of
what's happening around them."
Judge Butzbach voiced similar sentiments and even went one step
further. She said television, far from having a detrimental effect on
viewers, would have a beneficial effect. Citizens would become familiar
with the "operations and language of the law" if they watched actual
trials on television, she said.
Both women objected to the discussion of fair trial and free press
as a conflict, saying the rights reinforce and guarantee each other.
They are inseparable, not mutually exclusive, they said.
"Liberties which exist under no other system of govern-
ment exist because the courts are there to protect them. If
these liberties are to endure, the people must again learn the
processes of justice."
Roberta Butzbach
Judge, Los Cerritos Municipal Court
Judge Butzbach traced the history of public trials from the days of
William the Conqueror through the signing of the Magna Carta to
Shakespearean times.
"Only once did England experiment with a court held behind closed
doors, ' ' she said. ' ' The Star Chamber has ever since been a symbol for
injustice. Legal historians tell us the proceedings themselves were not
unfair, but the fact of secrecy was so abhorrent to the English people
that this alone made the proceedings suspect. ' '
The judge said television enables citizens to "become educated in
the concept of a rule of law while being entertained. Must an interest
in court proceedings be condemned because it presents the fascination
of high drama V9
Assemblyman Willson asked the witness if the use of "unobtrusive
television" during one of her court sessions "would so influence you as
a judge that you couldn't render a proper verdict in a proper case?"
Judge Butzbach said she "couldn't conceive of what difference it
would make having just another piece of equipment there." She said
she would not make a different decision than she would make if there
were no one there except the litigants and their attorneys.
20 ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
"The issue has been joined as free press versus fair trial. I
submit free press is not an adversary of fair trial, but, on the
contrary, free press is an ingredient of fair trial. The press is
the watchdog of the public."
Noel Canon
Judge, Municipal Court, Los Angeles
Judge Cannon reminded the committee that judges are "answerable
to no one — to no one but the public. The exclusion from the courtroom
of radio, press photography and television, censors the public's view of
the judicial process."
This is supportable, she said, "only where free press actually denies
fair trial. That free press does not deny fair trial in every case is
basic."
Judge Cannon stressed the educational value of courtroom televi-
sion, noting the 47,000 traffic fatalities recorded annually in the United
States, "caused primarily by ignorance of the law. Television in the
traffic court can prove a powerful and painless educational device in
explaining the Vehicle Code to the public. ' '
Television is already being used in the new Los Angeles Traffic
Court, "without jeopardizing fair trial," Judge Cannon said. "The
television art has progressed to the point where entire trials can be
televised invisible to courtroom participants.
"Should not the courts take advantage of the space age and have
the best of all possible worlds ? ' ' she asked.
The judge's vigorous defense of courtroom photography included —
in response to a question from Assemblyman Bagley — the contention
that not even the defendant should have the right to exclude cameras.
"Take a defendant that is guilty, guilty, guilty and has managed to
bribe the judge or jury. Naturally, he would not want the evidence
coming out, ' ' she said.
FINAL REPORT ON FREE PRESS FAIR TRIAL 21
SPOKESMEN FOR THE BAR
More attorneys testified at the Los Angeles hearings than members
of any other profession. Despite the diversity of their specialties —
two men representing newspaper photographers, one representing a
bar association, one representing a media association, one representing
a civil liberties organization, one representing himself and even one
district attorney — the attorneys were virtually unanimous in their
condemnation of Rule 980.
Both Edward Shattuck, president of the Los Angeles County Bar
Association, and Robert Neeb, Jr., counsel for the Greater Los Angeles
Press Club, criticized the dichotomy of fair trial versus free press. The
assumption of a conflict between the two is, Neeb said, a "false
premise."
The only prosecuting attorney among the committee's witnesses was
Lawrence Drivon, district attorney in San Joaquin County and presi-
dent of the California District Attorneys Association. Drivon admitted
many prosecutors fear television will encourage theatrics in the court-
room, but he suggested the decision on the presence of cameras be left
to the trial judges. "The trial judge is in a much better position than
an appellate court, than the Legislature, than the Judicial Council to
know what is going to be appropriate and what is going to be in-
appropriate," he said. "He knows the prosecutor, the defense lawyers
and the general nature of the case. Generally, he also has some idea of
the reaction of the public. ' '
"We think the 800 judges of California are quite a group
of men, and we say that the matter of photography (in court)
should be left with the individual judge."
Caryl Warner
Chief Counsel, California Press
Photographers Association
Mr. Warner said the entire subject matter of Rule 980 should not
be decided by the Judicial Council but by the State Legislature itself
as a political matter involving the freedom of the people. He suggested
the adoption by the Senate and Assembly of a concurrent resolution
saying the matter should be left with the trial judge. With this guide-
line from the Legislature, the Judicial Council might be inclined to
rescind Rule 980 which "deprives the public of a closeness to the
courtroom. ' '
"Restriction of the photographer or the broadcaster in the
courtroom during proceedings, and also during recess, is the
first step in total abridgment of what is the basic right to know
on the part of the people of California"
Paul Caruso
Associate Counsel, California Press
Photographers Association
Mr. Caruso warned that logical extension of Rule 980 could enable
the banning of photographers and broadcasters from "any place of
confinement."
22 ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
"The county jail could be out of bounds next, and the photographers
and broadcasters could take their pictures from the corner of 10th and
Broadway or by telephoto lens from Spring Street in front of the Fed-
eral Building/' he said.
Mr. Caruso said photographers have been allowed in courtrooms dur-
ing recess for "hundreds of years," and "I know of not one case where
any irregularity or injustice has resulted."
When asked by Assemblyman Foran to defend this statement in light
of the Texas Supreme Court's reversal of Billy Sol Estes' conviction,
Mr. Caruso said the "number and mass of equipment was a large con-
tributing factor. If you walked into the Billy Sol Estes courtroom, you
saw 12 television cameras and the cables all about the courtroom. You
must immediately think this had a circuslike atmosphere.
"But you walk in that same courtroom and there is one man with a
hand camera and a proportionately lower amount of lighting, then I
would say, well, this is a matter of public interest . . . and I can under-
stand the people wanting to know. ' '
With only one camera, Mr. Caruso said he not only did not think the
courts would have reversed Estes' conviction because of the "circuslike
atmosphere," but that "this element would not have been mentioned."
Assemblyman Willson questioned Mr. Caruso about the use of tele-
sion in the murder of Lee Harvey Oswald making it "impossible, or
nearly so, to obtain an unprejudiced or unbiased jury. ' '
Mr. Caruso replied, " If a juror wants to sit on a jury ... he will sit
on that jury and tell you he has formed no opinion ... I don't think
we will ever have a jury that is completely impartial. There are always
those jurors who are prejudiced when they take that jury box, but I
don't think we are ever going to eliminate their prejudice by the avoid-
ance of any photography.
"Every photographer, and, incidentally, every broadcaster, has as
basic a right to pursue his occupation as has the man who comes to
court with a notepad and a pencil," Mr. Caruso contended. "The re-
striction of the photographer or broadcaster in the courtroom during
proceedings — and also during recess — is the first step in the possible
total abridgment of what is the basic right to know on the part of the
people of California.
"The Los Angeles County Bar is unwilling to accept the
proposition that a fair trial and a free press are inherently
antagonistic, out we have taken the position that if both are to
be preserved, voluntary restraints are required in the activi-
ties of both the media and the bar. We now have Rule 980
which places limitations on photographing , recording, and
television broadcasting in the courtroom. This rule should be
given an opportunity to demonstrate its workability, both by
the media and the bar."
Edward S. Shattuck
President, Los Angeles County Bar
Association
Because of illness, Mr. Shattuck did not appear as a witness but
submitted statement for inclusion in the transcript.
FINAL REPORT ON FREE PRESS FAIR TRIAL 23
Mr. Shattuck contended that solutions to the Rule 980 problems are
still in the process of being sought by across-the-table discussions be-
tween representatives of the media and the bench and bar. He advised
that the State Legislature "should not close the door to continued ex-
change of ideas to resolve the problems."
"Rule 980 is based upon the theory that you cannot have
the preservation of the balance of fair trial and free press ....
The reasoning is: The taking of one picture in any courtroom
during session or during recesses automatically prevents a fair
trial. Under the rule of logic, if you start from a false premise,
you are going to end up with an answer that has a falsity in
it. Therefore, I submit that the rule that we now have has to
be changed, and one of the problems is how to change it."
Robert Neeb, Jr.
Attorney and Counsel, Greater Los
Angeles Press Club and Radio and
Television News Association of
Southern California
Mr. Neeb cited the famous California case of People v. Stroble, a
gruesome murder case involving a little child as the victim, and the
wording of the State Supreme Court decision regarding whether tele-
vision, radio and newspaper photography coverage of the trial in Los
Angeles Superior Court was prejudicial to the defendant.
"Television was allowed in the courtroom during the proceedings,"
Mr. Neeb recalled, "and in one instance they actually photographed for
live television the jurors sitting in the jury box while the court was
going on. This reached the Supreme Court because Stroble was con-
victed and sentenced to death, and it went up on the automatic appeal.
' ' One of the questions was : What about this television ? It was ad-
mitted in all the briefs that TV had been in the courtroom during ses-
sion, had photographed lawyers, parties, witnesses and the jury. Now
keep in mind the base of this rule which says you cannot have a fair
trial if you have a picture in the courtroom.
"Now, what does the Supreme Court say about that case? They
had the case directly before them as to what to do about a case that
was widely televised and photographed. The defendant complained
about this. It was one of his points on appeal, that he didn't have
a fair trial.
"The Supreme Court, in 36 Cal. 2d at page 621, has in it the part
about televising the jury during the session, the same jury that had
to decide a man's life or death.
"The high court said: 'We can also assume' — now note this word
assume — 'that it was improper.' The court doesn't say that it was im-
proper, or that there was no fair trial; the justices just say 'we assume
that this wasn 't quite proper. '
"And they go on: 'We assume that it was improper to allow the
taking of news photographs or televising of scenes in the courtroom. '
"Then they go on — and listen to the wording of your own Supreme
Court: 'But there is no indication that the jury's verdict was in-
fluenced by the taking of pictures or the televising of courtroom
scenes.' Your Supreme Court has said the base of the rule now
adopted is not that. "
24 ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
Mr. Neeb also cited the famous case of Kirstowsky v. Superior
Court in 1956 as a demonstration of the principle that judges already
have complete plenary power to protect the rights of an accused, or
any litigants or any witness. In this case the superior judge excluded
everybody from the courtroom in the trial of a woman for murder,
on the grounds that her defense testimony was so salacious "that I
couldn't get it out of me before people.''
In the Kirstowsky case, the California appellate court held that
you can't have a private trial in California, Mr. Neeb pointed out,
adding :
"The court held that no judge has the right to exclude the public
or the press. It said that the judge could have — and this is the major
point — in the interests of justice under the laws of Sections 124, 125,
and 128 of the Code of Civil Procedure, excluded everybody to let
the defendant testify, but after the testimony, he had to open it up
to everybody.
"So you see, embodied in the case law of our state is complete
plenary power in the judges to act if they think it is necessary in
any case to protect the rights of the accused, or any litigants, or
any witness. ' '
Mr. Neeb concluded with this analysis : "A lot of people say the
issue is, shall television or the newspapers have rights? I say the
issue is, shall the public have rights? This case says the right to public
trial — contrary to popular belief — is not a defendant's right. It's the
public 's right, yours and mine and everybody else 's. ' '
Replying to a question by Chairman Willson as to how a legal re-
view of the judicial rule can be obtained through a test case in the
courts, Mr. Neeb said :
"I think judges are supposed to be able to admit a mistake if they
make one. The proper precedure — and I have suggested this already
to the news media — would be a court test based on the cited cases
and code sections to determine whether or not the rule goes beyond
the power of a committee or a commission . . . You might end up in
the Supreme Court of the United States. ' '
"I must say that the right of fair trial has no peer when
there is a conflict between freedom of the press and fair trial.
. . . I don't think that a court ought to have the discretion to
decide whether or not the television or mass communication
media is going to sit upon a trial — or at least not the abso-
lute and sole discretion. . . . I submit that as long as we
have the concept of presumption of innocence, that where the
defendant doesn't want publicity, he or she ought to have the
right to say to the press, 'Leave my courtroom; I prefer to
try this case before the judge and jury only.' I would like
this committee to consider a rule that would recognize the
principle that a fair trial is the basic whip of liberty. There
can't be any dispute about the importance of a defendant's
liberty as against the importance of selling newspapers."
Hugh R. Manes
Hollywood attorney
FINAL REPORT ON FREE PRESS FAIR TRIAL 25
Several instances of pretrial publication of information prejudicial
to defendants lie was representing were related to the committee by
Mr. Manes.
He urged passage of a statute giving defendants the right to
seek damages from prosecutors, police, sheriffs and other law enforce-
ment officers who furnish the press media with prejudicial pretrial
information, which, he said, is not made available to defense attor-
neys.
"I am less concerned," Mr. Manes said, ''about the ability of a
newspaper or television station to sell a product, news or commercials
that surround the news item, than I am about the right of an accused
person to have a jury which does not receive pretrial information
that would not be allowed in the courtroom trial itself. What I am
asking this body to do is dry up the sources of information. The
public hasn't any right to know before a trial."
"Insofar as Rule 980 goes beyond prohibiting coverage
through television or photography of an actual court proceed-
ing and insofar as it bars photographing or recordings during
recesses, I think it goes too far."
A. L. Wirin, Los Angeles
Counsel, American Civil Liberties
Union
Mr. Wirin immediately exposed what he described as "my bias" by
testifying that if he had a choice between a free press and a fair
trial, he would live in a society which had a free press. He said he
believes the two great rights — free press and fair trial — can be recon-
ciled, since the public should have the right of access to the admin-
istration of justice.
"I think one has to balance these rights." he explained, "and I
arrive at the valance of barring photography during a court pro-
ceeding but allowing it at all other stages. Neither right can be
absolute, and both have to be reconciled with each other. When it's
out-of-court coverage, I think the freedom of information should pre-
vail. I draw the line at the door of the court. ' '
"The basic problem appears to be one of an apparent con-
flict between these two basic constitutional rights. I say ap-
parent, because I believe the conflict is more apparent than
real. There cannot truly be a fair trial without a free press.
A free press is vital in the administration of justice, par-
ticularly of criminal justice. It is necessary for the public to
know and understand the functions of our judicial processes.
There is no other complete way for the public to become in-
formed except for the news media. I believe that the con-
stitutional right of a public trial in a criminal case is a right
belonging to the public as well as to the defendant."
Lawrence DRrvON
District Attorney, San Joaquin
County ; President California
District Attorneys Association
26 ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
Expressing his own personal views and not those of the association,
Mr. Drivon said the real problem appears to be how to curb or cure
the excesses of both the news media and of public bodies like the Judi-
cial Council. He called for exploration of methods of ' ' self -correction. ' '
He cited instances in which it would be the duty of the public prose-
cutor, "for the protection of the public which he serves," to inform
the public of particularly aggravated cases. For example, he said that
if there is a widespread bunco ring operation in a community, the
public should be informed of the modus operandi thereof "so that
members of the public can protect themselves through knowledge."
"You have to leave this type of thing up to the judgment of the
prosecutor," Mr. Drivon contended. "If he makes a mistake, the elec-
torate at the next election will take care of the situation, I'm quite
sure."
Mr. Drivon said most prosecutors "are opposed to photography and
certainly to TV in the courtroom during the process of the trial be-
cause we are fearful of grandstanding and theatrics." But he said
there would be no prejudice to a fair trial if pictures were taken at
recesses or before or after the adjournment of court.
"This type of thing can be taken care of by the trial judge him-
self, ' ' Mr. Drivon concluded.
FINAL REPORT ON FREE PRESS FAIR TRIAL 27
BROADCAST INDUSTRY SPOKESMEN
Witnesses from the radio and television industry included a tele-
vision executive and a working radio newsman. Both men called on
the Judicial Council to reconsider its action and, in doing so, to keep
in mind the significant, longstanding role the press has played in
world history — particularly recent American history.
As Elton Rule, vice president of the American Broadcasting Co.,
pointed out, "It was television which brought astronaut Ed White's
walk in space into the living room. It was television which brought
the launching of Gemini 7 to the people. And, even though only four
presidential campaigns have been carried by television, the greatest
proportions of our population think of these campaigns solely in terms
of television."
No medium capable of exposing so many to so much should be pro-
hibited from entering a courtroom and showing all America how jus-
tice operates, he said.
"Let me make clear that we are not criticizing or con-
demning the structure of our judicial system. California has
one of the most modern and functional judicial systems of
the 50 states. Reforms effected during the past 20 years have
made it one of the best, if not the best, judicial systems in
the nation. The role of the State Judicial Council is vital.
The council has led the way — actually implemented most of
the judicial reforms with the cooperation of the Legisla-
ture. Why, then, at this critical point, has the council chosen
to turn backwards in time by adopting Rule 980 V
Elton H. Rule
Vice President, American Broad-
casting Company; General Man-
ager, Station KNBC-TV, Channel
7; President, California Broad-
casters Association
As the top official of the organization of the television and radio
broadcasting stations and networks operating in California, Mr. Rule
pointed out that the unilateral action of the State Judicial Council
November 26, 1965, in banning all photographic and electronic " tools
of modern journalism" from courtrooms in this state has an equal
impact upon a large segment of newspapers and magazines and their
photographers as it has upon radio recorders and television and mo-
tion picture cameras.
"It is our firm conviction," he said, "that the courts of this state
and nation belong to the people. Our courts are not the property of
judges, district attorneys, lawyers or juries.
"This being so, we maintain that the inherent powers of the court
are sufficient to deal with individual violations of broadcast news-
men, when and wherever they may occur.
"But even more important is the public's right to know. This right
embraces more than simple or complicated news coverage through elec-
tronic journalism, or the presence of press photographers in court-
rooms.
" It is the right which guarantees that our courts will not evolve into
chambers of secrecy, that the dignity of our courts shall not be de-
28 ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
stroyed in a shroud of darkness, that we shall guarantee continuing re-
spect for American justice. It is the public which ultimately guarantees
our concepts of justice through court procedures. ' '
The Elmo Roper survey of 1963 showed that 53 percent of all Ameri-
cans look to the newspapers as their basic source of news. Another 55
percent look to television for their news and information, and 29 per-
cent turn to radio as their basic news source.
"Thus, with the implementation of Rule 980, the public is being
deprived of the best news coverage," Mr. Rule noted. "By qualifying
our coverage of courts — through elimination of the tools of our trade —
Rule 980 has the effect of depriving half the public of complete and ac-
ceptable coverage. This is not an action to be taken lightly. There is
no reason at this time for Ride 980. ' '
Consideration of two main factors should be sufficient to have the
rule repealed, Mr. Rule said. First, the technology of electronic journal-
ism has made great advance in the last 15 years and still is making
rapid strides in the fields of handheld, portable TV cameras, highly
sensitive directional microphones, and revolutionary optical develop-
ments.
Second, the sociological changes of the population explosion and the
space age are drying up former personal sources of public informa-
tion. The town forum, as such, has disappeared. The courthouse steps
no longer serve as the nerve center of the community. "Main Street"
has all but vanished.
"Thus, the expanding obligations of the mass media to provide
information are being spelled out in unmistakable terms," Mr. Rule
concluded. "The traditional 'watchdog' role of the press has been
expanded to include the electronic areas of journalism. Literate Ameri-
cans look to us for news. ' '
"A reciprocity is needed between broadcasters and judges,
attorneys and law enforcement authorities. A schism of mis-
understanding exists between the field of electronic journalism
and members of the bar. The unfortunate decision by the Cali-
fornia Judicial Council on November 26, 1965, is indicative of
that gap/'
Edmonde A. Haddad
News Editor, KPOL, Los Angeles ;
President, Radio and Television
News Association of Southern
California
Mr. Haddad proposed a national conference of top newsmen and
influential judges and attorneys to exchange views on l ■ free press — fair
trial" and to reconcile the divergent approaches of the bar and the
broadcast press through compromise and agreement.
1 ' Broadcast newsmen simply cannot supinely submit to rulings which
clearly abridge the constitutional guarantee of a free press," he said.
"First, we would like very much to initiate dialogue on this subject
with members of the bar and bench. Second, broadcasters would draft
a code of behaviour and seek approval of it from other broadcasting
and press organizations. Third, we are prepared to investigate the
possibility of pool coverage of news events where it appears that too
much physical equipment would make for serious interference with the
coverage of a given story. "We will not surrender our freedom to pub-
lish or broadcast."
FINAL REPORT ON FREE PRESS — FAIR TRIAL 29
FOR THE PRINT MEDIA, WIRE SERVICES AND
PUBLISHERS ASSOCIATION
Newspapermen who testified before the committee seemed less con-
cerned with the immediate effect of Rule 980 on television cameramen
and their own still photographers than with the "dangerous trend"
that rule could establish.
"We should not be discussing by what methods we can limit press
access to information. Rather we should be seeking new means to de-
stroy the trend toward secrecy in public function from the White House
to the smallest police precinct," said John Jopes, editor of the Ontario
Daily Report.
Larry Sisk, managing editor of the San Diego Tribune, issued a simi-
lar warning. ' ' The invoking of these new rules would set the precedent
and establish the right for other arbitrary curtailment of the public's
access to its own institutions, ' ' Sisk said.
And Robert Studer, managing editor of the Alhambra Post-Advo-
cate, reminded committee members that continued infringement on the
rights of the press could lead to a "return to the old-time 'rubber hose'
kind of policework. It is the constant scrutiny of the press that prevents
our courts from becoming star-chamber sessions where bad justice can
be covered up by secrecy. ' '
Lone dissenter among the newsmen was Joe Nevens, managing editor
of the Monterey Park Progress. He supported Rule 980 and a strict
regulation of press coverage of all crime news because, he said, the
press has often deprived citizens of a fair trial.
Nevens said the presence of cameras in the courtroom might prevent
judges from maintaining proper decorum. He also warned that tele-
vision coverage of trials in brief excerpts could "catch the witness or
counsel in an embarrassing situation just because it's eye appealing or
newsworthy. It would not carry the impact of what is going on."
"Incompetency and dishonesty cherish a mania for secrecy.
. . . Discriminatory or preferential barring of photographer-
reporters from the public's own courthouses, courtrooms and
corridors — when there isn't a hint of 'clear and present
danger' of interfering with the courts — not only is contrary
to the Constitution of the United States and of the state of
California and contrary to the intent of state laws but it con-
flicts with landmark decisions of the State Supreme Court. . . .
If reporters using cameras and recorders can be barred from
performing their duties, the next action by the Judicial Coun-
cil could be against reporters using pencils. . . . The Legis-
lature must take positive action to nullify this Judicial Coun-
cil ride, and to clarify beyond all doubt that there is to be
no interference with the inherent right of the public to be
informed about its own business."
Larry Sisk
Managing Editor, the San Diego
Evening Tribune; for the Copley
Newspapers
30 ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
Mr. Sisk quoted information assembled by the Freedom of Infor-
mation Center at the University of Missouri, showing that of the esti-
mated 40,000 jury trials involving major crimes in the United States
during 1963-64 and until March 1965, appeals were filed in only 101
cases on various grounds of possible community prejudice.
Of the 101 cases, he said, there have been only five reversals by
the U.S. Supreme Court, and no writ of relief was granted on the
narrow argument that publicity by news media had made a fair trial
impossible.
Of the five reversals, he said, only two were on the grounds of pre-
sumed juror prejudice due to publication by the news media.
"Without arguing whether the decisions by the courts in these cases
were right or wrong," Mr. Sisk commented, "they are mentioned
specifically to show how few are the instances in which even presumed
prejudice is upheld. "
Mr. Sisk contended that a judge is the master of his court and
should have the right to cite for contempt in a specific case where
there is interference with the court.
"I, and most responsible editors everywhere, oppose any
proposition to further limit the function of a free and respon-
sponsible press. That is why I oppose the action of the Judicial
Council and why I call upon the Legislature of California to
override its edict. I warn this committee that proposals to
handcuff news media and regulate the flow of information
to the public will increase in years to come. These proposals
must be rejected, just as the Judicial Council's ruling must
be reversed."
John Jopes
Editor, the Ontario Daily Report;
Chairman, Southern California
United Press Editors
Mr. Jopes made the point that in view of the fact that crime is
increasing six times faster than the population growth, the whole
trend toward secrecy in public function should be reversed.
"Every new attempt to tie the hands of journalism, such as the
California Judicial Council's edict to ban the use of news cameras in
courtrooms during recesses, puts new chinks in our constitutional
right to freedom of the press," he said. "It brings us closer to the
Star Chamber. If there ever was a time in history when newspaper
should extend their interests in and coverage of major crime, it is
now."
"We have always conceded the fact that the judge should
control his courtroom. And perhaps there are circumstances
when a judge would, on mutual agreement with the news
media, decide not to have a trial televised or photographed."
Ben Martin
General Manager, California News-
paper Publishers Association
For the record, Mr. Martin reiterated the association's opposition
to Rule 980. He urged the Judicial Council to witness demonstrations
by the news media of the modern techniques of covering a trial with
photography and microphones.
FINAL REPORT ON FREE PRESS — FAIR TRIAL 31
"The press and the bar share tremendous responsibility in
keeping the people informed in a society where there is
greater freedom than any other place on earth. One of the
greatest threats to this freedom is complacency. Unless the
bar, the Legislature, the judiciary and the press are alert,
the liberties guaranteed by law will not remain fully pro-
tected. Whenever there is a dictatorship established, the dic-
tatorship first muzzles the press, then strips the judiciary and
the governing bodies of their powers of administering justice
by law."
David N. Schutz
Editor, the Redwood City Tribune;
Secretary and Director, The Asso-
ciated Press Managing Editors
Association
Mr. Schutz said the newspaper profession feels that the allegation
of " trial by newspaper" is so oft repeated that the legal profession
tends to accept it as fact.
"Stated simply," Mr. Schutz explained, "it implies that innocent
men are being railroaded to jail because of improper pretrial pub-
licity. Newspaper men do not believe this to be true. Lawyers have
never been able to name even one case. . . .
"The first thing we ought to observe about freedom is that it is
not absolute. It must be discharged with responsibility. The right of
a free press is not freedom of newspapers. It is the right of a demo-
cratic society to full information. The right of a fair trial is not the
right to defeat a just punishment. ' '
Mr. Schutz said his association took the position that the Judicial
Council's action on Rule 980 "is a violation of the First Amendment".
"The problem of how freedom of the press can be main-
tained in the face of growing crescendo of attacks upon the
basic American freedom is of vital concern to me and to my
colleagues in the profession of journalism. It is also of vital
concern to the readers of my newspaper and those of every
other newspaper. And to the viewers of every television sta-
tion. And to the listeners of every radio station. The problem
is whether any pretext, no matter how well Mentioned, can
serve as the vehicle to deny our society its hard-won right to
be freely and fully informed. Certainly the camera has be-
come as basic and important a tool in the reporting of the
news as are the pencil and the typewriter. Modern photo-
graphic technology has improved to the point where accusa-
tions that news photographers, of necessity, must interfere
with the orderly conduct of a trial or with the dignity of the
court, or that they constitute a threat to the right of the ac-
cused to a fair trial, are both unfair and uninformed."
Robert Studer
Managing Editor, The Alhambra
Post-Advocate; Chairman South-
ern California Associated Press
News Executive Council
32 ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
Mr. Studer conceded that there have been isolated instances of jour-
nalistic irresponsibility, but he contended the press generally is as
concerned over the right of an individual to a fair trial as are the
courts, the judges, the bar and the Legislature. He cited six already
existing safeguards for the right of the accused in the event such right
is jeopardized.
"Rule 980 seems to me to be like using a bulldozer to weed the
garden," he commented. "Sure, it does a fine job of weeding, but it's
pretty tough on the flowers. "
"I think for the most part that newspapermen are respon-
sible, at least as responsible to their profession as lawyers are
to theirs ... I am a working-type newspaperman. I am aware
of only one study of the number of times it has been con-
tended that the newspapers have violated someone's right to
a fair trial. This was conducted by the Hoosier State Press
Association for the 1963-64 period. Of all the hundreds of
thousands of criminal trials, from misdemeanors up to felo-
nies, that were prosecuted in this country in that time, 60 con-
tentions were made that someone's rights had been violated by
improper news stories. Sixty cases were carried to appellate
courts on that contention, and of those 60, 11 reversals oc-
curred ... 7/ these statistics are accurate, there hasn't been
any wrong of great consequence ... I have heard questions
and statements about fair trial publicity. If a man is arrested
by the police, that is a fact, it is not a contention someone is
making. And it has to do with the ability of the police de-
partment to get its job done. The arrestee's guilt or innocence
is not being argued. But he has been arrested. I think that
fact should be reported. If the man is subsequently charged
with a crime, that fact should be reported. If the man is not
charged with a crime and is released, certainly that fact should
be reported."
Robert Schmidt
Court Reporter, Long Beach
Independent Press Telegram
Mr. Schmidt told the committee he is not in favor of Rule 980.
"I feel that it is high time that the press is made to ac-
count for its abuses. It is a commercial entity, make no mis-
take about that. The press should be brought to the bar of
justice just like any other lawbreaker. The concept that the
press is above the law should be voided."
Joe Nevens
Managing Editor, The Monterey
Park Progress
Mr. Nevens was the only newsman witness to take a stand in favor of
Judicial Council Rule 980 on the banning of photographers and tele-
vision cameras in courtrooms.
" It is not that I have an animosity against my colleagues in TV and
radio," he explained, "it's just that I feel that the very nature of their
physical equipment and reproduction qualities of their work suggest
FINAL REPORT ON FREE PRESS FAIR TRIAL 33
the possibility that a witness or participants (in a trial) would quickly
join the ranks of actors and so forth, and even the judges and counsels
in question could have this feeling altered — they might not be able to
continue the decorum the court demands in obtaining justice."
Mr. Nevens said he has attempted for many years — without success —
to stimulate the national journalism society, Sigma Delta Chi, to lead
the way in drafting a code which the press media would adhere to
voluntarily in disputed cases of free press versus fair trial.
He cited the Lucille Miller murder trial mistrial and the Billy Sol
Estes case as instances in which the press media clearly violated the
right of defendants to a fair trial.
' ' The goal of the court is to obtain truth and justice, not to entertain
the masses, ' ' Mr. Nevens commented in urging support for his proposed
federal statute making it a crime to furnish or publish information not
already properly filed with the court in a criminal litigation.
34 ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
FOR SIGMA DELTA CHI AND PHOTOGRAPHERS
ASSOCIATIONS
Two spokesmen for press photographers associations and one spokes-
man for Sigma Delta Chi spent considerable time before the committee
explaining the feasibility of using modern television and radio equip-
ment in a courtroom without disrupting legal activities.
Charles Waite — speaking as an attorney, a radio newscaster and a
member of the Sigma Delta Chi national board — said he has seen dem-
onstrations in which "most of the participants were unaware of a
broadcast. This can be done because in the State of California, virtually
all courtrooms are equipped for electronics, microphones and public
address systems. ' '
Modern techniques and miniaturization equipment could be used ef-
fectively in these courtrooms, he said.
Fred Bauman and Nelson Tiffany, both press photographers, charged
the Judicial Council with ignoring technical advances made in photog-
raphy. They said trials could be filmed with unobtrusive cameras and
existing lighting.
Another ' ' prof essional ' ' appearing before the committee was "Walter
Wilcox, professor of journalism at UCLA. Wilcox spoke at great length
about his attempts to convince university officials to open Academic
Senate meetings to the press. Like the newspapermen who testified be-
fore him, Wilcox voiced concern for the trend toward secrecy in the
conduct of official business, and branded as " specious " contentions that
press coverage of faculty meetings would be ' ' superficial and sensation-
alists" and would inhibit professors from making "far out and seem-
ingly unrealistic remarks designed to stimulate discussion and not as
their own positions.' '
"I think it would be a far stronger and clearer expression
of government's preservation of the public's right to know,
if nullification of Rule 980 were to be made by the State Legis-
lature. Since the Judicial Council's rulemaking powers are
limited by the Constitution to those which are not in conflict
with existing or future legislative enactments, it would seem
to me no substantial legal problem exists in the way of such
nullification by the Legislature, if the legislators, in their con-
sideration of the problem, agree that this is a desirable end
and, more importantly, a necessary act."
Charles Waite
Attorney, Chairman, Freedom In-
formation Committee, Los Angeles
Chapter, Sigma Delta Chi; West-
ern States Director of Freedom
of Information, SDC's National
Board
As both an attorney and a radio newsman, Mr. Waite is uniquely
conversant with the problems posed by Rule 980 for the courts and
legal profession on the one hand and the various news media on the
other.
FINAL REPORT ON FREE PRESS FAIR TRIAL 35
Mr. Waite cited the strong stand taken December 6, 1965, by the
board of directors, Los Angeles Chapter, Sigma Delta Chi, the pro-
fessional journalism society, protesting and opposing Rule 980.
"The strength of the SDC feeling," he said, "is that the rule is
a genuine step backward in the important area of the right of the
people to know what their government is doing. We feel the rule was
passed with entirely inadequate showing of its supposed need."
"The Judicial Council was extremely prejudiced and entered
the hearing (on Rule 980) with preconceived objections and
preconceived decisions on the matter.9'
Nelson Tiffany
President, California Press Photo-
graphers Association
Mr. Tiffany complained that Rule 980 is "arbitrary" and was ap-
proved "without a fair hearing from the media."
He said the use of photographers during United Nations General
Assembly session "demonstrates what might be done in courtrooms in
the future in California." United Nations delegates have not objected
to the presence of cameras, Mr. Tiffany reported.
"The California Press Photographers Association is on record as
favoring a soundproof booth with perhaps a two-way mirror glass
from which to photograph. This would certainly do away with the
argument ... of distractions. In many cases, even the judge would
not know a picture was being taken, ' ' he said.
Tiffany, CPPA president, cited the 10-year experience of Colorado
courts in giving trial judges the discretion to admit the taking of
photographs in the courtroom or the broadcasting by radio or tele-
vision of court proceedings.
"We feel the Colorado rule . . . should be adopted in this state,"
Mr. Tiffany said. ' ' We do not understand this sudden emergency mea-
sure by the California Judicial Council to exclude us. The 17-to-l
vote demonstrates, I think, that the Judicial Council was extremely
prejudiced and entered into the hearing with preconceived objections
and preconceived decisions. ' '
"You ban the cameras today, and tomorrow the world may
find itself on the outside, banned by a similar rule. ... What
are our courts afraid off99
Fred Bauman
West Coast Director, National
Press Photographers Association
In adopting Rule 980, the State Judicial Council has failed to recog-
nize the technological advances which permit unobtrusive camera and
television coverage with miniaturized equipment, Mr. Bauman con-
tended.
"We cannot and must not impede progress," he explained. "The
artist's sketchpad of the past has become the television camera and
the news photo of today. Why penalize the news media industry for
its technological advancement by a code of ethics established years
ago in the era of flashpowder 1 ' '
36 ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
VIEWS OF AN EDUCATOR
"Those of us who have studied the matter at UCLA and
at other universities are becoming convinced that the dialogue
concerning free press and fair trial has come full circle, and
that further debate without empirical evidence is pointless.
Everything has been said that can be said. We are, therefore,
undertaking behavioral science research in the hope that we
can provide some new facts with which those concerned can
illuminate this dialogue. At present, we have a modest study
underway to determine the initial reaction of a prospective
juror when exposed to news of confession, previous criminal
record, pretrial evidence and the various combinations thereof.
This study, we feel, is a beginning only, but it may well set
up guide lines with which we can follow the juror through the
trial process/'
Professor Walter Wilcox
Chairman, Department of Jour-
nalism, UCLA
FINAL REPORT ON FREE PRESS — FAIR TRIAL 37
THE SAN DIEGO HEARING /"AN UNOBTRUSIVE
DEMONSTRATION OF NEWS COVERAGE"
CITY COUNCIL CHAMBERS, JANUARY 31, 1966
"The great complaint has been that reporters with their
cameras and lights are obtrusive and interfere with the nor-
mal conduct of a trial or hearing. This need not be the case.
In these chambers [the council chambers in the City of San
Diego Administration Building] you have not seen a single
light glaring in your faces or the faces of the witnesses. There
have been no cumbersome cables or wires, no bulky equipment,
no reporters running around. In a word, we of the press have
been unobtrusive. And yet we have been here, covering every
second of these proceedings . . . The demonstration you have
just seen [a video tape playback] is only one phase of the total
coverage. Still photographs also were taken, and without glar-
ing flashbulbs . . . There are other journalistic tools, and most
of them have been operating here this morning. Seated at the
press table, a radio reporter has recorded on audio tape the
voices of all the participants. Again, in the glassed-in booth at
the back of the room, two sound-on- film cameras have been re-
cording both pictures and sounds of this event, while at the
press table another reporter has been taking silent film pic-
tures of witnesses and committeemen. I trust this demonstra-
tion has proved what news media and broadcasters have con-
tended— that court proceedings and committee hearings can be
televised and broadcast without danger that justice, proper
procedures and decorum will be jeopardized . . . We ur-
gently request that a moratorium be declared to stay the exe-
cution of Rule 980."
George Whitney
Representative, San Diego County
Chapter, Sigma Delta Chi
38 ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
SPOKESMEN FOR SIGMA DELTA CHI /NATIONAL
AND REGIONAL
"1 plead with this committee to encourage the process of
evolution in the whole field of communication between the
courts and the public. Urge upon your fellow legislators the
repeal of Rule 980, and at least restore us to the position where
controlled experimentation with newsroom photography,
broadcasting and televising of criminal trials may be contin-
ued on a progressive and evolutionary basis. It is essential,
I believe, to good citizenship in the 20th Century."
Eaymond Spangler
Publisher, the Redwood City
Tribune; President, Sigma
Delta Chi
Mr. Spangler quoted the preamble of California's Ralph M. Brown
Act on the conduct of the public's business by public bodies, as fol-
lows:
1 ' The people of this state do not yield their sovereignty to the agen-
cies which serve them. The people, in delegating authority, do not give
their public servants the right to decide what is good for the people
to know and what is not good for them to know. The people insist on
remaining informed so that they may retain control over the instru-
ments they have created. ' '
It is fundamental error, Mr. Spangler held, to claim that, of the
three great branches of public government — legislative, executive, judi-
cial— the judicial is protected from public scrutiny. . . . Under pres-
ent-day technical conditions, the ordinary citizen cannot obtain his in-
formation for himself. But he can or could at least be given a choice
of alternative channels of information. To allow broadcasting by radio
or television grants alternative sources of information to the public,
and this choice should not be further curtailed. But it is curtailed by
Rule 980.
Commenting on the majority opinion of the U.S. Supreme Court in
the case of Billie Sol Es'tes v. the State of Texas, Mr. Spangler said:
"I venture that none of these Supreme Court justices has had any
experience in a courtroom with a televised or broadcast trial. Lacking
that experience, the majority opinion reflected a great deal of specula-
tion. . . . The court apparently decided that the pen and pencil are
the ultimate in communications and here, as in the Scopes trial in Ten-
nessee, evolution must stop.
"The quotations of the majority indicate the court's confessed lack
of knowledge on the critical point involved, to wit: the influence of
television cameras and radio microphones on a jury, the witnesses and
the court.
"In this connection the court said: 'Still, one cannot put his finger
on its specific mischief and prove with particularity wherein he was
prejudiced. . . . The conscious or unconscious effect that this may have
on the juror's judgment cannot be evaluated. . . . The impact upon a
witness of the knowledge that he is being viewed by a vast audience
FINAL REPORT ON FREE PRESS — FAIR TRIAL 39
is simply incalculable. . . . And even in the absence of sound, the in-
fluence of such viewing on the attitude of the witness toward testifying,
his frame of mind upon taking the stand, or his apprehension of with-
ering cross-examination defy objective assessment.'
''Obviously, the Supreme Court doesn't know the effect of televising
upon the juror and the witness. ' '
Asked by Chairman Willson to state Sigma Delta Chi's position on
wanting individuals to receive a fair trial, Mr. Spangler concluded:
"We endeavor to raise the sights of newsmen everywhere. Since the
Oswald and Ruby cases we have succeeded in having the major orga-
nizations involved in mass communications agree to a code which en-
courages pool coverage. We are making progress in this direction."
"We have no punitive measures at all. It's agreements. It's
a code of ethics that is being fostered by the various news-
paper associations, by Sigma Delta Chi, by the people in the
[news media] industry who get together after something like
the Dallas affair and agree on measures and ways to cover
these stories without having this thing occur again."
Guy Ryan
Assistant Managing Editor, the
San Diego Evening Tribune; Re-
gional Director, Sigma Delta Chi
Despite some "skeletons in the closet" and some "deplorable in-
stances of abuse," the vast majority of newsmen are honorable and
high-principled, Mr. Ryan contended.
"Efforts to raise the standards of journalism were going forward a
long time before the recent urging by the Warren Commission report
on the assassination of President Kennedy," he testified. " Self -regula-
tion and constant emphasis on the fair and honest presentation of in-
formation will bring greater results and will be more lasting than any
possible controls that could be contrived. ' '
Mr. Ryan submitted a number of codes of ethics adopted by the
Colorado Press Association, Southern Newspaper Publishers Associa-
tion, American Newspaper Guild, National Association of Broadcasters,
Radio and Television News Directors Association, American Society of
Newspaper Editors, and the Richmond (Virginia) News Leader.
40 ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
VIEWS OF ELECTED PUBLIC OFFICIALS
Two public officials, both responsive to the electorate, appeared at
the San Diego hearing to offer testimony. The two men indicated they
felt the obvious information and educational values to be derived
from the broadcasting and photographing of court proceedings would
far exceed any possible objections.
Joseph O'Connor, the Sheriff of San Diego County and the sole
witness from law enforcement, joined County Supervisor Frank Gib-
son in saying the inclusion or exclusion of photographic and recording
equipment should be at the "sole discretion of the presiding judge."
"The judges are men of learning and wisdom," Sheriff O'Connor
said. "They were elected by the people on this basis, and being in the
courtroom, they can best see when the rights of an individual may be
jeopardized by anyone, including news photographers. "
Supervisor Gibson said the judges are "solid men trying to ad-
minister justice fairly and still carry out their responsibilities to the
citizenry." The judges, he said, would "cooperate in every possible
way with the news media," but would not endanger the rights of the
defendants.
"If there was violent objection [to cameras] on the part of the at-
torneys and the litigants ... I would say that decision [to exclude
cameras] would have to be the decision of the judge." Supervisor Gib-
son said in response to a question from Assemblyman Johnson. "He
would have the authority to request that there be no coverage."
"I think the conduct of any individual, when he knows
he is being recorded, is bound to be on the better side rather
than on the worse side."
Joseph C. O'Connor
Sheriff, San Diego County
Sheriff O'Connor, a 24-year veteran in law enforcement work, was
asked pointblank whether, in his opinion and experience, television in
the courtroom would have any adverse effect on the conduct of wit-
nesses or jurors. He replied in the negative.
He also testified he believes judges should be given the prerogative
of determining whether news photographers and reporters with elec-
tronic equipment should be permitted in courtrooms.
"Judges are men of learning and wisdom," Sheriff O'Connor com-
mented, "and were elected by the people on this basis. Since a judge
is present at all times, he can best foresee when the rights of an
individual may be jeopardized by the acts of anyone. I feel that the
judge should have the final say. "
"I know of no better means of communication than allowing
a complete freedom of on-the-spot observations. We invite
the newsmen as well as radio and television media to cover all
of our meetings. I do feel strongly that the same courtesies
should be extended in our courts, with the understanding
that the judge of each court be vested with the authority to
FINAL REPORT ON FREE PRESS FAIR TRIAL 41
grant or refuse such coverage by the different media. This has
been the practice in the past and, in my estimation, should
be continued."
Frank Gibson
Member, San Diego County Board
of Supervisors
Mr. Gibson noted that there is television and radio coverage every
week of the board of supervisors' meeting, ''and it definitely is not
a circus and never has obstructed the ascertainment of the truth."
"We find that the reaction from the public after the pictures are
shown on television, the reaction of the people to statements that
were made and the presentations that were made has always been cer-
tainly on a very constructive side," Supervisor Gibson said.
The supervisor said televising board meetings gives the public "A
little better understanding, a little better idea of what actually is
taking place. We are very much interested in inviting the [news
media] people to our board rooms."
42 ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
JUDGES RECOMMEND:
"RESTORE NEWS MEDIA JURISDICTION TO
JUDICIARY" AND "THE COLORADO PLAN"
Perhaps the most provocative and most constructive witness at the
committee hearings was almost 1,000 miles away when he testified.
His name is Otto Moore. His importance is based on his position
(Supreme Court Justice in Colorado) and his experience (Colorado
has permitted television and broadcasting equipment in the court-
room for more than 10 years) .
Justice Moore's testimony was presented by Clayton H. Brace, vice
president of Time-Life Broadcast Inc. and general manager of KOGO
radio and television stations in San Diego. Brace, who spent most of
his career in Colorado, brought the committee a partial transcript of
a 1956 question and answer session in which Moore defended the
use of TV, news cameras and radio in the courtroom. Brace also pre-
sented a video tape, with sound, of Justice Moore's latest views —
recorded the week before the hearings.
The rule issued by Justice Moore warns that proceedings in court
" should be conducted with fitting dignity and decorum." However,
it provides for the presence of newspaper photographers and radio
and television newsmen and equipment, in limited numbers, so long as
their actions do not "detract from the dignity of the court, distract
the witness in giving his testimony, degrade the court or otherwise
materially interfere with a fair trial. ' '
Further, Justice Moore stipulated in his special memorandum, "No
witness or juror in attendance under subpoena or order of the court
shall be photographed or have his testimony broadcast over his express
objection."
What did Justice Moore tell the committee about the practical appli-
cation of this rule? He said he personally was "very much surprised
that it created . . . practically no distraction whatever. ' '
The complete texts of Justice Moore's remarks immediately follow
this summary and is itself followed by excerpts from the testimony
of three other judges.
One of these judges, Roberta Butzbach of the Los Cerritos Municipal
Court, reported on the experimental use of video-tape recording equip-
ment in her courtroom. Like Justice Moore, she said she "detected no
differences from the customary behavior" of the witnesses, jurors, liti-
gants or attorneys.
The highest ranking local judge to testify, Luther Hussy, President
of the San Diego County Municipal Court Judges Association, said he
was very impressed with the telecasting and broadcasting equipment
demonstrated during the hearing itself.
"It shows what can be done," he said. "I think it would be unfor-
tunate if we had an inflexible rule which would discourage the fur-
ther development and refinement of this kind of equipment. ' '
FINAL REPORT ON FREE PRESS FAIR TRIAL 43
FULL TEXT OF JUSTICE MOORE'S VIDEO-TAPED STATEMENT,
RECORDED JUST PRIOR TO THIS HEARING
"The rule of the Supreme Court of Colorado which permits closely
supervised operation of cameras in the courtroom has been in effect
for about 10 years. The best photographers and operators of television
cameras and radio men have never created any problem whatever in-
sofar as the decorum of the court is concerned. The cameras are always
concealed. They are silent. Their output is accurate. They create no
false impressions.
"In all the 10 years in which they have been permitted to function,
no complaint has ever been made to the Supreme Court of this state
by any lawyer, defendant, witness or juror that the use of a camera or
a microphone by the press media has in any manner whatever prevented
a fair trial or in any way interfered with any person in performing
his duty as lawyer, judge, witness or juror.
"Under our rule, but one concealed television camera is permitted
to function. Any station desiring to use the output is entitled to use it
under a pooling arrangement voluntarily entered into by the various
stations. To my knowledge, no more than two press photographers
have ever been permitted to cover proceedings at the same time. Their
work is also subject to a pooling agreement and is made available to
papers desiring to use any picture taken by a press photographer in
the courtroom.
"In order to guard against possible reversal of cases, following the
decision of the Supreme Court of the United States in the Billy Sol
Estes case, we amended our rule. We now require that the consent of
an accused person be shown of record before cameras are permitted
to function in any criminal case. In a civil action, the litigants must
affirmatively show by statement in the record that they have objection
to cameras in the courtroom.
"Following this change in our rule, I know of no case in which a
defendant has failed to consent to the use of cameras in his trial where
a request was made by the news media to take pictures. We are com-
pletely satisfied that our rule is a good one. The lawyers who practice
in the trial courts will agree that cameras properly regulated are in
no way offensive, and do not in the least prevent a fair trial . . .
"We believe our rule fully protects all participants in the trial of
any case, and in permitting a regulated use of cameras in court we
only give the same recognition to the cameramen which has been af-
forded the press reporter in our courtrooms since courts were first estab-
lished in this country.
"Actually, our experience has been that cameramen function with
even less disturbance than do press reporters, and their handiwork is
always free from distorted interpretations. We intend to keep our rule
and are completely satisfied that we are right in doing so. ' '
"At least 90 percent of the trial judges in our state have
permitted cameras in court under our procedures, and I don't
know of one trial judge who has had an unpleasant experience
in the connection with the use of cameras in the courtroom."
Otto Moore
Associate Justice, Colorado State
Supreme Court
44 ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
Text of the 1956 television interview with Justice Moore presented
to the committee by Clayton Brace :
Question: "Justice Moore, as the referee in the hearing of the Su-
preme Court of Colorado and Canon 35, would you tell us your reac-
tions to the demonstrations of courtroom photography and radio re-
cording as presented to the court. ' '
Answer: "Frankly, I was very much surprised that courtroom pho-
tography, radio and cameras could operate in the courtroom and create
so little, practically no distraction whatever. ' '
Question: "Now, just as the John Gilbert Graham trial provided
the Denver area radio and television stations with their first oppor-
tunity to cover a trial following the modification of Canon 35, what
was your reaction to that coverage ? ' '
(Note: John Gilbert Graham was executed in Canon City, Colorado,
January 11, 1957, for murder. He had put a time bomb in his mother's
suitcase when she went on a trip. The bomb exploded, blowing the
airplane she was riding out of the sky and killing 44 persons.)
Answer: "I thought the reaction to the coverage of that trial by
radio, television, newsreel and photography was very exceptional. It
seemed to me to be proved conclusive that the findings which I reached
as a result of our hearings were amply justified. "
Question : ' ' The John Gilbert Graham trial was appealed to the high
court. Was the fact that the case was televised and broadcast cited as
a cause for error at the trial ? ' '
Answer: "No assignment of error was based upon the claim that
the right of the defendant was prejudiced in any way by photography,
radio or television coverage. ' '
Question: "Was such coverage mentioned at all in the appeal f "
Answer: "No."
Question: "May we ask you ... do you see any educational value
through the televising and broadcasting of trials ? ' '
Answer: "Yes. I have always been of the belief that the procedures
in courtrooms were, as generally understood by the public, not accur-
ate at all. I think some very definite benefit is to be derived from an
accurate, truthful presentation of what goes on in the courtrooms of
America."
Question: "Finally, Justice Moore, do you think radio and televi-
sion coverage of trials might conceivably serve as a deterrent to
crime ? ' '
Answer: "Well, I asked all the district judges of our state their
conclusions in that behalf and received a number of answers from them.
Many of them thought that it would have a definite effect upon de-
terring crime. Personally, I think that if one were about to commit
some sort of offense, one [might] hesitate and pause if he were to under-
stand and know that crime really doesn't pay and that the culprit is
very, very, very often brought to justice. I think it has . . . would
tend to have . . . over the years a very definite influence in this realm
of deterring crime. ' '
FINAL REPORT ON FREE PRESS FAIR TRIAL 45
"Law is a living thing. It deals with real people in real
situations, and no amount of platitudes spoken from a ros-
trum will make it live. I do not mean to imply that I would
approve of any disruption of proceedings for the sake of pub-
lic information. I do say that knowledge of the process of jus-
tice is so important that ways must be devised to give society
that knowledge. Without knowledge of why and how justice
is administered, any slander is believed. The strength of the
judiciary comes from the people's confidence in it."
Judge Roberta Butzbach
Los Cerritos Municipal Court,
Bellflower
At the request of Chairman Willson, Judge Butzbach permitted a
television taping of an ordinary misdemeanor trial in her courtroom.
It was conducted with two unhidden cameras and one hidden one,
and the entire proceedings were thereafter reduced to video tape. The
purpose was to determine the effect of the presence of the news media
upon all participants. It was done with the consent of both sides. The
jury panel was informed that any who objected to being televised could
be excused. None objected.
''The only extraordinary aspect was the presence of the news me-
dia," Judge Butzbach said in reporting on the results of the experi-
ment. "They were there in profusion — lights, cameras, microphones.
"We each had a duty to perform, and we proceeded to perform
it. Both counsel had appeared in my court many times. I could detect
no difference from their customary behavior. The jurors had been on
the panel for some time. I could detect no difference in their behavior,
nor in that of witnesses. The universal comment was that once the trial
began, the presence of the news media was simply forgotten.
"All the dire predictions and suppositions as to the manner in which
people would behave in such a situation simply did not happen. There
were no attempts to play Hamlet or to outdo Bob Hope.
"If there was any effect at all, and I am not certain there was, it
was in the direction of a slighter degree of restraint and dignity. If
this was the effect, it was not only contrary to prediction, it was salu-
tary. I hope the experiment conducted in my court will be helpful in
your evaluation. ' '
Judge Butzbach concluded her testimony with a statement that on
what she has seen as a judge over a period of 19 years, she "probably
would not" have voted for Rule 980.
"1 strongly feel that this trend to take away the discretion
from the trial judge is detrimental to our judicial process.
However, I also feel that a courtroom is a temple of justice,
and if there by any factor within that temple that would de-
tract from justice, then I would be the first to refuse to toler-
ate such invasion."
George Crawford
Judge, Municipal Court, San Diego
Though Judge Crawford defended the presence of cameras in the
courtroom, he strongly advocated their prohibition in cases involving
46 ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
sexual perversion, because of the effects it could have on children. In
response to the question from Assemblyman Willson, "Do you feel
that ignorance is better than knowledge in these cases?" Judge Craw-
ford said: "This is not the education I would want my children to
receive ... I do not feel I have to bring such filthy, disgusting
events in ... I can warn my children not to have contact with stran-
gers. I can tell them that certain things happen without bringing out
the sordid details. ' '
Assemblyman Johnson asked Judge Crawford if he thought televi-
sion cameras might prove as distracting today as they would have sev-
eral years ago. "Do you think people are a little more sophisticated
nowadays and pay less attention to a camera ? " he asked.
The judge said he agreed — "if the camera were unobtrusive. In that
way, it would not have any more detracting effect than a shorthand
court reporter. He has become a fixture in the courtroom. ' '
In response to questioning by Assemblyman Foran, Judge Craw-
ford said the right to a public trial is a right of the litigant, not the
public. He said he would not permit the televising of a trial over
the objection of a defendant.
"1 think it is good that the Judicial Council adopted Rule
980. 1 believe the rule was needed to bring this issue into sharp
focus. I think also it is equally good that you, Mr. Chairman,
had the courage of your conviction to take some formal action
when you concluded the rule was premature. Otherwise we
would not be here today and we would not have the oppor-
tunity we have had to see all this unobtrusive equipment and
these unobtrusive procedures. It shows what can be done. I
think it would be unfortunate if we had an inflexible rule
which would discourage the further development and refine-
ment of this kind of equipment."
Luther Hussy
President, San Diego County Mu-
nicipal Court Judges Association
After witnessing the demonstration of equipment, Judge Hussy said
he was "thoroughly satisfied" that every courtroom should have a
fixed-focus camera that would record all sounds, motions and colors
on tape as a permanent record of the proceedings.
"It would be a shame for us not to take advantage of it," he con-
cluded.
FINAL REPORT ON FREE PRESS FAIR TRIAL 47
SPOKESMEN FOR THE BROADCAST INDUSTRY
Two prominent executives in the mass media brought their views be-
fore the committee in San Diego. They were Paul Comstock, vice presi-
dent of the National Association of Broadcasters, and Clayton Brace,
vice president of Time-Life Broadcasting Company, San Diego.
Mr. Comstock charged that Rule 980 violates the First, Sixth and
Fourteenth Amendments to the United States Constitution, and ac-
cused the Judicial Council of ignoring a lesson ' ' our forefathers learned
from bitter experience — that the greatest ensurance of a fair trial [is]
a public trial.
"The courts are a branch of the government, and in a democracy
such as ours, government is altogether in the province of the people,"
he said. "While a defendant or civil litigant has important rights in
the sanctity of the judicial process, the public has inherent rights in
the administration of justice. ' '
Mr. Brace joined Mr. Comstock in defending "the right of the pub-
lic to know what goes on in a courtroom" as an "important right."
Also, like Mr. Comstock and like the representatives of the electronic
media who testified in Los Angeles, Mr. Brace said there was "no dem-
onstrated need for Rule 980," and called for the Judicial Council to
"make a real effort to find out whether cameras in the courts . . . are,
in fact, detrimental to anybody's rights."
The results of such a study, he predicted, would show the use of
photographic and recording equipment to be "beneficial rather than
harmful in the courtroom proceedings of this state."
"If we were convinced that radio, television and newspaper
photographic coverage of courtroom proceedings would inevi-
tably bring distractions precluding calm judicial consideration
of cases, we would not be seeking access to the courts. But we
are not convinced that such would be the case. On the con-
trary, we believe that as responsible broadcasters we can work
out procedures for courtroom coverage which would be mutu-
ally acceptable to those on trial, to the bar, to the bench and to
ourselves."
Clayton H. Brace
Vice President, Time-Life Broadcast,
Inc.; General Manager, KOGO Ra-
dio and TV Stations, San Diego
Mr. Brace testified he is convinced that no real effort thus far has
been made to balance the right to a fair trial with the public right
to know.
"We think that when all the facts are in, they will show that cam-
eras and electronic equipment can be used effectively and responsibly
in the courts of this state," he said. "We believe that the committee's
study will show that our equipment can be used in courts not only
during the time the judge is off the bench but also during the time
the court is actually in operation. ' '
48 ASSEMBLY INTERIM COMMITTEE ON JUDICIARY
"After all, these [recording and televising equipment] are
modem devices. Probably in 20 or 30 years this whole subject
[free press — fair trial] will be considered ridiculous for hav-
ing to fight it ... I think we have appealed and are appealing
to them [the bar] with facts of logic. With younger men, stu-
dents coming out of school, we have made a great deal of head-
way. On the other hand, with fellows our age, it takes a very
open-minded man to get him to change."
Paul Comstock
Vice President, Governmental
Affairs, National Association of
Broadcasters
The National Association of Broadcasters (NAB) has headquarters
in Washington, D.C., and is composed of 400 television stations, 2,600
radio stations, and all the national television and radio networks.
Mr. Comstock testified that NAB does not impugn the motives of the
Judicial Council in adopting Rule 980, and agrees with the council's
concern to preserve the dignity and decorum of the courts.
"But we certainly do not agree with the methods chosen to attain
these objectives," Mr. Comstock continued. "We do not agree to a total
blackout of vital media of information. ' '
printed in California office of state printing
L-1853— 100 1-67 250
MEMBERS
Newton R. Ru:
Robert E. Badham
John L. Burton Rose Cyfert
GEORGE DAN.ELSON ^l,.,| \] T[ , ',,
Mervyn m. Dymally
carley v porter
CALIFORNIA LEGISLATURE
AflH?mblg Utttmm (Enntmtttrp
on
iltlttartj an& UpterattH Affairs
WALTER W. POWERS
CHAIRMAN
• 1. 7444
LETTER OF TRANSMITTAL
California Legislature
Assembly Interim Committee on Military and Veterans Affairs
January 3, 1967
Hon. Jesse M. Unruh
Speaker of the Assembly, and
Members of the Assembly
Assembly Chamber, State Capitol
Sacramento, California
Gentlemen :
Pursuant to House Resolution No. 710 of the 1965 Regular Legislative
Session, the Assembly Interim Committee on Military and Veterans Af-
fairs submits its final report covering its functions and activities during the
1965-67 interim.
Respectfully submitted,
<?
U3 *£> **»- ^
Walter W. Powers, Chairman
Newton R. Russell, Vice Chairman
Robert E. Badham George Danielson
John L. Burton Mervyn M. Dymally
Charles E. Chapel Carley V. Porter
CONTENTS
CALIFORNIA'S CIVIL DEFENSE AND
NATURAL DISASTER PROGRAM
Page
A. Introduction 4
Preface ~ - 4
B. Findings .— 6
Summary of Findings 6 mmmM
Responsibility 7 ^
Organization 8
Authority
Riot Prevention
News Media
American Red Cross
Military Defense .....
C. Recommendations 15
Reorganization 15
Military Support 16
Traffic and Crowd Control 17
Disaster Training 17
Prevention of Civil Disturbance 17
Communications 18
Employees 1 8
Legislation 18
D. Scope 19
Public Safety Agency 19
California State Disaster Council 21
California Disaster Office 22
California Civil Defense and Disaster Plan 24
a) The Crescent City Tidal Wave Disaster of 1964 25
b) The 1964-65 Humboldt County Floods 33
c) The Watts Riots— 1965 56
Disaster Communications Systems 72
APPENDICES
1. List of Witnesses 74
2. List of Persons Interviewed 75
3. Statistical Report, Federal Assistance Programs Administered by
California Disaster Office, Fiscal Year 1964-65 76
4. Chart, Organization and Staffing, California Disaster Office, July
1965 78
5. Map, Mutual Aid Regions in California 79
6. Civil Defense/Disaster Organization Expenditures by
State of California _ 80
Mtel
^k -am ^w mmBBb
Disaster Program
A. INTRODUCTION
1. Preface
California's disaster organization is a complex network of local, state, and
federal agencies. Some are constituted solely for civil defense and disaster
purposes. Others have civil defense and natural disaster responsibilities as-
signed to them as an extension of their normal responsibilities. The Cali-
fornia Disaster Office is designed as the organizational focus and coordi-
nating agency for the entire network in California.
The problem areas examined in this study are representative of the con-
tinuing concern which has accounted for a variety of legislative, administra-
tive and procedural changes in California's disaster organization during the
past 5 to 10 years. Indicative of this concern is the fact that the Califor-
nia Disaster Office has undergone three major reorganizations within the
past five years.
The first problem area concerns lines of authority during the state's re-
sponse to a disaster. Is it clear who has the authority to do whatever needs
to be done in a disaster situation? Is the authority being exercised accord-
ing to its formal allocation, or does the exercise of authority tend to fol-
low other lines? Is legal authority sufficiently clear? Is the state disaster
program organizationally clear? Is the administrative procedure sufficiently
clear?
The second problem area concerns duplication of responsibility and effort
in disaster response programs. Does duplication of effort exist in Califor-
nia's disaster program? How does the California Disaster Office's coordinat-
ing function and responsibilities correlate with the disaster responsibilities
and functions of other state agencies?
To obtain answers to those questions, the state's response to three disas-
ters was reviewed. Those three disasters were the 1964 Crescent City Tidal
Wave Disaster, the 1964-65 Humboldt County Floods, and the 1965 Watts
Riot.
The main focus of this study was on what state agencies actually did
rather than on what they were supposed to do under the State Disaster
Plan.
Disaster communications systems in California, news media reporting of
natural disasters, and the emergency broadcast system were also reviewed.
Also included was a general discussion of related subjects by California
state and local officials.
Some attention was also given to federal civil defense and natural dis-
aster responsibilities and programs in California, as well as to related pro-
grams in other states.
While the approach of this study was essentially factfinding, it has resulted
in legislative recommendations for the improvement of the state's disaster
program.
The committee held public hearings on this subject area on January 12,
1966, at the State Building in Los Angeles, and on October 5, 1966, at
the Los Angeles board of supervisors chambers. Numerous field trips and
individual interviews were also conducted by the committee staff.
B. FINDINGS
Summary of Findings
The state agencies with facilities and staff in the area of Crescent City
when the tidal wave devastated that city responded to the disaster in a
most prompt and commendable manner. Local government agencies and
personnel of state agencies located in the disaster area demonstrated a high
degree of cooperation. However, the committee finds a lack of a central
coordinating agency for all state departments involved in that disaster re-
sponse. Such a coordinating force might have resulted in a more efficient
use of the resources and management of state government.
Again, during the Humboldt County floods of 1964-65, state agencies re-
sponded promptly and courageously. Many lives were saved and needed
relief provided for distressed areas. However, the committee finds that no
one was in overall command of state agencies with the clear responsibility
to coordinate the disaster response efforts of state government.
The committee finds that the state's response to the Watts Riot was essen-
tially a law enforcement problem. The coordination of state assistance to
local police authority was accomplished by staff personnel of the two prin-
cipal state agencies involved: the California Highway Patrol and the State
Military Department, along with the Los Angeles Police Department. The
postriot activities of state government in providing relief and rehabilitation
services was prompt.
Responsibility
Finding No. 1
Primary responsibility for state disaster plans rests with the chief elected
state official, the Governor. The people look to the Governor for leader-
ship in mobilizing state resources for protection in the event of natural
disasters such as fires, floods, or civil disturbances. The Governor, in turn,
has delegated some civil defense and disaster responsibilities to the Public
Safety Agency, the California Disaster Office, and members of his personal
staff. Many other state agencies also have disaster responsibilities under
the California State Disaster Plan.
The Public Safety Agency is currently headed by the Commissioner of the
California Highway Patrol. The California Highway Patrol is part of the
Transportation Agency. The California Highway Patrol Commissioner,
therefore, plays two different roles. He is a department head in one agency
and head of a different agency. As Public Safety Agency Administrator,
he is a member of the Governor's Cabinet. As California Highway Patrol
Commissioner, he is not a Cabinet member. As Public Safety Agency Ad-
ministrator, he is responsible for the coordination of the California Dis-
aster Office, the State Military Department, the State Fire Marshal, and
the Department of Veterans Affairs. However, under the California Dis-
aster Plan, the California Disaster Office is responsible for the coordination
of all units of government having civil defense and disaster responsibilities.
The Director of the California Disaster Office is not a Cabinet member.
The committee finds that the presence of the Public Safety Agency Ad-
ministrator, and the Governor's personal staff, between the California Dis-
aster Office and the Governor has downgraded the responsibility of the
California Disaster Office in disaster operations. Consequently, there is a
need to clarify the state disaster organization to take full advantage of all
the management and operating capabilities which exist in the executive
branch of state government.
Organization
Finding No. 2
The primary mission of the California Disaster Office is to coordinate
state disaster operations. How well this mission. is accomplished depends on
which agencies are to be coordinated, whether they need coordination by
another agency, and whether such coordination should be a single or con-
tinuing action.
Disaster response may be examined by reviewing at least five phases of
state action: planning, warning, control and rescue, relief and rehabilita-
tion. By examining each phase, the committee made a series of findings.
A. Planning: The planning division of the California Disaster Office has
been instrumental in designing the State Civil Defense and Disaster Plan
and the Mutual Aid Agreements. The committee finds that once the Dis-
aster Plan has been developed, presented to the Governor and adopted
as part of the Chief Executive's administrative program, then there is no
need to continue the planning function on a day-to-day perpetual basis.
Further, the committee finds that the eight full-time planners on the staff
of the State Military Department have been instrumental in planning
for military support of local government in civil disturbances or natural
disaster. The State Military Department establishes direct liaison with lo-
cal government. The Department of Agriculture, the Department of Cali-
fornia Highway Patrol, and the Department of Social Welfare have also
created full-time civil defense staff positions which can also be used for
disaster planning and coordination purposes.
The committee also finds that during the Humboldt County floods of
1964-65, the coordination of state disaster response activities was accom-
plished by the joint efforts of local civil defense officials, the California
Highway Patrol, the Division of Forestry, the Department of Fish and
Game, the State Military Department, the Department of Social Welfare,
the Department of General Services, and the California Disaster Office.
Collectively these agencies coordinated the channeling of supplies, equip-
ment and manpower for the disaster area.
The committee also finds that a two-year period of planning occurred di-
rectly between the Los Angeles Police Department and the State Military
Department in anticipation of the need for the National Guard to assist
local law enforcement officials. The committee finds further that a year
before the Watts Riots, the Department of Social Welfare alerted state
officials that there was a high potential for civil disturbances, such as
riots, in several areas of the state. This subject had been introduced for
discussion to the California Disaster Office. However, the committee finds
that there had not been any definitive statement of responsibilities or pol-
icy to guide state or local government within the general framework of
the California Disaster Plan in the event of a civil disturbance. Therefore,
the committee finds a need for leadership, direction and guidance which
can only emanate from a central authority. The committee finds further
that although some degree of confusion may he expected during any dis-
aster, there is a need for a more clearly defined planning and coordinating
agency for all state and local disaster activities.
B. Warning: The technical operations division of the California Disas
ter Office is primarily involved with this phase. The committee finds that
this division duplicates the disaster warning systems of the Department
of Water Resources, the Department of Conservation, the Division of For-
estry, the U.S. Weather Bureau, and the California Highway Patrol. The
committee finds that during the flood of 1964-65, the California Highway
Patrol, the Division of Forestry, the Department of Water Resources, and
the California Disaster Office coordinated the communications systems dur-
ing the disaster. The chief coordinating role was performed by the Divi-
sion of Forestry. The Department of Water Resources effectively operated
the Flood Operations Center and established liaison with all other con-
cerned state agencies. The committee, therefore, finds a need to develop
a single statewide communications network of maximum flexibility for dis-
aster warning and disaster relief or rescue operations.
C. Control and Rescue: This activity centers on the Law Enforcement,
Fire and Rescue, and the Medical and Health Divisions of the California
Disaster Office. The committee finds the operational responsibilities for
control and rescue also lodged in other state agencies: the Justice Depart-
ment, the Office of the Fire Marshal and the Division of Forestry, and
the Department of Public Health. Also, the planning staff of the State
Military Department duplicates the function of the Law Enforcement Di-
vision of the California Disaster Office. Further, at the sheriff's request,
the Law Enforcement Division furnished approximately 11 law enforce-
ment officials recruited from the San Francisco Bay area to Humboldt
County law enforcement officers during the flood. The committee finds
that the assistance of outside law officers was not needed by the California
Highway Patrol, that the Department of Employment was able to recruit
guards from the local area as needed, and that the Department of Fish and
Game made personnel available to assist police officers when needed.
Further, because of inclement weather, the extra law enforcement officers
could not be dispersed so the local sheriff found himself with more help
than he needed.
The committee also finds that contrary to the California Disaster Plan,
the Department of Justice does not function as the chief law enforcement
coordinator during a disaster. Therefore, the committee finds a need for
better coordination of control and rescue programs during a disaster.
D. Relief: The committee finds that several state agencies have opera-
tional responsibilities for disaster relief. Coordination of such relief has long
been a major responsibility of the American Red Cross. The Department
of Social Welfare and the Department of Public Health in particular
have provided valuable emergency relief services for disaster areas. The
Department of Agriculture and the State Military Department accomplished
the airlift of hay and feed for stranded cattle in the Humboldt County
flood disaster area. The Department of Social Welfare and the Department
of General Services accomplished the provision of temporary housing and
trailers to residents of the disaster area. Several state agencies cooperated
in providing relief to the residents of the Watts Riot area under the direc-
tion of the Governor's assistant for human rights.
E. Rehabilitation: The Support Operations Division of the California
Disaster Office is primarily involved with this activity. This division ad-
ministers all federal assistance programs, including moneys for disaster re-
lief available under the Federal Disaster Act of 1950, as amended. The
California Disaster Office also coordinates the assessment of damages re-
sulting from a disaster. The committee finds that the Department of Fi-
nance and the Department of General Services also have the capability
to process applications for state and federal disaster relief funds and to
assess damages. The coordination of assessment of damages, the need for
repairs, and providing assistance in the processing of applications for fed-
eral and state assistance to repair-damaged areas as a result of the Hum-
boldt County floods was accomplished by the Department of Water Re-
- - -
sources, the Department of Public Works, the Department of Finance
and the Department of General Services.
The State Disaster Council is generally overlooked by state agencies dur-
ing a disaster. The State Disaster Council meets about once a year and its
advisory committees have not reported on their activities in over four
years. Therefore, the committee finds a need to realistically examine the
role of the State Disaster Council in state disaster response activities.
The committee finds that contrary to the assigned mission of the Califor-
nia Disaster Office, it does not function as the immediate staff and coor-
dinating agency of the Governor in carrying out the state's responsibility
under the California Disaster Act. Rather, the California Disaster Office
is primarily engaged in operational activities pertaining to disaster prepared-
ness, emergency systems development and mutual aid, and disaster relief.
Some of those operational functions unnecessarily duplicate the day-to-day
operations of other state agencies. Therefore, the committee finds a need
to clarify the state organizational program of operation to avoid unneces-
sary duplication of function by state agencies in disaster response activi-
ties.
Authority
Finding No. 3
There are three kinds of disaster proclamations: "local emergency," which
is proclaimed by local government; "state of disaster," which excludes en-
emy attack; and "state of extreme emergency," which includes enemy at-
tack.
The authority of proclaiming a state of disaster belongs ultimately to the
Governor. Federal relief funds become available only on the basis of a
gubernatorial proclamation. Since the first proclamation on November 21,
1950, there have been over 50 proclamations dealing with natural disasters,
with the exception of the Watts Riot Proclamation, which dealt with a civil
disturbance.
If the Governor is unavailable, the authority to proclaim a State of Disas-
ter follows the constitutional provision for continuity of government (Arti-
cle V, Section 16). However, the minutes of the California Disaster Coun-
cil of December 4, 1961 state that, in the event of an enemy attack, the
Public Safety Agency Administrator assumes the responsibility of acting
for the Governor. Further, authority to proclaim a State of Disaster is
vested in the Department of Water Resources and the Department of Pub-
lic Works without reference to the Governor, the California Disaster Office
or the State Disaster Council.
A closer examination of the lines of authority during the Watts Riot illus-
trates a lack of clarity. The Law Enforcement Mutual Aid Plan assigns
coordinating responsibilities to the Law Enforcement Division of the Cali-
fornia Disaster Office during a "state of disaster." This responsibility is as-
signed to the Attorney General during a "state of extreme emergency." The
Watts Riot was declared both a "state of disaster" and a "state of extreme
emergency" on the same day, August 14, 1965.
The coordination work during the Watts Riot was effectively accomplished
by direct liaison among the Los Angeles Police Department, the California
Highway Patrol, and the State Military Department. Further, it appears
that the role of the Attorney General's Office consisted chiefly of compiling
statistical information for the McCone Commission after the riot.
The request by the Governor's executive clemency and extradition secre-
tary to be kept informed of all developments during the riot placed an-
other party, not in the disaster plan, in the chain of command in addition
to the Public Safety Agency Administrator and the California Disaster Of-
fice.
The executive secretary to the Governor was assigned the coordinating re-
sponsibility of providing the services of the Department of Employment
to the disaster area. The assignment of this role to the executive secretary
12
to the Governor diminished the authority of the California Disaster Office
as the Governors coordinating agency in disaster relief operations. The
Governor also assigned the responsibility of coordinating the distribution
of food and drugs to residents of the disaster area to his assistant for
human rights, bypassing the California Disaster Office as the Governor's
coordinating agency.
Therefore, the committee finds that the lines of authority from the Gover-
nor's office to the state operating units during a disaster are confusing and
in need of clarification.
Riot Prevention
Finding No. 4
The committee finds a need to review the California Disaster Plan to in-
clude all state agencies which may have a significant contribution to make
to state disaster response plans.
Perhaps the Division of Fair Employment Practices, the Division of Ap-
prenticeship Standards, the Division of Labor Law Enforcement, and the
Division of Industrial Welfare, all located in the Department of Industrial
Relations, should be included in the formal State Disaster Plan. The com-
mittee finds that the Division of Fair Employment Practices is one state-
wide agency with the kind of personnel and working knowledge of inter-
group relations which can be of great value in helping to solve problems
that precipitate riots in our cities.
News Media
Finding No. 5
The committee finds that the Suggestions for the Reporting of Civil Dis-
turbances voluntarily adopted by the Radio and Television News Associa-
tion of Southern California are commendable and a responsible step in the
right direction. While the committee does not find a need for legislation
concerning news media reporting of civil disturbances, it does encourage
all news media to become familiar with the suggested Code of Ethics vol-
untarily written and adopted by some of the news media.
American Red Cross and Salvation Army
Finding No. 6
The American Red Cross and the Salvation Army are to be complimented
for their swift and effective action in meeting the needs of persons who
suffer as a result of a disaster. Both organizations have provided invaluable
assistance to residents of disaster areas and have performed liaison and
coordinating activities to assist local and state government agencies in
disaster response activities.
13
Military Defense
Finding No. 7
Disaster response plans may be divided into two basic programs: natural
disasters and military disasters. Obviously, a nuclear attack on California
would be widespread and cover the major cities, military installations, de-
fense factories, and harbors in the state. Population centers at opposite
ends of the state would probably be simultaneously attacked by the enemy.
A natural disaster or civil disturbance on the other hand is more localized.
A small geographical area is involved in a flood, fire, or riot.
The response to a natural disaster and a military disaster would not be
the same. Therefore, the committee finds that military defense of the con-
tinental United States, including California, is primarily a federal respon-
sibility necessitating the employment of federal military forces. The response
to a natural disaster is primarily a state responsibility calling for the use of
state resources.
C. RECOMMENDATIONS
Recommendation No. 1
Reorganization
The committee recommends reorganization or the California Disaster Of-
fice along the following lines :
The Director of the California Disaster Office should be physically lo-
cated in the Governor's office so that it is obvious to all that the Director
of the California Disaster Office speaks for the Governor in all matters
pertaining to the state's disaster response.
Further, the California Disaster Office staff should be reduced to a total
of not more than 30, including a director, a deputy director, six regional
coordinators, six field representatives, clerks and secretaries.
The reorganization would consist of eliminating the Support Operations
Division, the Medical and Health Division, the Technical Operations Di-
vision, the Fire and Rescue Division, and Law Enforcement Division of
the California Disaster Office and making a drastic reduction in the man-
agement, planning and programming services of the Disaster Office. This
proposal also envisions a continuation of all the special civil defense con-
tracts between the state and federal government.
Much of the personnel currently employed by the California Disaster Of-
fice should be transferred to other departments of state government which
perform similar day-to-day functions.
For example, transfer of personnel and equipment could be made from
the Support Operations Division to the Department of General Services,
Office of Local Assistance; from the Fire and Rescue Division to the State
Fire Marshal and the Division of Forestry; from the Law Enforcement Di-
vision to the Justice Department. The planning functions should be per-
formed by the California Disaster Office's reduced staff including consul-
tation with civil defense planning officers of other state agencies.
The reorganization should also include abolishing the State Disaster Coun-
cil but retaining its advisory committees to advise the Governor through
the California Disaster Office. Such citizens' advisory committees may be
created by the Governor at any time. The Governor's Cabinet, composed
of the Governor's closest advisors and chief agency administrators, should
be constituted as a Disaster Control Board during a disaster. The Governor
should serve as the chairman of the Disaster Control Board, and the Di-
rector of the California Disaster Office should serve as Chief Coordinator
for the Governor during a disaster and at meetings of the Disaster Control
Board. The executive secretary to the Governor, or someone in similar
status should be designated as Director of the California Disaster Office.
The California Disaster Office should be responsible for maintaining the
State Disaster Plan on a current basis with as many regional and local dis-
aster plans as may be adopted. The planning should insure that all units
15
of government having operational responsibilities are able to respond effec-
tively during a disaster. In addition, the California Disaster Office should
be responsible for the coordination of the deployment of state resources
during a disaster.
This reorganization plan would vest the California Disaster Office with
clear authority during a disaster. The California Disaster Office would
consist of well-informed generalists rather than technicians that dupli-
cate work of other departments. The reorganization plan also provides for
the minimum civil defense federal requirements for the establishment of a
state disaster agency while allowing the state to devote greater attention to
the development of a more effective response to natural disasters.
This reorganization would make the California Disaster Office the imme-
diate staff and coordinating agency of the Governor in carrying out the
state's responsibility in disaster response. It would eliminate unnecessary
duplication of function between operational divisions of the Disaster Office
and the day-to-day functions of other division of state government. It
would also provide for more efficient and more rapid mobilization of state
resources because authority would emanate from one central location in the
Governor's office. It would make clear the lines of authority between the
state operating units and the Governor through the California Disaster
Office.
Recommendation No. 2
Military Support
The Committee recommends that the State Military Department designate
certain specific units of the National Guard as "standby'' units for each
month of the year, so that at least 200 guardsmen could be assembled
anytime within one hour.
Some infantry units could be placed on standby status for the month of
January. Different units could be so designated for February, and so on.
A standby designation would mean that those men would be required to
be ready to report in full uniform to the armory within one hour anytime
during the month, perhaps even requiring them to keep their uniforms
in their cars while at work. Unit commanders should have a system to
contact their men in ample time to assemble them in one hour.
The armory headquarters of the standby units should be stocked for that
month with sufficient weapons, ammunition, trucks, tear gas, radios, so that
the guardsmen can assist in combating natural disasters as close to the
hour as possible.
This plan would cost nothing extra. It would merely make use of existing
facilities and resources. However, it would mean an inconvenience to the
standby guardsmen to the extent that they would carry their uniforms
with them at all times, and they might have to clear any out-of-town
trips with the unit commander.
16
The important idea is that the National Guard should be available to assist
local government agencies within the maximum time of one hour.
The main body of the National Guard can then be assembled and available
in about four hours. However, those first four hours, when the natural
disaster seems to be out of local control, could be very crucial.
Recommendation No. 3
Traffic and Crowd Control
The committee recommends that Section 2812 of the Vehicle Code and
Section 409.5 of the Penal Code be amended so that traffic on highways
outside a disaster area may be closed or restricted by the California High-
way Patrol if such action is essential to the movement of equipment into
and out of the disaster area. The use of ropes, signs, markers or guards
other than police officers to indicate a closure should also be permitted.
The committee also recommends that Section 2409 of the Vehicle Code
be amended to give the California Highway Patrol powers of a peace offi-
cer in case of riot, civil disorder, flood, or any disaster. The California
Highway Patrol is now limited to operating on highways.
Recommendation No. 4
Disaster Training
The committee recommends that the state departments with disaster re-
sponsibilities should be called together at least annually to evaluate their
progress and programs against an overall objective which had been set for
that particular year. It would be of great assistance in determining where
each agency stood and in establishing priorities for future action.
The committee also recommends that consideration be given to the assign-
ment of training responsibilities to one agency of state government which
would serve all state staff with similar educational and training needs in
civil defense and natural disaster relief. The problem is that in order to
be effective, staff of each department must have knowledge and specialized
skills to fulfill emergency assignments. Until recently some of these train-
ing needs could be met at the Office of Civil Defense, Western Training
Center, Alameda. With the closing of the center on October 1, 1965, most
of state departments face the necessity of developing their own training
programs.
Recommendation No. 5
Prevention of Civil Disturbance
The committee recommends that the California Disaster Office review the
State Disaster Plan to insure that all state agencies with disaster related
functions are included.
The committee further recommends that more emphasis be placed on the
planning and warning phases of disaster response, particularly in expand-
ing state programs and warning systems concerning civil disturbances.
17
The Department of Justice and the Bureau of Intergroup Relations of the
State Department of Education should be encouraged to detect and solve
problems that might precipitate a civil disturbance.
The committee also recommends that the Department of Justice encourage
local law enforcement agencies to establish community relations committees
to develop better police-community relations.
Recommendation No. 6
Communications
The committee recommends that state radio communications systems be
reexamined for the purpose of unifying all communications systems under
one agency responsible for maintaining all systems. The logical agency ap-
pears to be the Communications Services Section of the Department of
General Services or the state's Emergency Operating Center.
Recommendation No. 7
Employees
The committee recommends that the present employees of the California
Disaster Office who are transferred to other state agencies as a result of
reorganization be permitted to assume all civil service benefits retroactive
to the date of their employment by the Disaster Office upon the comple-
tion of their transfer.
Recommendation No. 8
Proposed Legislation
The committee recommends that legislation be introduced at the 1967 Gen-
eral Session of the State Legislature implementing the recommendations
contained in this report.
D. SCOPE
Public Safety Agency
The Public Safety Agency was established on October 1, 1961 by execu-
tive order of the Governor. It is one of eight agencies created by statute
or executive order to promote more effective and economical state govern-
ment.
The agency is composed of the California Disaster Office, the Military
Department, the State Fire Marshal, Department of Veterans Affairs, and
the United Spanish War Veterans Commission.
The agency administrator acts under the authority of the Governor and is
responsible to the Governor for the efficient operation and the effective
organization of the departments which comprise the agency. He supervises
the development of broad departmental policy and long-range programs
and insures that these policies and programs are administered effectively at
departmental level. The administrator reviews the legislative, budgetary,
and other administrative programs of the departments in the agency and
makes appropriate recommendations to the Governor. He also represents
the component departments of the agency in the Governor's Cabinet.1
It is difficult to see the relatedness between the California Disaster Office
and the Department of Veterans Affairs which are both in the Public
Safety Agency.
It is no criticism of the incumbents to suggest that it does not appear
physically possible for a person to function as an agency adminstrator
and at the same time serve as a department head with direct responsibility
for the day-to-day line operations of one of the departments within the
agency. In the present Public Safety Agency this concept would be even
more difficult to apply because the incumbent agency administrator has a
direct responsibility for the day-to-day line operations of a department out-
side the agency.
As originally conceived, this agency was to be comprised of the California
Highway Patrol, the Department of Motor Vehicles, the Military Depart-
ment, the California Disaster Office, as well as certain law enforcement
functions including the Department of Justice. However, the first two of
these were assigned by statute to the Highway Transportation Agency,
and the final draft of the Governor's committee report, as well as subse-
quent staff recommendations, left the Department of Justice undisturbed.
A Governor's committee proposed that the Fire Marshal be affiliated with
the Architectural and Building Standards Services and that the Depart-
19
ment of Veterans Affairs be grouped for administrative purposes with re-
lated services of the Health and Welfare Agency. Consideration should be
given to the realignment of the remaining departments comprising this
agency for there appears little practical likelihood of a logical grouping
of these functions into a true public safety agency.2
A proposal to establish a Department of Public Safety by combining the
California Disaster Office and the Military Department under a civilian
director who would be the State Director of Civil Defense in emergency
planning was made during the 1965 session of the Legislature (SB 1261).
The proposal was prompted by three major considerations: (1) a need to
improve the degree of coordination between the two departments in dis-
aster planning and recovery operations, (2) the desirability of placing the
employees of the California Disaster Office under the state civil service
system and (3) the nominal savings which would accrue as a result of the
proposed organization.1'5
The proposal was referred to interim study and subsequently killed for
several reasons. One of these is that the changes proposed related only
to an attempt to improve cooperation between the California Disaster Of-
fice and the Military Department and ignored those agencies having a pri-
mary responsibility for disaster operations during a disaster, such as the
California Highway Patrol, the Division of Highways, the Department of
Water Resources, the Department of Health, and others. In other words,
this bill just did not go far enough.
It is significant that the bill was not referred to the State Disaster Council.
This council, which includes representatives of state, county and city
governments, is specifically empowered by law to "recommend to the Gov-
ernor the assignment of any service or activity relative to disaster or dis-
aster planning to a state department having duties related to such service
or duty." 4
1 Public Safety Agency, California Blue Book, 1963, p. 370.
-See: Findings and Recommendations Concerning Reorganization of Executive Branch of Cali-
fornia's State Government. Commission on California State Government Organization and
Economy, December 31, 1962.
:5See: Legislative Fact Sheet, A Proposal to Establish a Department of Public Safety in Cali-
fornia State Government, distributed by supporters of SB 1261, 1965 General Session.
4 Military and Veterans Code, Section 1513.
20
CALIFORNIA STATE DISASTER COUNCIL
The California State Disaster Council consists of representatives of local
and state government, the American Red Cross, Speaker of the Assembly,
and President pro Tern of the Senate.5
Members of the Disaster Council are reimbursed for their actual and neces-
sary expenses incurred in connection with their duties or in lieu thereof
they receive mileage and $10 per day of actual service.0
The Governor is the ex officio chairman of the Disaster Council.7
The duty of the Disaster Council is to act as an advisory body to the
Governor in times of war or disaster and to minimize the effects of such
occurrences by recommending ameliorative action. The Disaster Council
meets upon the call of the Governor. During any war declared by Con-
gress or during any national emergency proclaimed by the President of
the United States, the Disaster Council is required to meet not less fre-
quently than once every month on the day to be designated by the Gov-
ernor.
It is also the duty of the Disaster Council to devise a state disaster plan,
encourage and approve mutual aid plans, and to evaluate state communica-
tions systems.8
The Governor may also establish a committee or a board composed of
heads of state departments or agencies of the state government, should he
deem it necessary, to aid him or the Disaster Council, or both, in obtaining
information and advice, assisting in developing or carrying out plans, or
otherwise acting in accomplishment of the purposes of the Disaster Act.9
The Disaster Council usually meets annually.10
STATE DISASTER COUNCIL
Number of Meetings Held
Year
1945 .....
Meetings
1
Year
1950
Meetings
5
Year
1955
Meetings
3
Year
1960 .
Meetings
.... 1
1946 .....
3
1951 .....
1
1956 .....
1
1961 .....
1
1947 .....
1
1952 .....
5
1957 .....
0
1962 .....
1
1948 .....
1
1953 .....
3
1958 .....
1
1964 .....
0
1949 .....
1
1954 .....
1
1959 .....
1
1965 .....
1
Source: Minutes, State Disaster Council.
The California State Disaster Council on December 4, 1961, approved
state government organization plans for civil defense. Basically, the plan
constitutes the new cabinet of agency administrators as the Disaster Con-
trol Board and gives to the Public Safety Administrator responsibility to act
for the Governor in the direction of overall state emergency operations.11
There are several advisory committees to the California Disaster Council.
However, these committees have not reported on their activities since
February, 1962, more than four years ago.12
5 Ibid, Section 1510.
"•Ibid., Section 1511.
"Ibid., Section 1512.
»Ibid., Section 1513.
»lbid., Section 1514.
10 Minutes, State Disaster Council.
11 Ibid., December 4, 1961.
12 Ibid., February 21, 1962.
21
CALIFORNIA DISASTER OFFICE
The California Disaster Office has responsibility for planning and coordi-
nating statewide programs for emergency relief operations in the event of
natural or war-caused disaster and for providing leadership and assistance
to other state agencies and local governments in developing an effective
state of operational readiness as provided in the California Disaster Act.13
The California Disaster Office implements four basic programs:
1. Disaster Preparedness
The objective of this program is to create on the part of state and local
governments the ability to cope with the natural or war-caused disaster.
Some 15 projects relating to civil defense and disaster planning and train-
ing are included in the program. These projects include the development
and maintenance of the State of California Civil Defense and Disaster
Plan, Master Mutual Aid Agreement, and plans to provide for continuity
of government during an emergency.
2. Emergency Systems Development
The objectives of this program are to develop and maintain the equipment
and various systems needed by state and local governments to conduct dis-
aster operations. Some 30 projects are contained in this program. These
projects relate to development and maintenance of communications sys-
tems, radiological monitoring systems, medical and health supplies and
equipment and specialized vehicles and equipment needed for mutual aid,
fire and law enforcement purposes. Under this program the office assists
state agencies and local jurisdictions throughout California in the procure-
ment of federal matching funds for the procurement and maintenance of
22
equipment needed for disaster purposes. Additionally, the office provides
administrative and technical assistance to local jurisdictions.
The capabilities which are developed through this program are primarily
applicable to civil defense programs but may be applied to natural disaster
programs.
3. Mutual Aid and Disaster Relief
This program includes actions taken in anticipation of, during and subse-
quent to a disaster. The included projects relate to operation of the state
warning and communications center, conduct of mutual aid operations,
such as fire suppression during a disaster, and administration of federal
disaster relief funds under Public Law 875.
4. Administration
All management and supervisory functions, fiscal and other services re-
quired for direction and support of all departmental programs are consid-
ered part of administration. The management structure includes the direc-
tor and his staff, seven headquarters division administrators responsible for
specific functions and four regional administrators. A system of project au-
thorization and control and a policy procedure manual provide the method
of directing the activities and evaluating the progress of the office.
The 1966-67 budget allocated $1,137,894 for support of the Disaster Of-
fice. An additional $837,863 was contributed by the federal government for
support. The headquarters staff total approximately 90 positions of a total
of 126 authorized positions.14
13 Military and Veterans Code, Chapter 1, Division 7. See also: Natural Disaster Check List for
Public Officials, California Disaster Office, August 1964.
11 Senate Bill No. 1, 1966 Second Extraordinary Session.
23
CALIFORNIA CIVIL DEFENSE AND DISASTER PLAN
The 22 state agencies involved in the California Civil Defense and Dis-
aster Plan and their major responsibilities are:
1. Department of Agriculture — Food supply administration, biological
and chemical defense.
2. Department of the California Highway Patrol — Traffic control and ra-
diological monitoring.
3. Department of Conservation — Division of Forestry — Fire and rescue
organization and radiological monitoring.
4. Department of Corrections — Emergency shelter and welfare for disas-
ter victims and radiological monitoring.
5. Department of Education — Dissemination of survival information.
6. Department of Employment — Manpower administration.
7. Department of Finance — Equipment and material supply and records
preservation.
8. Department of the State Eire Marshal — Assistance to fire and rescue
operation and radiological monitoring.
9. Department of Eish and Game — Law enforcement and radiological
monitoring.
10. Department of Industrial Relations, Division of Industrial Safety —
Facility protection advice and radiological monitoring.
11. Department of justice — Law enforcement, communications and radio-
logical monitoring.
12. Department of Mental Hygiene — Medical care and emergency welfare
to disaster victims.
13. Military Department — Law enforcement and intelligence.
14. Department of Motor Vehicles — Central registration service for dis-
placed persons.
15. Department of Parks and Recreation — Emergency shelter and welfare
for disaster victims.
16. Department of Public Health — Medical care, sanitation, and public
health, chemical and biological defense, radiological monitoring.
17. Public Utilities Commission — Transportation resource.
18. Department of Public Works — Damage control intelligence and trans-
portation resource.
19. Department of Social Welfare — Emergency relief.
20. Department of Veterans Affairs — Emergency shelter and welfare for
disaster victims.
21. Department of Water Resources — Flood control, engineering and ra-
diological monitoring.
22. Department of the California Youth Authority — Emergency shelter
and welfare for disaster victims and radiological monitoring.
24
Four of these enumerated departments, namely, Agriculture, Highwa) Pa
trol, Military, and Social Welfare have created full-time civil defense staff
positions with matching federal funds for half of the cost. The others
have assigned civil defense and disaster responsibility to regular personnel.
This committee requested each of the 22 state agencies to remit informa-
tion showing as specifically and extensively as possible what their depart
ment did before, during and after the following disasters: 15
1. The Crescent City Tidal Wave Disaster of 1964.
2. The 1964-65 Humboldt County Floods.
3. The 1965 Watts Riots.
Following is a summary of the responses received:
The Crescent City Tidal Wave Disaster of 1964
The Crescent City area was struck by a series of four heavy tidal wave
surges commencing about midnight Friday, March 27, 1964. The primary
geographical boundaries of the major damage areas comprise about 29
square blocks of the City of Crescent City.
The above areas of destruction represented an economic loss estimated at
from 20 to 45 millions of dollars. The entire business area of Crescent
City was considered a total loss, requiring complete rebuilding of this sec-
tion of the city.
The Department of Agriculture was not called for assistance in this disas-
ter because damage was restricted to business establishments. There were
ample local facilities for feeding and caring for the homeless.
The California Highway Patrol observed that no one was in overall charge
of the disaster center.
The California Highway Patrol assigned radio dispatchers to the disaster
area enabling 24-hour radio communications both with mobile units and
with the sheriff's office. The California Highway Patrol kept a journal, a
continuing summary report of status conditions which was maintained at
the area California Highway Patrol office to provide a running account
of their operations to all news media. The area commander of the Cali-
fornia Highway Patrol appeared on radio and arranged for televised mess-
ages to inform the public of the situation and traffic control measures
and to enlist their cooperation.
Police Aid Sought
The California Highway Patrol recommended that legislative action be in-
itiated to authorize police agencies whenever a menace to the public health
or safety is created by a calamity such as a flood or tidal wave, to close
or restrict traffic on highways outside the disaster area which are essential
to the movement of equipment into and out of the area. The use of ropes,
signs, markers or guards other than police officers to indicate a closure
should also be authorized.
25
Due to the absence of a teleprinter facility at the Crescent City area office
of the CHP, it was necessary to expend a great deal of clerical hours and
cost in long-distance telephone calls in submitting periodic and special re-
ports. In addition, relaying these reports and other communications
through other facilities increase the probability of error. This area has pre-
viously experienced four disasters during the last 11 years. Therefore, it
was recommended that in an area such as Crescent City, where disasters
have occurred in the past, teleprinter service be installed, regardless of the
size of the organization, to facilitate communications with adjacent areas.10
The Division of Forestry, Department of Conservation, is an integral part
of the State Fire Disaster Plan. Twenty-three Division of Forestry ranger
unit administrators serve as operational area coordinators and three district
deputy state foresters serve as regional coordinators within the framework
of the State Fire Disaster Plan. In addition, a number of pieces of Cali-
fornia Disaster Office, fire, rescue, and communications equipment are
based at Division of Forestry installations. On Sunday, March 29, 1964,
all units in Crescent City were working under the overall direction of
civil defense officials.
During and after the Crescent City Tidal Wave Disaster, the Department
of Corrections sent 80 inmates and 5 Department of Corrections staff
members who were utilized directly in providing relief to citizens of the
area. These people worked under the supervision and direction of the
Division of Forestry. As a side note, there were no incidents involving
trouble with the inmates reported.
The Department of Education reported that no state textbooks were re-
ported to have been destroyed.
Manpower Use
The Department of Employment used their local office as a manpower
center when the devastated area was declared safe enough to enter. In
response to a call from civil defense officials, the Department of Employ-
ment immediately began recruitment of workers over a local radio station.
The department accepted calls from citizens offering use of labor and
equipment, and the department directed individuals to various relief sites
and various public agencies.17
The Department of Finance has developed a working relationship with
the agencies directly involved in disasters to assure adequate financial sup-
port of emergency and disaster operations, so that timely action is possible
and delays arising from administrative bottlenecks may be avoided. Imme-
diately after the Crescent City tidal wave, staff members of this depart-
ment accompanied damage evaluation teams to assess the extent of dam-
age and cost of repairs. Following these efforts, the Department of Finance
undertook the processing of claims for payment of the cost of repair or
restoration of damaged publicly owned facilities under the provisions of
the Emergency Flood Relief Law.
26
* ~* *+ ^
1
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-i«i*SK
The State Fire Marshal's Office sent a deputy from the Eureka branch
office to work from the City Hall in Crescent City. He was able to assist
in directing state, federal and local officials who were coming into the
stricken area to the proper agencies or persons. After the disaster, the dep-
uty and a fire prevention engineer, assigned from the Sacramento office,
made extensive surveys of the individual damaged buildings. They were
accompanied by members of the State Division of Housing, Division of
Highways, State Department of Public Works, and Department of Fi-
nance. Particular emphasis was made on inspection of all schools, jails,
institutions, and places of public assembly, which are occupancies under
the direct jurisdiction of the State Fire Marshal's regulations.
Wardens Help
Wardens of the Department of Fish and Game, in the north coast area,
assisted in warning residents in endangered areas of the impending dis-
aster. The warden in Crescent City warned the occupants of buildings in
the lower part of that town prior to the arrival of the destructive massive
waves. Immediately following the disaster, wardens in the northwestern
counties were assigned to patrol duty in Crescent City to assist local law
enforcement agencies in preventing looting, providing radio communica-
tions, and controlling the entry of unauthorized persons into the disaster
area. Such work was done under the direction of the local agencies.
The Division of Industrial Safety, Department of Industrial Relations, was
not involved in the Crescent City disaster. The division was not called
upon for service, and a call would not normally have been expected un-
less the needed work was closely related to its assigned responsibilities.
The Department of Mental Hygiene did not take specific action and none
was requested. The department's facilities were outside the area affected .
The State Military Department took a number of significant actions be-
tween January 1, 1962 and the March 1964 Crescent City disaster, which
enhanced the readiness of the Military Department. The first action oc-
curred in February 1962 with the employment of a civil defense opera-
tions officer in the office of the Adjutant General. For the first time, the
Adjutant General had a full-time staff officer who could devote his efforts
exclusively towards coordinating and planning for state military support
of civil government during emergencies. The other major action was em-
ployment a year later of a full-time signal officer in the office of the Adju-
tant General. This was the first time the Adjutant General had a staff
officer who could devote his efforts exclusively towards that vital aspect of
disaster preparedness. This, in effect, gave the Military Department two
full-time coordinators for disaster programs. The Military Department also
maintains direct and continuous liaison in coordination with the headquar-
ters of the Sixth United States Army. In connection with the seismic wave
disaster at Crescent City, civil authority did not request military assistance.
The State Military Department, therefore, did not officially participate in
the Crescent City disaster. Unofficially some volunteer members of the
28
State Military Reserve made their services available. I [owever, the National
Guard was not utilized.
Military Support
Following the Crescent City emergency, the tempo of preparedness activi
ties increased as a result of actions taken by the Department of Defense.
In June 1964, the Secretary of Defense approved a plan whereby the
State Adjutant General would, in the event of a nuclear attack, become
the commander of all federal forces engaged in supporting civil authority.
This plan, concurred in by the Governor of California, had some impact
upon the Military Department. First, it established the Adjutant General
as the primary preattack coordinator and planner for military support of
civil defense. Second, it clarified the status of the National Guard under
such conditions, and third, it provided the Adjutant General with eight
federally paid, full-time planners to accomplish the new mission. Of signifi-
cant importance, even though the plan was predicated upon a nuclear
attack situation, the resources provided by the federal government to im-
plement and support the plan could be used fully in preparation for mili-
tary support of civil government under any other condition of emergency.
Initial planning for the implementation of this plan was completed in
January 1965. Employment of the full-time planning personnel was ac-
complished between March and June of 1965. The military forces of the
State of California have a traditional responsibility to be trained to assist
civil authority wherever civil resources are inadequate to meet an emer-
gency situation. Although the primary mission of the National Guard is to
be trained for the military defense of the United States, an ever-increas-
ing emphasis is being placed upon the Guard's civil assistance role.
The Department of Motor Vehicles indicated that their formal responsi-
bility in regard to the State Disaster Program was not affected by this dis-
aster.
The Department of Parks and Recreation field personnel from Jedediah
Smith Redwood State Park contacted the Office of Civil Defense in Cres-
cent City immediately and put all of the resources of the park at their
disposal. The Office of Civil Defense utilized these resources in both
evacuation and cleanup work. The Division of Small Craft Harbors made
a survey of damage to boats and harbors resulting from the tidal wave
and also made certain inquiries regarding boats damaged by the Humboldt
County floods. The Division took no further action in view of the Federal
Aid Program. The Division estimated that the cost for rehabilitation of
the harbor to be $252,000, which allows for some salvage.
Department of Public Health responsibility for coordination resided within
its Division of Community Health Services through its regional medical
coordinator who was first informed of the tidal wave disaster early on Sat-
urday, March 28, 1964. The situation was quickly assessed and it was de-
termined that the major problem was that of environmental health and
that the medical situation was well in hand. In addition to the local
29
Health Department, the regional medical coordinator worked closely with
the personnel of the State Department of Forestry, State Department of
Corrections, and the State Highway Patrol. Forty-eight hours after the dis-
aster, a state sanitarian from Berkeley arrived in Crescent City to assist
in the local health authority's program of debris removal. On the day of
the disaster, two food and drug inspectors were assigned to Crescent City
to assess the problem of damaged food goods and to quarantine as neces-
sary. Two days after the disaster, two members of the Bureau of Vector
Control of the State Health Department arrived to work with the local
health authorities in assessing the possibilities of problems arising as a
result of the disaster, mainly in the area of mosquito and rodent control.
State Agencies Cooperate
The Public Utilities Commission staff made periodic telephone inquiries
of electric, water, and telephone utilities involved concerning the extent
of their damage and the action they were taking to restore utility service
to the affected area.
The Department of Public Works, Maintenance Department of the Divi-
sion of Highways, has borne the brunt of emergency work in restoring
the state highway system to normal use following major storms, slides or
other disasters. After the Crescent City tidal wave struck and the waters
had receded, highway maintenance crews moved in immediately and
cleaned out the debris and opened Route 101 to traffic as soon as possible.
The Division of Highways maintenance crews were requested to assist the
city in cleaning up the streets of debris in the area that had been struck
by the tidal wave. Maintenance crews moved in immediately and worked
approximately four days in assisting city maintenance crews in clearing
the streets and opening them to traffic. The Division of Highways forces
were reimbursed in the amount of approximately $4,900 from other than
state highway funds for doing this work. The damage to the state highway
system was repaired in the customary manner, and this work was financed
with maintenance funds.
The Department of Social Welfare has established a staff position to carry
out the functions of the emergency welfare services program and assisting
local welfare departments to develop emergency welfare services plans as an
integral part of city and county civil defense and disaster plans. The depart-
ment placed initial emphasis on planning and organizing operations for
welfare services in war-caused emergencies. However, the department is
currently reexamining state and county welfare responsibilities in opera-
tional capability for disasters from natural causes as well. After the Crescent
City tidal wave struck, mass care centers for evacuees were set up under
the direction of Del Norte County officials. Inasmuch as the destruction
created by the tidal wave was limited almost entirely to the business dis-
trict and very few private homes or citizens were involved, little was re-
quired in the way of disaster relief or rehabilitation.
30
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-10 '" «
ill
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is
TEXACO
No Cal-Vet Farm and Home Loan contract holder suffered a loss to
his property in the disaster and, therefore, the Department of Veterans Af-
fairs did not participate in any of the state programs regarding that dis-
aster.
The Department of Water Resources sent a department employee for the
purpose of assessing the situation. It was determined that the department
could not render assistance through any of its programs.
The Department of Youth Authority was not directly involved in the Cres-
cent City tidal wave disaster.
Damage Assessment
The Department of General Services, through its Office of Architecture
and Construction, became involved by its evaluation of damages and its
offer of assistance during the period of disaster.
The Department of Finance requested the Office of Architecture and Con-
struction to dispatch a team of specialists to investigate and appraise dam-
age to public facilities in that area. Damage to sewer and water services
was also to be given special attention. When the team got to Crescent City,
they found that emergency clearing and sanitary control measures were
being done under the direction of the county sanitarian and flood control
coordinator, assisted by an official of the State Department of Public Health.
Equipment and personnel were made available by the State Division of
Highways, Division of Forestry, and Department of Corrections to expe-
dite the clearing operations.
The task force sent to Crescent City to assess damages adopted as a tem-
porary headquarters the assessor's office. A great deal of time was spent in
the county assessor's office, pulling records and tabulating assessed values
of all parcels in the damage area, verifying values of properties completely
destroyed or to be removed, and correcting maps of the area. The prelim-
inary estimate of damages to public and private property, prepared by the
Office of Architecture and Construction, was reviewed and concurred in
by representatives of the California Disaster Office, Department of Finance,
and two other representatives of the Office of Architecture and Construc-
tion.ls
The Department of Justice was not involved in any of the activities con-
cerned with this disaster.
The California Disaster Office now disseminates all seismic sea wave in-
formation and warnings issued by the United States Coast and Geodetic
Survey to California's coastal city and county governments, and to the
California Highway Patrol.
'"'Letters to 22 state agencies regarding disaster study, October 18, 1965, from Chairman Powers
to agency heads and responses.
See also: Administrative Orders 62—1 to 62—22 authorizes California Disaster Office to assign
specific civil defense and disaster responsibilities to particular agencies subject to agreement
between agency and California Disaster Office and approval of the Governor.
"; See: Summary Report, Crescent City Area Emergency Operation, State of Disaster, March 28,
1964, April 6, 1964, California Highway Patrol.
17 Sec: Log of the Crescent City Local Office Activities, during the 36 hours after the tidal wave
struck, Department of Employment.
18 See: "Tidal Wave Damage," by Ray H. Soehren, OAC Coordinator and others, April 16, 1964.
32
The 1964-65 Humboldt County Floods
The first indications of flooding became indicative on December 21. As
the situation progressed, it soon became apparent that a flood of major
proportions was in the making and would ensue. By the morning of De-
cember 22, all roads into and out of Humboldt County were closed due
to high water, slides, and bridges out. Many communities were isolated
and completely cut off from surrounding communities. Isolated communi-
ties, in the order of their isolation, were Cummins, Garberville, Miranda,
Myers Flat, Weott, Willow Creek, Hoopa, Weitchpec, Orleans, Pepper-
wood, Scotia, Rio Dell, Ferndale, Shively, Stafford, Fortuna, Carlotta, Eu-
reka, Areata, Samoa, Blue Lake, and Orick. The ravages of the waters
resulted in very heavy losses to bridges on major state and county road-
ways. Many stretches of highway were completely wiped out from slides
and slipouts. Approximately 550 homes were destroyed in Humboldt
County, with approximately 1,200 homes damaged. Hundreds of vehicles
were destroyed.
During the early stages of the flood, the Department of Agriculture con-
tacted the California Disaster Office and made inquiries on the food situa-
tion in counties affected by the flood. Information received revealed that
most refugees had moved to higher ground and were staying with friends.
In areas where mass feeding was instituted, food was supplied by wel-
fare agencies and the Red Cross. In rural, isolated areas there were air-
drops of food to those in need. Since airfields were in operation in Areata
and Crescent City, those cities were regularly supplied with food via char-
tered airlines.
Because the dairying and the livestock industries are major sources of
income to Humboldt and Del Norte Counties, the California Depart-
ment of Agriculture received numerous requests for assistance to transport
feed and hay to distressed dairymen and cattlemen in the disaster area.
The feed condition was very critical in that thousands of animals were on
narrow rations.
The department coordinated its activities with the California Disaster Of-
fice and assisted in the air movement from McClellan Field in Sacramento
to the Areata and Crescent City airports of 2,818,649 pounds of feed and
hay during a 26-day period, ending on January 22, when the first road
was opened.
The department also coordinated with the counties requesting assistance
in the airdrop of hay by helicopter to isolated cattle herds in remote areas
where bridges were destroyed.
During and after the flood period, the department's field representative
was in the disaster area to coordinate with local civil disaster officials on
feed matters requiring priority attention.
33
Other disaster activities engaged in by the department were in the burial
of thousands of animals drowned by the flood. The veterinarians worked
with public health officials and with army engineers on this problem.
The Bureau of Dairy Service assisted in the inspection of stray dairy cattle
that were assembled into many herds for milking.
CHP Actions
Field operations by the California Highway Patrol during the early stages
of the disaster consisted primarily of evacuation of flood victims and assist-
ance to evacuees. Much of the efforts of the CHP manpower during the
early stages was devoted to control of people rather than traffic. Two loca-
tions where this was more prevalent than in other locations were Garber-
ville and Hoopa.
Garberville was isolated completely without sheriff's office personnel on
hand. The only law enforcement officers were California Highway Patrol
officers. The CHP immediately assumed responsibility for all law enforce-
ment control in the Garberville-Redway vicinity. Directions were given to
set up patrols to control looting and enforce a rigid curfew immediately.
The Civil Defense Director, at CHP request, closed all bars in the com-
munities. The sheriff was able to place manpower in Garberville on De-
cember 26, and at this time California Highway Patrol personnel re-
turned to traffic duties.
The same condition prevailed in the Hoopa vicinity. A CHP officer was
dispatched from Willow Creek to Hoopa. He crossed the river and hiked,
with a backpack, to Hoopa. Hoopa was without heat, electricity, and
communications of any type. Once in Hoopa, the officer and a deputy
sheriff organized a law enforcement group. The deputy immediately depu-
tized 20 special deputies. These men were directed by the CHP officer
and the deputy sheriff.
The early stages of the disaster in the immediate vicinity of Eureka, Ar-
eata, and Fortuna also included many instances of assistance in the evacua-
tion of people. Traffic control, due to restrictions of automobile movement
during the early stages, was a minor problem compared to the control of
people. Assistance in patrol of flooded areas was rendered to the sheriff
at his request. Patrols were primarily necessary to suppress and discourage
looting.
As roads started to open, at first only to four-wheel-drive vehicles, Cali-
fornia Highway Patrol traffic responsibilities became abundant. The flood
left hundreds of people marooned in the area who were traveling through
for Christmas holiday visits in the south. Although many of these people
eventually flew out of the area, many did not have funds for this mode
of transportation. The economy of the area is extremely dependent upon
roadway travel. The railroad line into the area was completely wiped out
and the need for road travel was even more imperative. Roadways out of
the area opened slowly.
34
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Manpower
Some of the activities of the California Highway Patrol can be grouped
into general subject areas. First of these is manpower. On December 24,
a total of 80 outside police officers from the bay area were flown in to
assist the sheriff with law enforcement control. They were deputized by
the sheriff.
The influx of 80 lawmen into the area led to a situation wherein the
sheriff had more manpower than he could use, due to the fact that all
planes and helicopters were grounded because of inclement weather and
the men could not be dispersed.
The California Highway Patrol was contacted by the sheriff and asked
if the CHP could utilize some of the manpower. The assistance of these
extra officers was refused by the CHP.
The CHP points out that the men were, for the most part, inexperi-
enced in traffic control, not in uniform and, most important, not Califor-
nia Highway Patrol officers. The need for not accepting help from out-
side people was stated thusly by the CHP: "We have 3,000 uniformed,
trained, qualified and eager traffic officers available. How many do you re-
quire?" Resultant events proved the immediate availability of California
Highway Patrol assistance, when required and needed. On December 28,
12 traffic officers, 1 sergeant, and 1 dispatcher were flown in at the re-
quest of the Eureka area commander.
Other CHP Activities
Automotive equipment is the second subject area. The Eureka area, on
December 27, requested more automotive equipment. The vehicles arrived
the afternoon the request was made. The vehicles were flown in by C-119
Flying Boxcars. All vehicles arrived in good shape.
Another subject area is Civil Defense office liaison. As soon as the Civil
Defense office was activated, the CHP had a representative on post at
the Civil Defense office 24 hours a day. A meeting of Civil Defense service
chiefs was held daily in the county supervisors' chambers. The meeting
included attendance by federal and state coordinating heads. The CHP at-
tended each and every meeting.
On several occasions the California Highway Patrol would have been
placed into the taxi business for people who had no transportation had
not a representative been on hand to object. The California Highway
Patrol also maintained liaison with civil defense people in the smaller local
communities of Garberville, Willow Creek, and Hoopa. In Hoopa CHP
officers had to deal daily with decisions involving food supplies, medicines,
fuel and shelter. There were no other responsible persons to assume these
controls and they had to do so as a necessity.
As roadways started to open, it soon became apparent that a means of re-
cording road information had to be devised, and so the California High-
way Patrol devised such a system and began alerting the public. It was
36
soon apparent that the information regarding road conditions was not being
given the consideration it should have been given by the news media in
other area offices. The Division of Highways was putting out an informa
tional all-points bulletin which, in the opinion of the Highway Patrol,
was misleading and sometimes erroneous. People were driving up U.S.
101, having no idea that it was closed.
The CHP started an all-circuits, all-stations daily teletype road report. The
early teletypes asked all stations to advise their news media of the con-
tents. This helped in getting correct information concerning the condition
of the roadways out to the public.
Another subject area is relations with outside agencies. During the period
of the disaster, many agencies were dealt with by the CHP. The princi-
pal agencies dealt with daily were the California Disaster Office, the Di-
vision of Highways, the sheriffs office, the board of supervisors, police de-
partments, county road department, and the Red Cross.
During the early stages it became apparent that many flares and barri-
cades would be needed as soon as roads opened. Air transportation was ar-
ranged for the Division of Highways' supplies sent from Sacramento. This
transportation was arranged by California Highway Patrol personnel.
Communications Problem
Because of the numerous state agencies involved in the CHP communica-
tions systems, considerable research was required to find causes of break-
downs in that system. During the critical period of the disaster, the Eureka
area suffered many serious communications failures. Maintenance and re-
pair problems were increased because of the multiple ownership of state
radio facilities and the resultant division of responsibility toward their up-
keep.
When the California Highway Patrol communications failed, the CHP
had to depend upon the state agency owning the particular defective equip-
ment to make repairs and deliver fuel. As the trouble was almost always
located at mountain top repeater stations, the CHP was entirely dependent
upon other agencies for equipment to clear snow from roads leading to
those sites. It was apparent that the state agency which owns road-clearing
equipment does not give radio communications the high priority that the
CHP does during disasters. Consequently, necessary repairs to blacked-
out CHP communications during the flood disaster suffered extra delays
because of the lack of adequate transportation to snowbound stations.
The delay in replacing the defective antenna at Mt. Pratt was prolonged
because of having to wait for installers to come from Sacramento to per-
form a task that local technicians could have done in a much shorter time
because of the shorter distance involved. This was proven when, after
the installers had made their second trip from Sacramento to Mt. Pratt
and the antenna became defective again, the local technician was finally
given an okay to make repairs and did so in a matter of hours, rather
37
than several days as was previously required. Several of the standby gener-
ators are worn out war surplus machines, requiring constant repair.
The generator on Red Mountain failed so miserably that state agencies
were forced to use a private power plant for the long period that commer-
cial power was out. Fuel supplied to standby generators in Humboldt
County is mostly inadequate for sustained power during commercial black-
outs. The largest supply of fuel is contained in the 500-gallon tank at
Horse Mountain which required refueling six days after commercial power
failed and again the day before commercial power was resumed.
Borrowed walkie-talkie sets proved invaluable to officers that were isolated
in Hoopa and to officers on various one-way traffic control points. The
CHP had trouble obtaining walkie-talkie sets and then delayed operations
further until crystals could be located to set the transceivers on a common
frequency.10
Forestry Division Aid
Division of Forestry flood fighting and rescue activity can be broken down
into three areas of assistance:
1. That rendered to the Department of Water Resources for the patrol
and the protection of levee systems.
2. That rendered to local jurisdictions based upon the request of local
disaster officials, and
3. That rendered at the request of other state agencies, or which was
deemed necessary by the Division of Forestry personnel, based upon
their own judgment of need.
The Division of Forestry received its first request from the Department
of Water Resources flood operations center on December 22. This initial
request for 4 large bulldozers, 10 dump trucks, and 8 stakeside trucks,
was the first of a series of requests and activity that was not to end until
January 18.
The initial request for equipment was quickly followed by requests for
conservation camp crews to work in the Sacramento area. This resulted
in the establishment of a flood-fighting camp at the Davis installation on
December 22. A second flood-fighting camp was established at the Colusa
Fairgrounds.
To meet additional high water problems and levee threats, it became nec-
essary to establish the third and fourth flood-fighting camps at the State
Fairgrounds in Sacramento and at the Stockton National Guard Armory
on Christmas Day, December 25. The fifth flood-fighting camp was es-
tablished at Hastings Island near Rio Vista on December 26 as the high
water began to crest in the delta area. There were 78 conservation camp
crews plus additional kitchen crews committed for a total of 1,377 inmates
and Division of Forestry crew leaders.
The majority of crew activity consisted of patrolling levees and reinforcing
observed weak spots. To meet the needs for movement of men and equip-
38
ment dispatch offices in the Sacramento headquarters and in division dis
trict headquarters at Santa Rosa, Redding, and Sacramento were manned
on a 24-hour basis as required during this emergency period.
In the North Coast district personnel from the Alder Conservation Camp
assisted local authorities with rescue operations and in evacuation, cleanup
and salvage in the vicinity of Klamath, Klamath Glen, Smith River, and
Orick. They aided the local highway crews in the removal of slides on
main roads. Several homeless families were given shelter at the Alder Camp
until other arrangements could be made.
In cooperation with disaster officials and the Red Cross, as many as 157
homeless people were furnished meals at the camp for approximately two
weeks.
The Division of Forestry's communications system played a vital role in
communications to isolated towns and small communities and in providing
flood-stage information to disaster and weather bureau offices.
Critical river readings were supplied on an hourly basis from the Leggett
and Alderpoint areas by Division of Forestry personnel. In addition, flood-
stage information was reported from Fort Seward on the main Eel River
and from Bridgeville on the Van Duzen River.
Division of Forestry personnel, with mobile units, reestablished communi-
cations with a number of the smaller mountain communities in the North
Coast area following the flood disaster.
In order to provide uninterrupted communications for emergency opera-
tions affecting not only the Division of Forestry but the Division of High-
ways, the Highway Patrol, and the California Disaster Office, communi-
cations service radio technicians and Division of Forestry personnel
manned repeater points at Mt. St. Helena, Mt. Berryessa, Cahto Peak,
and Seigler Mountain on a 24-hour-day basis for several days. In effect,
the Division of Forestry coordinated communications.20
Inmates Involved
Department of Corrections inmates and staff working jointly with the Di-
vision of Forestry in the northern and central areas of the state were in-
volved in —
(1) Saving lives of citizens trapped by flood waters;
(2) Reinforcing levees to protect communities in danger of flooding;
(3) Operating kitchen crews to feed refugees from flood-stricken areas,
and
(4) Playing Santa Claus to homeless children in isolated areas during
Christmas.
During the disaster period 80 conservation camp crews, totaling 1,200 in-
mates, and 250 Division of Forestry support personnel battled floodwaters.
Communities where these services were provided included Davis, Colusa,
Sacramento, Stockton, and Rio Vista, as well as the hard hit northern coun-
ties of Del Norte and Humboldt.
39
The productivity and utilization of inmate manpower was effectively dem-
onstrated. This applied not only to inmates who were located in a par-
ticular area but also the effectiveness of bringing inmates from a consid-
erable distance to assist with a local disaster situation. Inmates were trans-
ported from as far south as San Bernardino County into the northern
parts of the state to help out with the flood. The fact that these inmate
crews received both physical as well as team training in fire-fighting and
other emergency and rescue work greatly increases their effectiveness in
emergency situations.
The Department of Education provided the California Disaster Office with
analyses and recommendations on each application from school districts for
supplemental assistance under Public Law 875 as a result of the disaster.
Immediately subsequent to the flood disaster in northern California, per-
sonnel of the Bureau of Administrative Services of the Department of Edu-
cation visited county schools' offices in school districts in the affected
areas. The purpose of the visits was to assist all local agencies in recon-
structing attendance records, so that there would be no loss of attendance
incurred on account of the disaster. Emergency applications were processed
and approved for all school districts with the result that there was no loss
of attendance for state apportionment. There developed a need in the
disaster area for immediate classrooms to replace those that had been wiped
out. Eventually new schools were established.
Personnel Availability
The Department of Employment, Employment Service Office, was con-
tacted by the sheriff's office with a request for guards. The Employment
Service Office recruited, screened, and placed nearly 200 guards so quickly
that with their help the law enforcement officers were able to prevent all
looting. Over 100 other emergency service workers were recruited to load
and unload planes, assist in the construction of prefabricated buildings,
clear debris, and do other emergency work.
As soon as the extent of the disaster was recognized, Department of Em-
ployment personnel were at the manpower desk in the Civil Defense Oper-
ating center. The desk was manned 24 hours a day, 7 days a week.
During the first week, over 500 applications were taken by the Manpower
Service, most of them for volunteer labor. The interviewers were able to
dispatch several hundred of these volunteers. No shortage of people or of
skill appeared at the Employment Service Office in Elumboldt County.
The problem of restoring unemployment insurance services to those resi-
dents cut off by the floods received attention. Two staff members flew into
Garberville by Marine helicopter and set up a temporary claims service;
then arrangements were made for itinerant claims service in the Scotia-
Rio Dell area, which is not ordinarily so served.
On January 7, claims service was begun by airplane to the Hoopa area,
which contains California's largest Indian reservation, and to Willow
Creek. Another isolated town, Orleans, was served by air and by mail.
40
Civil defense people had apparently assigned a high priority to unemploy-
ment insurance services, and from the beginning of the emergency had
urged that there be no interruption in benefit payments. The workload
eventually became so great for the department employees that volunteers
were called for from the San Francisco Bay area offices. Many responded
to the call for help and eight were chosen. They were flown to Eureka
where they worked on an as-long-as-needed basis.
Two things became evident to the department as a result of their experi-
ence in this disaster:
(1) the importance of prompt unemployment insurance payments in
supporting the economy of the disaster area, and in minimizing
the necessity for long-term relief:
(2) the lack of need for recruitment outside a disaster area; the disrup-
tion of normal business in industry usually frees more local men
than the disaster services can use.21
The committee notes that while the Department of Employment is of the
opinion that recruitment of workers from outside the disaster area is un-
necessary, other state agencies, such as the Department of Corrections,
transported personnel from as far away as San Bernardino to the disaster
area.
Claims Processed
The Department of Finance acted primarily in an advisory or consultative
role. Immediately after the Humboldt County floods staff members of this
department accompanied damage evaluation teams to assess the extent of
damage and cost of repairs. Following those efforts, the Department of Fi-
nance undertook a processing of claims for payment of the cost of repair or
restoration of damaged publicly owned facilities under the provisions of
the Emergency Flood Relief Law.
The State Fire Marshal deputy from the Eureka branch office set up op-
erations in the California Disaster Office's Coordination Center in Eureka.
All activities relative to fire and life safety were administered through this
center. An inventory was immediately taken of all fire-suppression equip-
ment in the area and the degree to which it was operable and the degree
to which the fire departments could provide fire protection. After the flood,
inspections were made of existing buildings for temporary housing of school
facilities. Under the broad performance-type building regulations, the
State Fire Marshal was able to approve use of churches, motels and other
facilities for school purposes on a temporary basis and at the same time
to provide reasonable fire and life safety to the children.
The State Fire Marshal suggested that while there is always some con-
fusion in all emergencies, there does appear to be a need for a more
clearly defined single agency responsible for directing and coordinating all
state and local activities. According to the State Fire Marshal, this is par-
ticularly evident during large forest and brush fire emergencies.
41
The Department of Fish and Game personnel, particularly the officers in
the Wildlife Protection Branch, took an active part in the disaster. The
law enforcement personnel of the department were concerned with rescu-
ing persons stranded and endangered by floodwaters. Such rescues were
effected by use of department boats, mainly small skiffs with outboard mo-
tors. In addition to rescue operations, the law enforcement personnel as-
sisted other law enforcement agencies in the performance of necessary du-
ties. Use was made of the department's radio communication system. In
several areas isolated by the flood, the only communication with the out-
side was through the department radio equipment in wardens' vehicles.
This radio equipment was also used to transmit local weather informa-
tion to military rescue operation bases where helicopters were dispatched
for rescue flights. This local weather information was invaluable in sched-
uling helicopter flights as all other communication systems were inopera-
tive. The radio system was used extensively. Extra portable radio sets were
flown into the area by military aircraft.
Del Norte Center
The Department of Fish and Game made reference to the disaster control
center in Del Norte County. Apparently the Del Norte County disaster
control center was a small, compact, efficient operation made up of the
local sheriff, the civil defense director, four chiefs of staff and clerical and
dispatch personnel. The warden of the Department of Fish and Game
served as one chief of staff dealing with all information and actions af-
fecting life and property.
The committee notes that local people stationed at the location of the dis-
aster were able to formulate and set up their own disaster control center
to meet the threat from the disaster. It illustrates that those persons on
the local level who are accustomed to dealing with each other on a day-
to-day basis can effectively coordinate with each other to meet the threat
of a disaster.
The Department of Industrial Relations, Division of Industrial Safety, had
a representative located in Eureka at the time of the Humboldt County
floods. He was isolated at his home in Rio Dell by bridge failures and so
he remained in that area for the rest of the week. He assisted in evacuating
people, home furnishings, and livestock to higher ground. However, as a
division, there was no participation by the Division of Industrial Safety
in flood activities.
The Department of Justice did not do any special activity as a result of
the Humboldt County floods.
Talmage Flood
The Department of Mental Hygiene State Hospital was threatened by the
Humboldt County floods. The high water in later December and early
January badly flooded the village of Talmage, which is adjacent to Men-
docino State Hospital. Personnel and equipment from the hospital worked
42
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with the county disaster corps in evacuating the area. About 50 people
were evacuated to the hospital the first night, with about 20 remaining for
three or four nights. One family of 8 was given housing for about 2 weeks.
Military Role
The seriousness of the flood situation in northern California was called
to the attention of the State Military Department by a telephone call
from the Humboldt County sheriff. The sheriff requested National Guard
assistance in the vicinity of Eureka. Between then and the end of March
1965, the National Guard was heavily engaged in supporting civil authori-
ties, not only in Humboldt County, but in most of the northern counties.
A variety of tasks were performed, including rescue and evacuation, pre-
vention of looting, security of installations, land and air transportation of
relief supplies, and even the operation of a ferry provided by the U.S.
Army where the flood had destroyed the Highway 101 bridge over the
Klamath River. National Guard personnel and equipment from Salinas,
San Jose, and Sacramento were flown into the areas by the Air National
Guard.
A step was taken to enter into an agreement with the Commanding Gen-
eral, Sixth U.S. Army, for the exchange of liaison and information. The
Army commander expressed his desire to look to the Adjutant General to
evaluate state requirements if federal military assistance were to be re-
quested through the regional Office of Emergency Planning. And, with the
employment of the federally paid, full-time military support planners in
the office of the Adjutant General, a nucleus of a full-time emergency op-
erations center was provided.
Personnel of the State Military Reserve who were assigned to units in the
vicinity of Eureka were ordered to active state military duty. These indi-
viduals were used, for the most part, in support of Humboldt County civil
defense, although some did perform other tasks during the early part of the
emergency. The main task assigned, however, was to assist in the operation
of the civil defense emergency operations center, at the request of the civil
defense director.
The Department of Motor Vehicles did not participate in the disaster pro-
gram. There was some personal participation by one of the managers of a
district office of the department, but there was no departmental response
to the floods.
The Department of Parks and Recreation, Division of Beaches and Parks,
district and field personnel, participated in the disaster operations begin-
ning during the build up period of the floods and continuing throughout
the disaster period. All personnel of the Division of Beaches and Parks
were placed on a 24-hour emergency call basis as of that time. All units
in the flood zone were instructed by telephone to contact their local office
of civil defense and to offer all park resources to assist with the disaster
effort. After that, Beaches and Parks personnel participated as requested
by the Office of Civil Defense in the disaster effort. For several days,
the town of Guerneville obtained water from the park water supply.
44
Public Health Department
The Department of Public Health received word on the morning of De
cember 22, that the Klamath River and the Redwood Creek were Hooding.
An emergency desk was established by the State Department oF Public
Health in the Division of Community Health Services. Other divisions
and bureaus were notified. By late afternoon, some of the counties had
declared their entire counties disaster areas and a state of emergency was
declared by the Governor. At this point, the Department of Public Health
notified Civil Defense that it was available for any calls. On December
23, it wras decided that representatives from the Bureau of Sanitary Engi-
neering, Food and Drug Inspections, and Vector Control, should be sent
to the flood area. They were flown into the area as soon as air transporta
tion was available. Daily reports were made and telephone surveillance was
made during the next few days. More health department personnel went to
the flood area later that week and on January 4, one physician, four
sanitarians, and one laboratory person joined the engineers and food and
drug inspectors. The Bureau of Nursing sent three nurses into the disaster
area to work with the Red Cross in certain isolated communities.
Department of Public Health personnel in Humboldt-Del Norte Counties
assisted in :
(1) Making surveillance trips to assess damage, determine general health
needs, and establish emergency measures for water, dead animals
and food in stricken communities;
(2) Helping with routine duties of the local health departments and
keeping constant surveillance after regular office hours;
(3) Coordinating the Red Cross and the local health departments in cer-
tain activities;
(4) Interpreting and evaluating reports on the local situation and trans-
mitting summaries to the State Department of Public Health.
The Bureau of Sanitary Engineering provided field personnel from as far
away as Los Angeles. At the peak of the emergency, 15 engineers were
in the field, and approximately 200 man-days were spent on flood disaster
work from December 22 to January 11. Where sources of water supplies
were disrupted, sanitary engineers from the department worked with the
local people to assist in restoration of these services. Assistance was given
in securing equipment and supplies, including chlorinators and chlorine
where needed. In one community, sanitary engineers from the department
led a work party in laying several hundred feet of pipe to bring in supple-
mentary water to a part of the community which was out of water. The
Bureau of Sanitary Engineering will continue to assist the flood-damaged
areas. Long-term followup is necessary until all water supply and sewerage
systems are restored to normal operation. The bureau is now assessing
damages to water and sewerage facilities and certifying to these damages
as part of the Federal Assistance Program (PL 875). Similar work will be
done later on the State Aid Program.
45
Food and Livestock
The major activities of the Bureau of Food and Drug Inspections were to
inspect flood-damaged food and drug establishments and, where necessary,
quarantine foods, drugs, or liquor suspected of being contaminated by the
flood waters.
The Bureau of Vector Control made extensive searches by ground and air
of beaches and flood areas for dead animals. Livestock carcasses were lo-
cated and mapped, and sites of log-jams and large concentrations of debris
were also noted. Animal disposal sites were established and disposal activi-
ties were conducted by the U.S. Army Engineers and the National Guard
under the bureau's surveillance. Other accessible county refuse disposal
sites were inspected to verify their levels of sanitary operation, and the bu-
reau assisted local public health personnel to reestablish garbage collection
services, chlorinate wells, and reactivate and clean septic tank systems and
other individual sewage disposal systems. Investigations were made of do-
mestic rat infestations and sites were established for garbage disposal, non-
combustible waste disposal, and combustible refuse burning.
On January 3, three Public Health nurses were assigned to the Red Cross
at the request of the California Disaster Office. They were reassigned to
isolated areas of Humboldt County which had no medical or nursing per
sonnel, and which were accessible only by helicopter. The nurses handled
first aid and prescriptions and arranged for helicopter transportation to Eu-
reka where more definite treatment was available.
Laboratory Field Services provided a person to the local health department
laboratory in Eureka, and also sent additional equipment that was needed
due to the increased work load. The water and sanitation laboratory in
Berkeley shipped an incubator to Eureka to handle an increased number
of water samples over the ensuing several months.
The Director of Transportation of the California Public Utilities Commis-
sion is also Chairman of the Emergency Motor Transport Board which was
formed under the auspices of the Interstate Commerce Commission and
the California Disaster Office. In this particular case, the Director of
Transportation convened the Emergency Motor Transport Board at the re-
quest of the Director of the California Disaster Office, to consider the
problem of moving feed and grain to Del Norte and Humboldt Counties
for livestock which were cut off from other sources of food. A critical prob-
lem had arisen, because this feed and grain had, up until the time of the
Emergency Transport Board meeting on January 7, 1965, been moved by
airlift by the federal government, and the federal government had ordered
the airlift discontinued. As a result of the meeting, the California Emer-
gency Motor Transport Board recommended to the Director of the Dis-
aster Office that the airlift be continued until barge and highway trans-
port would be available to the area. The airlift was continued for a week
or so which was sufficient time to permit the restoration of highway trans-
portation for the feed and grain.
46
Traffic Movement
The commission, or members of its staff, took a number of actions through
its normal channels, and it was these activities which constituted the
greater portion of the commission's involvement in the Humboldt County
floods. For example, the commission contacted the Western Greyhound
Lines officials in order to ensure the restoration of bus service to the area
at the earliest possible date. The commission also obtained information
from the California Division of Highways with respect to highway condi-
tions at various points, in order to properly advise Western Greyhound
Lines officials of those conditions. The commission also conferred with of-
ficials of the Northwestern Pacific Railroad with respect to rebuilding that
railroad through the Eel River Canyon. However, the commission has not
yet seen fit to order the restoration of rail passenger service to the Eel
River Canyon. Several requests to the commission regarding various public
utilities have been made, and the commission has taken appropriate action
regarding each request.
When the Governor declared a state of emergency on December 23, 1964,
the Department of Public Works, Division of Highways, activated survey
teams and started reviewing the storm damage on December 26. Emer-
gency contracts were placed into operation in order to open the major
routes for traffic as soon as possible. Maintenance crews were assisted by
private contractors and Army and Navy personnel. The damage to the
bridges in Eureka was of such magnitude that contractors were brought
in from San Francisco and Seattle to expedite the reconstruction. The
concentration of emergency work in Eureka, Redding and Marysville re-
sulted in the highways being open to normal traffic in far less time than
was originally estimated.
The Bureau of Public Roads, Office of Civil Defense, and the U.S. Office
of Emergency Planning, worked in close liaison with the Division of High-
ways in this emergency. The Bureau of Public Roads made federal emer-
gency relief funds available immediately for restoration of the damaged
roads and bridges. There are numerous contracts still in progress restoring
damaged bridges and roads in the northern part of the state. A large num-
ber of projects have already been completed, and traffic is once again
moving safely through all major routes in northern California.
According to the State Government Code, in case of a disaster resulting
from storms or floods, the Director of the Department of Public Works may
declare the existence of an emergency. The department may perform any
work required or take any remedial measures necessary to avert, alleviate,
repair, or restore damage or destruction to property.
Emergency Aid Financing
The mechanics of declaring the emergency require the Director of the
Department of Public Works to transmit his declaration of emergency to
the Department of Finance with a recommendation and a request that
47
money be allocated from any available money appropriated for that pur-
pose.
The Director of Finance is then required to determine if a state of emer-
gency exists and if money is available in any appropriation or emergency
fund for the work and remedial measures. Upon the Director of Finance's
affirmative findings upon these matters, he is required to allocate to the
Department of Public Works such amount as in his opinion will be re-
quired to meet the emergency. --
The committee notes that the Director of Public Works, in declaring his
proclamation of emergency, is not required to inform the California Dis-
aster Council nor the California Disaster Office nor any civil defense offi-
cial, of his action. It is also interesting to note the total absence of any
reference or mention of the California Disaster Office in the procedural
outline that the department is to follow in case of disaster due to floods.2"
The letter to the Director of Finance, requesting funds pursuant to Section
14122 of the Government Code, is necessary only for work to be done by
the Division of Highways on roads or streets not on the state highway
svstem. State highwav funds for work on the state highway svstem are al-
located by the Highway Commission pursuant to Section 188.1 of the
Streets and Highways Code.24
Social Welfare Department
The Department of Social Welfare supported disaster relief programs. The
kind and extent of assistance and relief which was provided was confined
almost exclusively to those which have traditionally been provided by the
American Red Cross.
Upon the request of the American National Red Cross, the Department
of Social Welfare assigned 10 staff members to assist in case work activi-
ties on an emergency basis. This staff worked primarily in Del Norte,
Humboldt, and Mendocino Counties.
The department also indicated that it was involved in other rehabilitative
and followup activities. For example, approximately 200 trailers had been
brought into Del Norte and Humboldt Counties for use as temporary hous-
ing after the floods, and also plans to relocate Klamath, Myers Flat, and
one or two other small communities, necessitated the involvement of So-
cial Welfare in helping meet the social needs of individuals and families
in those towns. The rebuilding of homes and rehabilitation of the Hoopa
Indians likewise required considerable assistance from County Welfare
Departments.
The Department of Veterans Affairs assured those veterans who had Cal-
Vet home and farm loans that new loans could be obtained to make re-
pairs to their property which was damaged as a result of the flood, and
subsequently legislation was enacted whereby the loans were paid in full
by the state.
48
Flood Forecast
The Department of Water Resources participated in joint state-federal flood
forecasting. Beginning on Saturday, December 19, the United States
Weather Bureau Forecaster analyzed and reported the developing storm
from data available from the Weather Bureau teletype circuits released from
San Francisco and Washington, D.C.
On Sunday, December 20, the first joint forecasts of possible high water
stages were issued by the Weather Bureau and the Department of Water
Resources. The department's first estimates, based on quantitative precipi-
tation forecasts, were sent by teletype to the Weather Bureau office in Eu-
reka. Periodically thereafter, as additional data became available from storm
reports and from precipitation gauges and streamflow gauges jointly owned
and operated by the U.S. Weather Bureau, the Department of Water Re-
sources, and the U.S. Geological Survey, new estimates of peak flows were
made and forwarded to Eureka for dissemination. This was an example
of joint federal-state river forecasting.
On Saturday, December 19, 1964, the first level of activity by the depart-
ment as a result of floods was the activation of a flood operation center
on a 24-hour basis. A duty forecaster is assigned responsibility for alerting
key personnel to changing conditions during nights and weekends.
The next level of activation was a declaration made by the chief engineer
authorizing the utilization of departmental personnel who may be required
to support the flood operation activity. This preemergency activation oc-
curred on December 22, 1964. And, finally, an emergency may be declared.
The declaration is made by the Director of the Department and concurred
in by the Governor. An emergency was declared on Christmas Day, De-
cember 25, 1964.
In the first hours of the emergency period, travel into the north coastal
area was virtually impossible and no assistance in flood-fighting could be
provided Humboldt County by department personnel.
Damage Evaluation
Following the flood peaks, and as soon as transportation was available,
engineering teams were organized and sent into the area to evaluate dam-
age. The California Disaster Office called a meeting on Monday, Decem-
ber 28, 1964, to brief damage evaluation survey teams. These teams, com-
posed of representatives of state and federal agencies, traveled throughout
the flooded areas to determine public and private damages resulting from
the floods.
The first damage evaluation survey was made to assist the California
Disaster Office in recommending to the Governor the need for a declara-
tion of a state of disaster. Further, it was the basis for advising the Presi-
dent of the scope of the disaster and of the need for a federal declaration
of a state of disaster.
This survey also provided an estimate of the possible magnitude of the
State Emergency Flood Relief Program. Survey teams departed by air from
Sacramento on Monday, December 28, for Eureka, Redding, and Yreka.
Other survey teams for the Santa Rosa and Willits areas left approximately
the same time by auto. Each team was headed by a Department of Water
Resources representative.
Evaluation of damage throughout the north coast area and the administra-
tive work in connection with both the State Emergency Flood Relief Law
and Public Law 875 continued for many months following the storm. As
the eligible work is completed, the department is requested by the Cali-
fornia Disaster Office to conduct a* field review of the work performed and
report on satisfactory completion. This phase of the work is still in prog-
ress.
The Department of Water Resources has developed a flood forecasting
and flood warning system with coverage four times as broad as the one
destroyed by the 1964 flood. It will provide virtually instantaneous infor-
mation and up to 24 hours advance warning of impending floods in the
seven river basins with the highest flood potential.25
Work Authorization
Authorization for the work performed by the department in flood emer-
gencies is contained in the Water Code. Section 128 authorizes the Direc-
50
tor of Water Resources to designate the existence of an emergency in
times of extraordinary stress and disaster resulting from storms and floods.
Upon concurrence by the Governor and availability of funds, the depart-
ment is authorized to perform any work required or to take any remedial
measures necessary to prevent, lessen, repair, or restore damage or destruc-
tion to property. Moreover, Water Code Section 8360 provides that the de-
partment, on behalf of the state, has supervisory powers over maintenance
and operations of the Flood Control Works of the Sacramento River Flood
Control Project.
Finally, Water Code Section 236 gives statutory recognition to certain
functions of the department by specifically authorizing the department to
collect hydrologic data necessary for river forecasting, to make forecasts of
stream flow and to provide for flood warning.
In the recovery period following the flood disaster, the Department of Wa-
ter Resources participates in two programs which provide financial assist-
ance in the repair and restoration of storm or flood damaged property
having a general public and state interest. These programs are created by:
1. The State Emergencv Flood Relief Law (Government Code Sections
54150-54164), and
2. Federal Pubic Law 875 (81st Congress, 2nd Session).
The State Emergency Flood Relief Law provides assistance to local public
agencies on a cost-sharing basis for the permanent repair or restoration or
the replacement of public property damaged or destroyed by storm, flood,
or flood conditions when funds are appropriated by the Legislature for this
purpose.
The department is responsible for administering this law in cases of dam-
age to levees, flood control works, channels, irrigation works, or other re-
lated water facilities. Proposed expenditures are subject to the approval of
the Department of Finance.
Federal Public Law 875 authorizes federal assistance to state and local gov-
ernments in major disasters for protective or preventative work, and the
minimum work necessary to the emergency repair of essential public facili-
ties. The department provides engineering services to the California Dis-
aster office in the review of these requests for assistance relating to water
facilities.
Role of Water Resources
In summary, the departments emergency role in the disaster program is
directly related to flood situations and it is influenced by the historical
assignment of supervisory responsibility for operating the Sacramento River
Flood Control Project. The department's recovery role is to provide funds
for repair by cities, counties, and districts of public property and for en-
gineering review of applications for federal assistance under Public Law
875.
The department may, independent of the Disaster Office, declare a state
of emergency, so that the department can begin its disaster relief operations.
51
The California Disaster Office is not mentioned in any of the Water Code
sections that empower the department to become involved in the adminis-
tration of either the State Emergency Flood Relief Law or the administra-
tion of federal Public Law 875.
The Department of Youth Authority was not directly involved in the
flood disaster.
The Department of General Services, Office of Architecture and Con-
struction, Building, Maintenance and Protection section contracted with
the U.S. Office of Emergency Planning for 250 trailers for relief as tem-
porary emergency housing by flood victims.
Communications Systems
Prior to the flood emergency, when it began to appear that a major dis-
aster could develop, Department of General Services, Communications
Service, technicians and engineering forces were alerted to be ready on
call. As conditions worsened, Communications Service established an addi-
tional channel between Eureka and Sacramento using equipment flown
to Eureka by military aircraft and installed by department technicians to
increase the availability of weather information from the Eureka area.
Communications Service technicians proceeded to remote mountain top lo-
cations to assure continuous operation of state communications. They re-
mained up to 48 hours at these locations during the critical periods. Flood-
damaged radios were restored to operating condition, even though the tech-
nicians had to proceed through floodwaters and, in some cases, five feet
of snow to reach the damaged equipment. At the height of the flood the
technicians installed on a crash basis a radio-based station in the sheriff's
office at Weaverville and some 12 mobile radios in jeeps.
Prior to and during the flood, Eureka had only one microwave path to the
state's microwave system. After the flood, to increase the reliability of the
communications path to Eureka, a second microwave path has been added
in collaboration with the Division of Highways. Eureka can now be
reached by microwave on the coast route to the south and by an entirely
separate microwave route to Redding on the east, and then to Sacramento.
Agency Coordination
The Transportation Services Section made available two four-wheel drive
vehicles from the Sacramento State Garage which were airlifted from Mc-
Clellan Field to Areata for assignment to the California Disaster Office. In
addition, numerous other units, primarily pickup trucks, were issued which
were then used as needed by the sheriff's office, Division of Highways, De-
partment of Parks and Recreation, and the Department of Fish and Game.
The Department of General Services, Sacramento Office of Procurement,
assisted the Division of Highways, Military Department, Department of
Water Resources, California Disaster Office, and other state agencies dur-
ing the Flumboldt County floods as follows:
(a) Made emergency purchase of highway flares and flasher lights for
Division of Flighways and arranged to have them flown in to criti-
cal-need areas;
52
(b) Made emergency purchases or tires, bulldozer blades, grader blades,
buckets for heavy construction equipment, and other parts for
heavy road and construction equipment; arranged for airfreight de-
livery for some of the more emergent items;
(c) Arranged for present petroleum contract holder to make emergency
deliveries of bulk fuel and oil for Military Department, Depart-
ment of Water Resources, and Division of Highways; expedited pur-
chase of petroleum products in areas where contract vendor could
not make deliveries due to washed-out roads and bridges;
(d) Expedited purchase of large quantities of corrugated metal pipe and
metal retaining wall material for use by Division of Highways and
Department of Water Resources; located sources for, and made
emergency purchases of, cobblestones, rock, and other aggregate for
highway and levee repairs;
(e) Located a large diesel engine unit for Division of Highways for im-
mediate delivery into a distressed area; located sources of supply
and made emergency purchases of sandbags;
(f) Since the 1964-65 disasters, the Office Drug Buyer has been work-
ing with the California Disaster Office in making up special-pur-
pose drug kits, to be distributed throughout the state for use in the
event of future disasters. The Office Buyer has been instrumental
in obtaining information for the California Disaster Office relative
to the price, packaging, and availability of drug items to be in-
cluded in the kit.
Emergency Purchases
During and for three months after the December floods in Humboldt
and Del Norte Counties, the State Purchasing Office in San Francisco
was called on to make and approve hundreds of emergency purchases. The
principal customer was the Division of Highways with Forestry and
Beaches and Parks running a close second and third.
Construction material to repair roads, buildings, and park structures,
streams and banks, constituted the bulk of the requests. Equally, or per-
haps more important, were mechanical repair parts, gasoline emergency
lightings, signal equipment, chlorinating equipment, and supplies for water
purification, plus an almost limitless variety of other materials.
Total identifiable emergent transactions amounted to approximately one-
half million dollars. To this figure would have to be added those materials
which were ordered on regular requisitions where time would permit.
The Office of Local Assistance of the Department of General Services, with
respect to the major flood relief programs, had no responsibilities prior to
the enactment of Chapter 27, Statutes of 1965, which transferred the ad-
ministration of the state's program for roads, streets, and bridges to this
division. The office is now engaged in actively administering the program.
This includes considerable discussion and coordination of activities with
53
local units of government and other state agencies. This division prepares
the recommended allocation to the State Allocation Board. The board makes
the allocation and the staff has the responsibility for all necessary followup
work.
The Legal Services Section reported that at the request of the Disaster
Office it spent sometime in the Redding-Eureka-Crescent City area imme-
diately after the disaster. The purpose of doing so was to explain to the
cities, counties, and districts involved what they had to do to qualify for
state funds under the Flood Relief Act of 1959.
Subsequent to the activities enumerated above, the Legal Service Section
participated in the processing and drafting of reports and agreements which
enabled the areas involved to qualifv for state funds under the Flood Re-
lief Act of 1959.
Temporary Housing Standards
The State Building Standards Commission participated in the disaster pro-
gram by advising local building enforcing agencies and the Division of
Housing as to the minimum standards which may be used for temporary
housing.
The committee notes that the role of the General Services Department is
essentially one of coordinating activities between various state agencies and
local units of government.
The Office of Architecture and Construction in the Department of General
Services prepared an excellent summary of the team damage assessment
of the floods.20
Disaster Office
The California Disaster Office activated an Emergency Operating Center
as state headquarters and operating centers in the two northern regional
offices.
54
Communication with the affected counties was established through the
regional offices and the new microwave extension installed on the Division
of Forestry system, which made possible direct microwave radio communi-
cation from California Disaster Office headquarters to the Humboldt
County Emergency Operation Center. Continuing liaison was also estab-
lished with the Flood Operation Center and with other state and federal
agencies. These other agencies included the California Highway Patrol and
the Military Department, each of which assigned a staff man to the Cali-
fornia Disaster Office State Headquarters, as well as the Division of High-
ways, Department of Social Welfare, Department of Public Health,
Department of Employment, American Red Cross, the U.S. Office of
Civil Defense, and the U.S. Office of Emergency Planning. Additionally, the
Department of Water Resources assigned an engineer to the California Dis-
aster Office headquarters and to each of the California Disaster Office
regional offices for liaison purposes. California Disaster Office personnel
were sent to the Humboldt area and to Redding.
The California Disaster Office activities consisted mainly of obtaining re-
sources and manpower for the stricken area. Included were such things
as helicopter service and a dog sled team for rescue work.
Reinforcing Activities
The committee notes that the other activities performed by the Disaster
Office were also performed by other state agencies. The Disaster Office and
the Department of Public Health obtained medical personnel and equip-
ment. The Department of Agriculture, State Military Department, and the
Disaster Office conducted a massive airlift which continued for 30 days
following its inception on December 24, 1964. The airlift carried over
four million pounds to the disaster area. The Department of Social Wel-
fare and Department of General Services and the Disaster Office provided
homeless people in the disaster area with house trailers as a temporary
substitute for homes destroyed.
A series of meetings were held at six locations in the northern counties
to help political subdivisions prepare requests for federal assistance. The
Disaster Office, Department of General Services, and Department of Fi-
nance were able to obtain federal assistance in excess of 13 million dol-
lars in grant funds and 26 million dollars in federal agency assistance for
this disaster.27
19 See: Summary Report, 1964 Flood Disaster, Eureka Area, California Highway Patrol.
20 See: Flood-Fighting and Rescue Activity, Floods of December 1964 to January 1965, Division
of Forestry.
21 See: William Demerell, "Wild Water and the Local Office," Employment Service Review.
22 Government Code, Sections 14120 to 14123.
23 See: Division of Highways Circular Letter No. 64—33, regarding emergency relief under Fed-
eral Aid Highway Acts, dated January 21, 1964.
24 Streets and Highways Code, Section 188.1.
25 News Release, Department of Water Resources, November 2, 1966.
20 See: "Flood Damage, Northern California Floods of December 1964," Office of Architecture
and Construction, January 11, 1965.
27 See: "The Role of the California Disaster Office During the 1964-6% Floods." Remarks by
John W. Gaffney, Director, January 11, 1965.
55
Watts Riots— 1965
On the evening of Wednesday, August 11, 1965, a California Highway
Patrol officer in the South Los Angeles area, while making a drunk driv-
ing arrest, became involved in a situation which required him to call for
assistance. The drunk driving arrest precipitated a riot condition in that
area of the City of Los Angeles. The Watts Riots of 1965 occurred from
Wednesday, August 11 to Sunday, August 15.
The Department of Agriculture Regional Food Administrator met with
Civil Defense officials in the Los Angeles office of the Governor on August
16 for the purpose of planning for the feeding of victims of the riot.
The department furnished information at this meeting on the national
emergency food consumption standards prepared by the U.S. Office of
Emergency Planning. The department had available the names and ad-
dresses of major food supply sources of the Watts area. In this instance,
it was decided that the California Disaster Office would purchase surplus
food through the school lunch program. A number of San Joaquin Valley
growers donated fresh fruit for use of the riot area. The department coordi-
nated the efforts of these growers with the distribution agencies in the area
in order that the fruit was made available promptly. One of the large milk
distributors in the Los Angeles area donated milk and orange juice for
use of the riot victims.
A California Highway Patrol officer was assigned to the Los Angeles Police
Department's command post headquarters in the riot area for liaison. Re-
quests for manpower assistance were received from the Los Angeles Police
Department beginning on August 12. California Highway Patrol personnel,
as requested, were assigned and were deployed to posts as determined by
the Los Angeles Police Department.
56
On the morning of Tuesday, August 17, mutual aid assistance to the Los
Angeles Police Department was concluded. California Highway Patrol per-
sonnel on duty in the City of Los Angeles were not released until clear-
ance was obtained from the Los Angeles Police Department commander
in charge, and reliefs were made only at the request of the Los Angeles
Police Department.28
Although there was some confusion during the period of assistance, due
to all parties being thrust into an emergency situ on, with no time for ad-
vance planning, it appeared that excellent cooperation took place.20
Guard Moves In
On August 13, 1965, Friday, the National Guard began to move into
the Watts area along with 150 men from the Santa Monica Police Depart-
ment.
On August 14, 1965, Saturday, California Highway Patrolmen were being
pulled out of the Watts area for the first time. The initial withdrawal
of CHP officers involved 37 men and 9 sergeants.
The executive clemency and extradition secretary to the Governor was con-
tacted by the CHP to advise him of information pertaining to an incident
in Indio, California. On the afternoon of August 15, 1965, the secretary
called the CHP in Los Angeles and requested all the information that
comes in. CHP subsequently relayed approximately seven calls to him in-
forming him of various developments in the disaster.30
The committee is unable to locate the executive clemency and extradition
secretary to the Governor in the Disaster Plan. The committee notes that
the secretary's request for all information came at a time when the Public
Safety Agency Administrator and the Director of the California Disaster
Office were in Los Angeles.
Call for Shotguns
On Saturday, August 14, the Law Enforcement Division of the California
Disaster Office, contacted the chiefs of police and sheriffs in the state rela-
tive to the Los Angeles Police Department's need for 250 shotguns. The
Disaster Office requested all chiefs and sheriffs to notify the Regional Law
Enforcement Coordinators of the availability of shotguns from their de-
partments and to deliver available guns to the Regional Coordinator's Of-
fice. The State Disaster Office, Law Enforcement Division, was to arrange
a central delivery point for air transportation in Los Angeles.
The Regional Law Enforcement Coordinators are:
Region 1 — Sheriff, Los Angeles County
Region 2 — Chief of Police, San Francisco
Region 3 — Sheriff, Butte County
Region 4 — Sheriff, Stanislaus County
Region 5 — Sheriff, Madera County
Region 6 — Sheriff, Riverside County
57
The Department of Conservation, Division of Forestry, placed its depart-
ment on an alert status and standby status to assist in firefighting programs
if the need arose. In addition, because of Division of Forestry's concern
with wisespread incendiarism associated with the Watts Riots might spread
to the highly flammable watershed areas, 20 Division of Forestry fire trucks
with three-man crews and five assistant rangers were dispatched to south-
ern California from the Division of Forestry's five northern districts, as
was requested on Saturday, August 14, 1965. Additional fire trucks located
at Division of Forestry stations at Riverside, San Bernardino and San Diego
Counties were placed on alert but were not called.
The Department of Corrections submitted a plan to the Governor's office
for utilizing department resources. The plan made available 450 trained
custodial personnel experienced in handling firearms and groups of recalci-
trant persons upon proper authorization from institutions throughout the
state on two to four hours' notice plus traveling time. In addition, 150
parole agents scattered throughout the state were made available within
two to four hours plus traveling time, upon proper notification. The man-
power was organized on the basis of institutional location and parole agent
mobilization points throughout the state. Technical specialists in such areas
as feeding and medical service were also made available in limited num-
bers.
Vehicles Located
The department was also prepared to supply a total of up to 67 vehicles
which might be used in emergency situations. These vehicles were all lo-
cated at correctional institutions in the state and would be available imme-
diately upon authorization by the Director of Corrections plus traveling
time to locations where needed. Firearms totaling 557 weapons, plus am-
munition, gas, and restraint equipment were also available.
Parole agents actively cooperated with law enforcement officials both in
supplying information on the trouble area as well as screening large num-
bers of persons in the Lincoln Heights jail to determine whether they
were parolees.
The Department of Education found that no textbooks were destroyed
during the Los Angeles riots. The Bureau of Intergroup Relations of the
Department of Education played a role in the discussion of education
leaders to implement the school opening programs in the Los Angeles pub-
lic schools. The superintendents were informed that the services of the
Department of Education were available to them to work out various ap-
proaches calculated to getting schools underway with a minimum of trouble
and tension. Immediately following the riots in the Watts area, the State
Superintendent of Public Instruction called together the school superin-
tendents of the major cities in California to discuss with them possible
implications of the Watts Riots relative to the opening of schools. It was
then that the Bureau of Intergroup Relations came into play in assisting
the local school district.
58
The Department or Employment's downtown Los Angeles offices served
the Watts area. From the onset of the riots, the manager of the Los Ange-
les metropolitan area was in contact with civil defense and city authori-
ties. On the first working day of the riots, Monday, August 16, the area
office and all downtown local offices remained closed while the authorities
instituted initial control measures. On the following day, Tuesday, August
17, although the disturbance was still in progress, all offices resumed opera-
tions providing both employment services and making benefit payments.
Some localized adaptations had to be made to compensate for staff unable
to report due to the interruption of normal access and to reschedule claim-
ants similarly affected.
Job Office
On August 20, the Governor suggested opening a "one-door"' office in the
Watts area. At the close of business on August 20, a manager for this
operation was selected. At that time the method of operation was nebulous.
The department's main role would be to provide job guidance services.
On August 27, the premise had been selected, altered and the office opened.
On August 28, the Governor's executive secretary, designated by the Gov-
ernor to oversee the operation, indicated job placement services should be
provided. This information was relayed to the area manager in charge of
the Los Angeles operation. He and his staff worked Saturday and Sunday,
and on Monday, August 30, jobs were cleared from neighboring offices
and job placement activities commenced.
The Department of Finance acted primarily as an advisory or consultative
agent during the Watts riot. A representative of the Department of Fi-
nance was assigned to the Watts area immediately to expedite the estab-
lishment of a service center operation in that area. The Department of
Finance then undertook the processing of claims for payment of the cost
of repair or restoration of damaged publicly owned facilities.
The State Fire Marshal was in Los Angeles at the time the Watts riot
began. He immediately contacted the California Disaster Office operation
center in Pasadena. All of the State Fire Marshal's personnel in the Los
Angeles district office were notified to stand by for call. The State Fire
Marshal made immediate personal contact with the Los Angeles City and
Los Angeles County fire chiefs offering the services of the state office.
The State Fire Marshal was present during the entire period of the rioting.
Neither the California Disaster Office nor the State Fire Marshal's Office
was needed in the fire suppression activities. Some 45 local departments
around Los Angeles City perimeter had units ready to provide mutual aid
if needed. None of these were used.
No School Damage
The State Fire Marshal's personnel assisted in making building inspec-
tions. No damage was found in any school, institution or place of public
assembly, all of which come under the jurisdiction of the State Fire Mar-
60
shal. Three dry-cleaning plants and four dry-cleaning shops were de-
stroyed. These occupancies were inspected and regulated by the State Fire
Marshals Department.
The Department of Fish and Game personnel did not participate directly
in the law enforcement effort to suppress the Watts Riots. The department
felt that the total manpower it could provide would be insignificant. Con-
sequently, it did not volunteer its assistance for "front-line" duty. The de-
partment did, however, provide backup patrol for the Harbor Division of
the Los Angeles Police Department at Terminal Island, San Pedro, when
all men from that unit were at Watts. For several nights, at the request
of the captain in charge of the Harbor Division, the state wardens main-
tained all-night security patrols on Terminal Island, thus relieving the Los
Angeles Police Department officers for duty in Watts.
The Department of Industrial Relations, Division of Industrial Safety, was
not involved with the Watts riots, although the staff was at all times will-
ing to lend assistance. However, other divisions within the department
responded to the Watts Riots. These are divisions that are not adminis-
tratively related to the California Disaster Act. Personnel from the Divisions
of Labor Law Enforcement and Industrial Welfare were stationed at the
Watts center immediately following the riots. However, no workload de-
veloped for either divisions so the personnel were returned to their head-
quarters. A consultant from the Division of Apprenticeship Standards
worked intensively in the area after the riots. Concentrated special activities
in Watts added 114 Negroes in apprenticeship in California, representing
an 1 1 percent increase. The Division of Fair Employment Practices was
working in the area both before and after the riots. Negro members of the
consultant's staff went into the areas of disturbances at the request of the
Governors office to make first-hand observations of conditions and to inter-
view informally a number of residents, community workers and business
people.
Law Enforcement Network
The Department of Justice initiated a statewide intelligence gathering sys-
tem and established formal lines of communication with the Los Angeles
sheriff's office and the Los Angeles Police Department. The department
acted as the legal advisor to the Governor during the crisis. Liaison was
also established with the U.S. Attorney's Office in Los Angeles and through
that office to the Assistant Attorney General in Washington, D.C.
The committee notes that the Department of Justice was not included in
the 1963 meeting between the State Military Department and local police
departments called to establish guidelines for utilizing the National Guard
in support of local law enforcement agencies.
The Department of Justice also did some statistical work on the back-
ground of the persons arrested. In addition, the Bureau of Criminal Identi-
fication and Investigation and Data Processing Section incurred certain ex-
penses.
61
The Department of Mental Hygiene was not affected by the riots, except
for employees who could not get to and from home, and patients who were
on leave or at family care homes in the area. However, Patton State Hos-
pital loaned six walkie-talkie sets to Civil Defense officials. The hospitals
were on alert in case the rioting should move in their direction.
The State Military Department, Office of the Adjutant General, was di-
rected to contact the Los Angeles Chief of Police who had informed the
Governor of his concern over the growing civil disturbance threat. This
initial contact was established in late July 1963.
Immediately following his conference with top Los Angeles Police De-
partment officials, the Adjutant General assigned the task of continuing
liaison to an officer of his personal staff who brought key officers of Head-
quarters, 40th Armored Division, and top members of the LAPD staff to-
gether on August 21, 1963 to begin joint contingency planning on a con-
tinuing basis. This pattern of liaison was repeated with respect to the police
departments of the San Francisco Bay area and Headquarters, 49th In-
fantry Division.31
Police and Guard Liaison
There was direct liaison in the operations between the California National
Guard and the Los Angeles Police Department. The curfew area and
zones of responsibility were defined so that there were comparable level
Army Guard headquarters coordinating with and supporting police com-
mand elements. Division commanders would respond directly to requests
for assistance by the police field commanders responsible for division areas.
Police would turn to the National Guard with requests for assistance out-
side the curfew area and the National Guard would in turn assign these
missions to the appropriate guard division command.
Liaison between the National Guard and police officials seemed constant,
comprehensive and effective.32
The Los Angeles Police Department assisted in locating the guard units
in Los Angeles. Shortly after the Adjutant General arrived in Los Ange-
les, the police department assigned one of its inspectors as its logistics co-
ordinator to work with the National Guard's logistic staff and provide
liaison between the police and other city agencies. Through the police
inspector, arrangements were made with the Los Angeles Board of Educa-
tion to open various city schools for use as troop billets. The schools se-
lected were located in or adjacent to the guard's assigned areas of opera-
tion.
The local Salvation Army sent a station wagon loaded with refreshments
to a bivouac area in Glendale three times daily.
Shortly after the National Guard was committed, requirements emerged
for additional supplies, such as cots, radio batteries, repair parts, housekeep-
ing supplies and ammunition. As the buildup continued, such require-
ments increased in intensity. These demands were relayed to the United
62
States Property Fiscal Office in Sacramento who directed that required sup-
plies in USPFO stocks at Camp San Luis Obispo be dispatched to Los
Angeles. Items not in USPFO sticks were obtained on temporary loan
from Army, Air Force, Navy, Marine Corps installations and other gov-
ernmental agencies in the area. For example, Fort Erwin, through Fort
MacArthur, provided ammunition. The LI.S. Public Health Service and
U.S. and State Forestry services provided 8,000 canvas cots. The
USPFO Supply Division at Camp San Luis Obispo and Fort MacArthur
operated on a 24-hour basis providing supplies on call as needed.
A total of 137 tactical vehicles were borrowed from the USAR.
Airlift Arrangements
Units airlifted to Los Angeles required transportation from Van Nuys
Air National Guard Base to Los Angeles. Arrangements were made with
the Los Angeles Board of Education to borrow buses with drivers to ac-
complish this move. The movement of airlifted units from Los Angeles to
Van Nuys Air National Guard Base during the withdrawal phase was ac-
complished in the same manner.
Military red tape caused some delay in the use of aircraft during the riots.
For example, to clear the way for possible airlift support by either the
U.S. Air Force or Air Force Reserve, the Governor's staff took steps on
Saturday afternoon to insure that presidential approval would be forthcom-
ing. At 1430 hours an officer who was at the Office of the Adjutant
General and taking part in the Emergency Operating Center operation,
phoned the Deputy Commander of Western Transport Air Force and re-
quested assistance. The deputy commander advised that he could furnish
two CT30 and two C-124 aircraft provided approval was obtained from
the Military Air Transport Service and the Pentagon. At this time, the
Office of the Adjutant General Air Staff also contacted the Sacramento
Air Materiel area at McClellan Air Force Base and Mather Air Force
Base. The McClellan Air Force Base Commander immediately promised
support in the form of one C-54 and one C-118 aircraft. This commitment
was the first U.S. Air Force material assistance for the airlift mission.
Approximately four more hours were to pass before the operational release
of additional United States Air Force aircraft could be obtained. Although
the Office of the Adjutant General Air Staff received direct word that the
President had approved the use of federal airlift forces, confirmation
through LInited States Air Force channels could not be obtained. This
situation necessitated repeated telephone calls between the Office of the
Adjutant General's staff and the National Guard Bureau staff duty officer
to obtain the proper United States Air Force releases. Meanwhile, the
Western Transport Air Force capability was increased to three C-130 and
five C-124 aircraft.
The Office of the Adjutant General's Air Staff had previously contacted
the 349th Troop Carrier Wing (U.S. Air Force Reserve) at Hamilton Air
Force Base to determine if that organization could make its C-119s avail-
63
able. The wing commander replied that he had the capability but lacked
the authority to commit his aircraft in support of state military forces.
Unlike the deployment phases of the airlift, return air movements were ac-
complished entirely with California Air National Guard resources. U.S.
Air Force, Air Force Reserve, Military Air Transport Service and Arizona
Army National Guard aircraft were not available.
Food Brought In
By dawn of August 16, the situation in the riot area had definitely changed
for the better. Various groups such as the Salvation Army were given per-
mission by the Governor to distribute bulk foods at designated locations
within the disturbance area. Food distribution began early on the morning
of August 16 and continued without incident. At the same time, plans
were prepared to provide security for trucks and personnel required to re-
stock the many supermarkets located in the damaged area.
During the riot, many governmental agencies were constantly seeking in-
formation concerning strengths, locations and movements of the company-
size units making up battalions or brigades. To complicate the situation,
local representatives of the same agencies continually made requests and
then belatedly furnished the information to their higher eschelons. This
dual reporting resulted in many inaccuracies and erroneous assumptions
and was a considerable duplication of effort. The State Military Depart-
ment suggested that an accuarate and timely reporting system must be de-
veloped to overcome this problem and keep interested agencies informed
while avoiding unnecessary interference with operations.
Because of nationwide interest in the Los Angeles riots, the National Guard
public information staff was swamped with queries from the press, radio
and television. Besides countless local requests, calls came in from all over
the country. The Adjutant General and other ranking officers of the guard
held numerous press conferences in an attempt to provide the news media
with up-to-date information. Despite this, numerous news reporters were
continuously in and out of the National Guard emergency operation cen-
ter and often interferred with the conduct of operations. This situation
points up the need for clear policies and guidelines to permit full coopera-
tion with the press,33 and the requirement for a pressroom adequately
equipped and staffed during any large-scale operation of this nature.34
The McCone Commission suggested that the Third Brigade of the 40th
Armored Division from San Diego might have been committed earlier to
assist during the riot.33
The Department of Motor Vehicles considered its formal responsibility
under the disaster program as not affected by the riot.
Health Services Adequate
The Department of Parks and Recreation, Division of Beaches and Parks,
personnel participated in emergency preparation of an antipoverty pro-
64
gram workload shortly after the riots were over. This was part of an overall
statewide effort which was later extended to include most state agencies.
Once it became obvious that the riots in the Watts area of Los Angeles
were extensive and that the damage caused was of large magnitude, the
Regional Medical Coordinator's Office of the Department of Public Health
in Los Angeles made an assessment of the need for and the availability
of health services in Los Angeles and whether or not additional resources
would be needed. It was determined that available medical and health
services were adequately meeting the demand and continued to do so. In
addition to this, the Regional Medical Coordinator, a sanitary engineer and
sanitation consultant were part of a state team which surveyed the area
to assist the local government in making its declaration that a disaster
area did exist. The problems of general sanitation and contaminated food-
stuffs following the fires were handled by the local County Health Depart-
ment making it unnecessary for the State Health Department to supply as-
sistance other than on a consultation basis.
The Public Utilities Commission, Transportation Division, staff conferred
with officials of the Southern Los Angeles Transportation Company . (the
local transit company) with respect to stopping bus service so as to prevent
injury to bus operators and damage to the buses. After the riots, the commis-
sion staff conferred with the officials to provide bus service at the earliest
possible time.
The Watts area in Los Angeles is almost entirely served by the Los An-
geles Department of Water and Power. Informal contacts made by the
commission staff indicated that their crews reestablished service and re-
constructed the damage as soon as possible. Southern California Edison
Company, which serves outside of Los Angeles City in the vicinity of
Watts, suffered relatively minor damage. Contacts by commission staff in-
dicated that crews of Southern California Edison performed repair work
promptly.
Telephones Repaired
The Pacific Telephone and Telegraph Company reported 7,000 telephones
were out of service. Service was restored to 75 percent of these telephones
in three days. General Telephone Company reported that six toll cables
were cut in the Whittier-Downey area during the time of the riots. South-
ern California Gas Company closed many services at the street valves as a
precautionary measure.
The Department of Public Works, Maintenance Department, in Los An-
geles, was alerted by the Governor's office of the possibility of furnishing
men and equipment for transporting foodstuff into the riot zone. At 3
p.m., on August 16, the department had assembled 12 trucks with crews
at the Cheli Air Force warehouse. Eight of the twelve units were loaded
with foodstuff and dispatched to prearranged points with National Guard
convov into the Watts riot zone.
66
On Thursday, August 17, 20 trucks were loaded with materials at the Cheli
warehouse for delivery to five destinations within the Watts riot zone.
The use of state highway crews for transporting foodstuff during the emer-
gency in the Watts area was completed on the afternoon of August 17.
The Department of Social Welfare, along with several other state de-
partments, has been extensively involved in setting up the State Service
Center ordered by the Governor and in other rehabilitative efforts in the
Watts area.
After analysis and studies by the Social Welfare Board and other groups
throughout the state, the department became aware sometime ago that there
was high potential for various kinds of civil disturbances, riots, or protests
in several areas of the state such as the kind that took place in Watts.
Responsibility Areas Unclear
State officials were alerted to this possibility on numerous occasions by sev-
eral means during the previous year. The warnings and apprehensions
were not limited to the Negro minority groups. An analysis of the social
economic conditions throughout California revealed that tensions and poor
community relations exist particularly within the poverty and deprived seg-
ments. Some of these threaten to erupt in disturbances on a scale requiring
emergency action or measures on the part of state and local government
which go beyond the normal maintenance of law and order. In an effort
to determine state and local governmental responsibilities and to evaluate
the need for developing emergency operations to augment the law enforce-
ment arm of government in handling these specific situations, the Depart-
ment of Social Welfare Emergency Welfare Services staff representative
introduced this subject for discussion with the California Disaster Office
and other civil defense groups. There has not been to the knowledge of
this department, however, any definitive statement of legal responsibility
or policy within the general framework of disaster operations.
The Department of Social Welfare reported that while it is entirely in
accord with the concept of mobilizing total government in response to dis-
asters, it is difficult to know where the department stands in the total
effort. In other words, the department feels a lack of appropriate leader-
ship, direction and guidance which can only emanate from a central au-
thority.
As of early Sunday, August 15, the Governor had received information
from reliable citizens living and working in the curfew area that a con-
siderable number of individuals and families were in need of food and
drugs. The Governor instructed the California Disaster Office to review
the situation, determine the need and take immediate action to deliver food
supplies to meet the needs of those suffering hardship. The operation was
to be carried out under the general direction and supervision of the as-
sistant to the Governor for human rights, who called a meeting of local
67
merchants and officials of the Retail Clerks Union early Monday, August
16. He received their cooperation and commitment to open as many
retail grocery markets as possible as soon as possible. It was subsequently
reported that 40 to 50 markets were opened on Monday and Tuesday,
August 16 and 17. Also on Monday, August 16, at 10 a.m., the assistant
to the Governor for human rights convened a meeting of representatives
of the California Disaster Office, State Department of Social Welfare, De-
partment of Agriculture, Los Angeles County Administrator's Office, the
Food Service Branch of the City Schools Administrative Office, the Cali-
fornia Division of Highways, California National Guard and Salvation
Army.
Reliable Information Lacking
An initial review of the situation revealed that reliable information (in-
telligence) concerning the extent of damage, numbers of persons affected
and extent of distress or security measures required for safe operations in
the area were almost totally lacking. The Salvation Army representative
reported that they had sent some trucks and personnel into the area earlier
in the day with military escort and that they had experienced no difficulty
whatsoever in starting the food distribution operation. They had, in fact,
been well received. In addition, they reported that their personal contacts
indicated that the need in certain areas was acute.
The group decided to set up a food (groceries) distribution operation under
the auspices of state government at Watts. The educational agency for
surplus property had approximately 125 to 150 tons of food warehoused
near the area which could be delivered in wholesale shipments when truck-
ing facilities were provided. The Salvation Army volunteered the services
of 10 trucks and drivers. The Division of Llighways had enough trucks
and drivers immediately available to truck 25 to 30 tons per day. The
National Guard offered to provide the required security escort. The city
schools offered to open their facilities to be used for distribution points if
required. Plans were quickly formulated. The State Department of Social
Welfare in cooperation with the Department of Agriculture developed a
suggested grocery package (composed of items available) which would
provide a two- to three-day balanced diet with adequate calorie con-
tent for a family of five. Salvation Army and Division of Highway trucks
were dispatched to the warehouses. Contacts were made with a number
of churches and private organizations in the area which had volunteered
to serve as distribution centers, including the furnishing of manpower and
supervision of packaging and handing out packages. It was decided not to
use school facilities unless they were needed later. Local merchants and
warehouse dealers donated additional grocery items, such as fresh bread,
eggs, and milk and bags for packaging.
The plan was successfully carried out. The first trucks arrived in the area
Monday afternoon. By Thursday, August 18, approximately 110 to 115
tons of surplus food and $2,000 to $3,000 worth of donated food had
68
been distributed to 6,500 to 7,000 families (40,000 to 50,000 individuals).
Staff from the State Department of Social Welfare made a tour of the
affected area to observe the food distribution operation and to engage in
conversations with citizens in the community to determine whether their
needs for food were being met.
Drugs Available
Staff also undertook to determine the availability of doctors and drug sup-
plies to meet reported health and medical needs. A number of doctors had
kept their offices open, and although many drugstores had been destroyed
in Watts, drugs were obtainable from neighboring areas for those with
available transportation. There were sufficient retail food markets and drug-
stores in operation to meet the needs of those living in the western and
northern parts of the curfew area. Health officials were alerted and ap-
prised of the situation.
The Department of Veterans Affairs reported that no Cal-Vet contract
holder suffered a loss to his property as a result of the riots. There was no
involvement by this department in the Watts riots during any phase of
the incident.
Since the riot was not related to flood operations, the Department of Water
Resources did not participate in its alleviation.
The Department of Youth Authority had roughly 1,300 wards in the cen-
tral Los Angeles riot area.
The Youth Authority had 37 parole agents working in the central rec-
tangle. Some agents had their entire caseload in the area. Others extended
into adjoining areas.
69
Youth Authority staff efforts were three-fold: (1) instructing wards about
participation in the riots, (2) assisting police at division stations and (3)
assisting at detention facilities — Lincoln Heights and juvenile hall.
The Department of General Services, Property Acquisition Service, negoti-
ated and secured a lease of office space for various state agencies requiring
facilities in the riot area. The departments included: Employment, Indus-
trial Relations, Public Health, Social Welfare, Rehabilitation, Housing,
Governor's Office of Economic Opportunity and the Attorney General's
Fraud Section Office. The lease was made for 3,000 square feet of build-
ing area at $900 per month, which included janitorial service. The Build-
ing Maintenance and Protection Division sent four state policemen from
Sacramento to Los Angeles to assist the opening of the Department of
Employment branch offices in that area. They provided additional service
for the Museum of Science and Industry, Los Angeles, and provided
backup police support to the Los Angeles Police Department.
Work from Trucks
The Communication Service maintenance shop in Los Angeles is located
at the edge of the Watts area. When it became evident that the location
would become untenable for technicians, spare radio parts and test gear
were loaded into trucks which were then deployed to safer areas. The
technicians working out of their trucks were thus able to keep all essential
state communications working throughout the emergency.
The Los Angeles garage and the Los Angeles airport pool had considerable
increased activity during this period. Specifically, the pool furnished six
sedans for the California National Guard and two station wagons were
furnished a short time later to transport arms and ammunition back to
the Arizona National Guard in Arizona. The Los Angeles airport pool
furnished six to eight vehicles to members of the California Highway Pa-
trol and six other state employees who flew to Los Angeles for riot duty,
but the agencies involved cannot be determined at this late date. However,
it was recalled that the cars were issued with no time limitation when the
duration of need could not be given at time of dispatch.
The Los Angeles garage also made parking space available to the McCone
Commission, which was appointed by the Governor to study the Watts
riots. The Office of Procurement within 24 hours furnished to the Na-
tional Guard various emergency supplies and stores valued at about $3,000.
Disaster Office Acts
The California Disaster Office activated 24-hour operating centers at
Sacramento and Pasadena. Liaison was established at the Los Angeles
Police Department Command Center and the Los Angeles County Fire
Command Center.
The Disaster Office was requested to provide 105 shotguns, which it
subsequently did. A request for 500 riot guns was also received. An emer-
70
gency request was sent to all chiefs of police and sheriffs in the state. Over
the next 24 hours, 534 guns arrived from California, Nevada, and Arizona
law enforcement agencies and were furnished to California Highway
Patrol, Los Angeles Police Department, Los Angeles Sheriff's Department
and other local law enforcement agencies.
Due to the fact that available resources had been depleted, the Disaster
Office arranged to obtain ammunition from federal, state and local agencies
and was able to supply considerable amounts of ammunition to law en-
forcement agencies. Some of the riot ammunition was obtained from
Pittsburgh, Pennsylvania. The Disaster Office also obtained 250 flax suits
for firemen through the Marine Base at Camp Pendleton. 412 radio trans-
mitter receivers and 2,500 cots were also supplied by the Disaster Office.
The Disaster Office also assisted in setting up the system for emergency
feeding of needy families in the riot area.
A damage-assessment team, composed of state, county and city personnel,
was organized by the Disaster Office and the results of the survey were
furnished to the Governor's office.30
Another state government agency which participates in disaster prepared-
ness is the Bureau of Adult Education of the State Department of Educa-
tion. A program financed by the Department of Defense in the Depart-
ment of Health, Education and Welfare administered by the Bureau of
Adult Education of the State Department of Education is now available
in California. A staff of consultants and field representatives has been
geared to give the necessary guidance and support in setting up courses
in "Individual and Family Survival" in the adult divisions of high schools
and junior colleges. These courses are given in any school district main-
taining high schools or junior colleges. The course in "Individual and
Family Survival" is taught by qualified instructors over a 12-hour period,
usually divided into six 2-hour periods or four 3-hour periods.37
Two federal agencies have been established with primary responsibilities
to assist the states in civil defense and natural disaster planning and proj-
ects: the Office of Civil Defense and the Office of Emergency Planning.
The committee at this time is not prepared to judge the effectiveness of
the federal programs in California.38
^ For discussion of crowd control, see also: Raymond M. Momboisse, "Crowd Control and Riot
Prevention," Western City Magazine, September 1965.
211 See CHP Log, August 14 and 15, 1965 for 12-hour delay in transferring equipment from
Sacramento to Los Angeles.
:!'» CHP Log August 15, 1965 and August 16, 1965.
31 See: Report Concerning the California National Guard's Part in Suppressing the Los Angeles
Riot, August 1965, State Military Department.
3-See: Julian Hart, "National Guard at Watts," The National Guardsman, October 1965.
33 See: Transcript, "News Media Reporting of Natural Disasters and Civil Disturbances," As-
sembly Military and Veterans Affairs Committee, October 5, 1966.
34 See also: "Report on Characteristics and Potential of State Military Support During Natural
Disasters and Civil Disturbances," State Military Department, 1965.
35 Violence in the City — An End or a Beginning. A Report by the Governor's Commission on the
Los Angeles Riots, December 2, 1965.
at §ee. "Director's Report on CDO Activities in Los Angeles Area Disaster, August 1965," Cali-
fornia Disaster Office.
37 William J. J. Smith, "Civil Defense Education — An Answer to Anxiety," California Educa-
tion, November 1963.
38 See: Federal Disaster Relief Manual (Rev. Ed.), 1963, for listing of federal civilian agencies
with responsibilities in disaster planning, relief and rehabilitation. Some of these agencies
have sizeable staff, facilities and materials in California.
71
DISASTER COMMUNICATIONS SYSTEMS
A large number of federal and state radio, teletype and telephone net-
works may be found in California. Some of these systems may communi-
cate with each other while others are routed by use of other communica-
tions devices. Communications systems currently available and in use in
California include:
(A) Federal
1. NAWAS (National Warning System).
2. NACOM I (National Communications): teletype.
3. NACOM II: radio, two-way voice.
4. EBS (Emergency Broadcast System): successor to CONELRAD.
5. U.S. Weather Bureau, Sacramento.
(B) State
1. Department of Justice: teletype and radio.
2. Highway Patrol: IDT (Inter-regional Dial Telephone): microwave.
3. Highway Patrol: radio.
4. CDO: ''Local Government" VHF radio.
5. Division of Forestry: radio.
6. Division of Highways: radio.
7. Department of Fish and Game: radio.
8. Department of Water Resources: radio.
9. Military Department (Air National Guard) : radio.
10. Division of Communications, Department of General Services: the orig-
inal and continuing technical coordination and servicing agency for
several (but apparently not all) state-owned microwave, radio, and tele-
phone systems.
72
<mmm**
Appendices
..*+*#*
CALIFORNIA'S NATURAL DISASTER
AND CIVIL DEFENSE PROGRAMS
LIST OF WITNESSES
Appearing Before the Assembly Interim Committee
on Military and Veterans Affairs
January 12, 1966
1. Mr. Raymond M. Momboisse, Deputy Attorney General, State
of California
2. Mr. William Parker, Chief of Police, City of Los Angeles
3. Mr. Halton Arp, Chairman, Los Angeles Chapter, Federation of
American Scientists
4. Mr. William Frank, Deputy Civil Defense Director, City of Los
Angeles
5. Hon. William Goedike, Mayor, City of Inglewood
6. Mr. Andrew J. Fink, Assistant, Safety and Disaster Services, County
of Los Angeles
7. Mr. Roy McCann, Managing Editor, San Clemente Sun Post
8. Mr. Edmund L. Lewis, Executive Assistant, California School
Boards Association
9. Mr. Elmer Kell, President, Southern California Civil Defense
and Disaster Association
10. Hon. Peter J. Pitchess, Sheriff, Los Angeles County
11. Mr. John Gaffney, Director, California Disaster Office
12. Mr. Melville I. Stark, Director, Office of Civil Defense, Riverside
13. Mr. Rudy Medina, Coordinator, Civil Defense, Imperial County
14. Mr. Linton T. Collins, Representative, United Spanish War Vet-
erans
October 5, 1966
1. Mr. Edmonde A. Haddad, News Editor, Capital Cities Broadcasting
Corp.
2. Major General Roderic L. Hill, State Adjutant General, Military
Department
3. Mr. John W. Gaffney, Director, California Disaster Office
4. Mr. Howard Smiley, Executive Vice President, California Broad-
casters Association
5. Mr. Rorert M. Light, President, Southern California Broadcasters
Association (observe only)
6. Mr. William Horn, Chief, Flood Forecasting and Control Branch,
Department of Water Resources
7. Mr. Howard Moore, Deputy State Forester, Department of Con-
servation
8. Mr. Ben Martin, General Manager, California Newspaper Pub-
lishers Association
74
Persons Interviewed
The committee staff interviewed the following individuals while studying
California's Natural Disaster and Civil Defense Program:
1. Mr. David VV. Davis, Consultant, Program and Policy Office, De-
partment of Finance
2. Mrs. Emeline Ebberts, Director of Public Information, Sacra-
mento Area Chapter, American Red Cross
3. Mr. John W. Gaffney, Director, California Disaster Office
4. Mr. E. L. Halcomb, Jr., Executive Secretary, Commission on Cali-
fornia State Government Organization and Economy
5. Mr. Nathan B. (Dave) Keller, Principal Administrative Analyst,
Legislative Budget Committee
6. General Clarence D. Smith, Assistant to the Adjutant General,
Military Department
7. Mr. Frank Mesple, Legislative Secretary to the Governor, Gover-
nor's Office
8. Mr. W. A. Farrell, Chief, Surplus Property Office, State Educa-
tional Agency for Surplus Property
9. Miss Carlyn Froerer, Attorney, League of California Cities
10. Mr. Merrill Gaffney, Executive Secretary, California Peace Offi-
cers Association
11. Mr. Richard F. Gordon, Director, San Francisco Region, American
Red Cross
12. Mr. George M. Grace, Director, Region Seven, Office of Emer-
gency Planning
13. Mr. O. J. (Bud) Hawkins, Assistant Deputy Director, Department
of Justice
14. Mr. William L. Horn, Chief, Flood Control Center, Department
of Water Resources
15. Mr. Paul T. Hoyenga, Local Assistance Office, Department of
General Services
16. Mr. Edmund K. Lewis, Executive Assistant, California School
Boards Association
17. Mrs. Grace Lusk, State Personnel Board
18. Mr. John D. MacKenzie, Information Officer, Department of Vet-
erans Affairs
19. Mr. A. David Motes, Budget Operations (Public Safety Agency),
Department of Finance
20. Mr. William C. Parker, Chief of Police, City of Los Angeles
21. Mr. R. E. (Ron) Nelson, Assistant Director, Contra Costa Dis-
aster Office
22. Mr. Will H. Perry, Jr., Director, Contra Costa County Disaster
Office
23. Mr. Charles T. Rainey, Staff Member, Disaster Research, Stan-
ford Research Institute
75
Persons Interviewed — Continued
24. Mr. H. A. (Vic) Rosa, Assistant to the Administrator, Public
Safety Agency
25. Mr. Thomas C. Sheridan, General Counsel, Governor's Commis-
sion to Investigate the Los Angeles Riot
26. Mayor Samuel W. Yorty, City of Los Angeles
27. Mr. Bradford M. Crittenden, Commissioner, California Highway
Patrol
28. Mr. Carl H. Aulick, Major General (Retired), Director, Office
of Civil Defense, Santa Rosa
STATISTICAL REPORT
Federal Assistance Programs Administered by
California Disaster Office
Fiscal Year 1964-65
The California Disaster Office administers four programs under which the
federal government assists states and local governments in their efforts to
build effective civil defense organizations and cope with the effects of nat-
ural disasters. These four programs are (1) granting of matching funds
for civil defense supplies, equipment and training activities; (2) donations
of surplus federal property; (3) matching funds for administrative costs
for civil defense activities; and (4) grants for the emergency restoration
of public facilities damaged in a natural disaster which has been recog-
nized by the President as of major proportions.
Amounts of this assistance are shown on this summary. They reflect only
those donations and grants which were completed prior to July 1, 1965.
Still available to local governments are funds which were allocated during
fiscal year 1964-65 for approved projects.
Summary
Total
Fiscal year 1964-65
Supplies — equipment — training $1,349,068.33
Surplus property donations 2,889,856.73
Personnel and administrative costs 1,715,418.06
Grants under Public Law 875 6,334,389.12
GRAND TOTAL $12,288,732.24
Work requested by state to be performed by the appropriate federal agency
under Public Law 81-875 (expenditures resulting from the December 1964
flood).
Funds Expended or Contracts Let as of June 1, 1965 $23,872,000.00
76
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Volume 24 Number 5
REPORT OF THE
ASSEMBLY INTERIM COMMITTEE ON
MILITARY AND VETERANS AFFAIRS
1965-67
PART II
CALIFORNIA VETERANS BENEFITS
To the 1967 General Session of the
California Legislature
MEMBERS OF THE COMMITTEE
Walter W. Powers, Chairman
Newton R. Russell, Vice Chairman
Robert E. Badham George Danielson
John L. Burton Mervyn M. Dymally
Charles E. Chapel Carley V. Porter
STAFF
Louis R. Negrete, Consultant
Rose Cypert, Secretary
Published by the
ASSEMBLY
OF THE STATE OF CALIFORNIA
HON. JESSE M. UNRUH HON. CARLOS BEE
Speaker Speaker pro Tempore
HON. GEORGE ZENOVICH HON. ROBERT MONAGAN
Majority Floor Leader Minority Floor Leader
JAMES D. DRISCOLL
Chief Clerk
LETTER OF TRANSMITTAL
January 3, 1967
Hon. Jesse M. Unruh
Speaker of the Assembly, and
Members of the Assembly
Assembly Chamber — State Capitol
Sacramento, California
Gentlemen :
Pursuant to House Resolution No. 710 of the 1965 Regular Legisla-
tive Session, the Assembly Interim Committee on Military and Veterans
Affairs submits its final report covering its functions and activities
during the 1965-67 interim.
Respectfully submitted,
Walter W. Powers, Chairman
Newton R. Russell, Vice Chairman
Robert E. Badham George Danielson
John L. Burton Mervyn M. Dymally
Charles B. Chapel Carley V. Porter
(3)
INDEX
Part II
CALIFORNIA VETERANS BENEFITS
List of Witnesses 7
Introduction 8
Findings 8
Recommendation 8
SCOPE
California Veterans Board as a Policymaker 9
Introduction 9
Recommendation 9
General Considerations 9
Legal Considerations 11
Cost Considerations 12
Per Diems 13
Actual Annual Cost 13
Advisory Committee 12
California Veterans Board as a Policymaker 14
Conclusion 17
Bibliography 18
Summary of California State Benefits for Veterans 18
Summary of Veterans Legislation, 1965 General Session 22
Suggestions by Veterans Organizations 23
Proposed Revision of the Military and Veterans Code 24
Committee Bill Draft 26
Testimony by Mr. Keith Garrison 42
Brief Summary of Federal Veterans Benefits 44
Number of U.S. Military Casualties in Vietnam 47
(5)
CALIFORNIA VETERANS BENEFITS
LIST OF WITNESSES
APPEARING BEFORE THE ASSEMBLY COMMITTEE
ON MILITARY AND VETERANS AFFAIRS
November 12, 1965
1. MR. JOHN HANDSAKER, Administrative Deputy Director,
Department of Veterans Affairs
2. MR. JAMES A. GILBERT, Vice Commander, Department of Cali-
fornia, American Legion
3. MR. STANLEY DUNMIRE, Legislative Representative, American
Legion, Department of California
4. MR. EDWIN MYERS, Department Commander, Veterans of For-
eign Wars of the United States
5. MR. J. NORMAN KELLY, Director, Military and Veterans Affairs
for County of Los Angeles
6. MR. B. BILL MURAD, Commander, AMVETS, Department of
California
August 18, 1966
1. MR. JOSEPH M. FARBER, Director, Department of Veterans
Affairs
2. MR. STANLEY F. DUNMIRE, Legislative Chairman, American
Legion
3. MR. BYRON B. GENTRY, Member, California Veterans Board
4. MR. CHARLES WOOD, Sacramento County Veterans Service
Officer
5. MR. CESAR MENDEZ, State Secretary, American GI Forum
6. MR. W. KEITH GARRISON, Director, County of Ventura Veter-
ans Service Bureau
7. MR. JOHN MONAGHAN, Member, California Veterans Board;
Veterans Political Council of San Francisco
8. MR. MANUEL VAL, Manager, Service and Coordination Division,
Department of Veterans Affiairs
9. MR. JOHN ERTOLA, Board Counsel, Department of Veterans
Affairs
10. MR. MATTHEW ZOLLNER, Assistant Manager, Farm and Home
Purchases Division, Department of Veterans Affairs
11. MR. HARRY E. WENTWORTH, Representing Disabled American
Veterans
12. MR. E. W. REYNOLDS, County Service Officer, Kern County
(7)
PART II
CALIFORNIA VETERANS BENEFITS
INTRODUCTION
The committee reviewed California veterans benefits for the pur-
pose of insuring California's position as having the nation's finest
state program of benefits for war veterans. A grateful people could do
no less for the thousands of Californians called to serve their country
in the uniform of the United States armed forces. The California
Military and Veterans Code was reviewed to determine whether it
was suited to meet current conditions realistically.
The committee held public hearings on this subject on November 12,
1965, at the Museum of Science and Industry Building, in Los Angeles,
and on August 18, 1966, at the State Building, in San Francisco. The
committee requested and received suggested problem areas to be re-
viewed from veterans organizations. The committee then prepared a
draft of a proposed revision of the Military and Veterans Code which
encompassed a variety of suggestions made by interest groups and
ideas developed by committee members as a result of independent
research.
The end result was the drafting of a legislative proposal embodying
repeal of many obsolete code sections and the amendment of other
sections to make clear legislative intent. New ideas are presented.
Changes in the organization of the Department of Veterans Affairs
are offered. The committee also gave special attention to the role of
the California Veterans Board as a policymaker.
This report first considers the findings and recommendation con-
cerning the California Veterans Board. Then a general chronological
development is presented of the steps that resulted in the committee's
legislative proposal for the 1967 Regular Session of the State Legis-
lature.
FINDINGS
The committee finds that some sections of the Military and Veterans
Code have not been amended since 1939. Much has happened in the
last 27 years that is not reflected in the current code provisions. Two
World Wars, the Korean and Vietnam conflicts and the several lesser
military actions involving American troops, together with the changing
social, economic and educational conditions in society, constitute a
need to revise California's program of benefits to veterans.
RECOMMENDATION
The committee recommends that the legislative proposal developed
as a result of interim studies be presented to the Legislature for en-
actment into law at the 1967 Regular Session of the State Legislature.
(8)
CALIFORNIA VETERANS BENEFITS 9
The revision of the Military and Veterans Code should include: making
the California Veterans Board an Advisory Board and transferring
all policymaking responsibilities to the Director of Veterans Affairs;
amend, add and repeal various sections; change definition of "veteran"
and "veterans" for veterans' benefit purposes; increase educational
benefits and make other changes relative to educational assistance;
make changes respecting claims for educational benefits; provide for
administration of local assistance and burial provisions through county
veterans service officers and make other changes respecting those pro-
visions and officers ; make changes in provisions on farm and home pur-
chases, including change increasing amount of home loans from $15,000
to $20,000 ; make other related changes.
The committee also recommends that a bond issue of $500,000,000 to
continue financing the Cal-Vet home and farm loan program be pro-
posed to the electorate for approval at the 1968 general election.
The committee further recommends that the position of commandant
at the State Veterans Home be filled by the administration to clarify
the responsibilities for management of the State Veterans Home.
CALIFORNIA VETERANS BOARD AS A POLICYMAKER
INTRODUCTION
The Assembly Committee on Military and Veterans Affairs is not
limiting its interest to merely authorizing policies and programs for
administrative action. It is also concerned with the administrative
organization to carry out the policies and programs of state govern-
ment.
We may say as a general rule that politically and legally this
committee is as much interested in how government functions as it is
in what government is supposed to be doing. Therefore, the committee
is asking whether the Department of Veterans Affairs should continue
to be headed by the California Veterans Board.
RECOMMENDATION
It is recommended that the California Veterans Board be made an
advisory board and that all policymaking responsibilities be vested in
the Director of the Department of Veterans Affairs.
SCOPE
General Considerations
In the early years of the Federal Republic, Congress established
most agencies with a single individual as head and by 1860 it was
generally accepted that single-headed control of administrative agencies
was preferable.1 After the Civil War, legislative thinking began to
change. The number of boards and commissions in the federal govern-
ment tended steadily to increase. Perhaps the most important such
body set up after World War II was the Atomic Energy Commission.
i LJoyd M Short The Development of National Administrative Organization in the
United State's, Baltimore: Johns-Hopkins Press, 1923, pages 37-51.
2— L-1828
10 COMMITTEE ON MILITAEY AND VETERANS AFFAIRS
However, it is interesting to note that the trend has been somewhat
different in our state and local governments. Here during most of the
1800 's it was customary to have boards for education, health, welfare,
road and even police administration. Except in the field of education,
this trend has been reversed and the prevailing practice is to have
single-headed agencies in these fields, sometimes with an advisory board
attached. To be sure, there are still many boards and commissions in
state and local government but in relative terms, the proportion of
government services operated by boards has tended to decline.2
Arguments in favor of board administration may be made. First,
it may be claimed that it is of vital importance to have a board that
deals with a particular activity such as veterans and veterans benefits
and that that particular activity is best entrusted to the judgment
of a group rather than to the decision of a single person.
A second argument is that there is more wisdom in a group than in
a single individual. Furthermore, as part of this proposition about
wisdom, a board may be advocated by various groups in the expectation
that a representative of their organization may be appointed and so
ensure the presentation of their particular point of view.
A third argument in favor of a board is that this creates positions in
state government to which individuals may be appointed as a reward
for political favors or support.
Fourthly, a board may be valuable in overcoming public apathy in
opposition toward necessary public projects. It may be helpful in
creating a favorable climate of opinion for many issues and questions
which require voter approval such as a bond issue.
A fifth argument is that a board may become a visible and re-
sponsible pressure group on a reluctant administration. The board may
render a major civic service by evaluating the needs of the community
and the resources and urging the elected officials to take appropriate
steps for meeting these needs.
And, a sixth argument may be made that one of the least publicized
but certainly one of the most vital potential advantages of the board
is that it may act as a counterforce against a growing void between
the government and the governed.
There are also some general arguments that may be made against
a board-headed administrative agency.
The first is that it tends to dilute or obscure political responsibility
for direction of an agency's work. When an administrative activity is
headed by a single person, he and he alone must accept responsibility
for all basic policies of operation. Popular dissatisfaction with work
objectives or performance can then be expressed through pressures
which result in replacement of the agency's head. This kind of simple
solution is not available in the case of an agency headed by several
persons.
Secondly, a multiheaded agency may encourage vaccilating or in-
effective direction of work. A good deal of organizational experience
has indicated that agencies run by several persons are apt to have
uncertain or confused lines of communication, channels of command
a John D. Millett, Government and Public Administration, McGraw Hill Book Co.,
Inc., 1959, pages 99-100.
CALIFORNIA VETERANS BENEFITS 11
and divisions of work assignment. The reasons for this are primarily
technical in nature.
A third defect of this type of board is a method of selection or
appointment. Thus the board is borne with two limitations. First
of all, since the members are selected with a specific problem in view,
presumably an attempt would be made to select persons who will be
sympathetic to the agency's or official's point of view. Thus the board
becomes, in fact, either a device by which a respectable rubber stamp
may be applied to one of the administration's proposal or a pressure
group in disguise.3
However, it may be said that even though the administration may
have recommended policy to the board, it does not diminsh the fact
that the board adopts the policy and may be held responsible to the
appointing power for its success or failure.4
In general it may be laid down as a canon of correct administrative
practice that where the work to be done is essentially of an adminis-
trative character, that is, one calling for direct performance of work,
the bureau-type of organization should be adopted.5
If, however, important regulatory, rulemaking, or quasi-judicial
functions are assigned to an agency, the commission form of organiza-
tion is usually provided.6
Legal Considerations
The California Veterans Board consists of seven members who are
appointed by the Governor with the consent of the Senate.7 Each
member of the board receives a per diem of $20 for attendance at. each
meeting of the board and $20 per diem for each day spent on official
duties assigned by the board. In addition, each member is reimbursed
for his traveling and other expenses incurred in the performance of
his official duties.8 The board sets its own meetings.9 All meetings are
open and public.10 The board selects its own chairman and also is
empowered to appoint and fix the salary of a secretary.11 The board
is empowered to determine the policies for all operations of the de-
partment.12 The board may create advisory committees.13 The chief
administrative officer of the Department of Veterans Affairs is the
Director of Veterans Affairs,14 who is appointed by the Governor.15
The director is required to present reports and recommendations to
the board concerning any matter relating to veterans' welfare when
asked to do so by the board or when the director feels it is advisable
to do so.16
3 Lyle E. Schaller, "Is the Citizen Advisory Committee a Threat to Representative
Government?" Public Administration Review, September 1964, pages 175-179.
*John M. Pflffner and Robert V. Presthus, Public Administration, Ronald Press Co.,
1960, page 189.
5W. F. Willoughby, Principles of Public Administration, Johns Hopkins Press, 1927,
page 120.
8 Joseph P. Harris, Congressional Control of Administration, Brookings Institution,
1964, page 31.
7 Military and Veterans Code, Sec. 65.
8 Ibid., Sec. 68.
°Ibid., Sec. 69.
10 Ibid., Sec. 69.5.
ii Ibid., Sec. 71.
™Ibid., Sec. 72.
13 Ibid., Sec. 73.
i* Ibid., Sec. 74.
15 Ibid., Sec. 75.
i« Ibid., Sec. 84.
12 COMMITTEE ON MILITARY AND VETERANS AFFAIRS
Cost Considerations
All per diems, travel, and other expenditures are paid from the
Veterans Farm and Home Building Fund of 1943 including the salary
of the secretary to the Veterans Board,17 and the salary of the legal
counsel to the board.
The board counsel is a part-time attorney for the Department of
Veterans Affairs. He serves as legal counsel for the Veterans Board
and the Director of Veterans Affairs. This salary is one-half the rate
for a full-time attorney in accordance with the salary adopted by the
Personnel Board.18 The administration also has a full-time attorney
on its staff and it may request the services of the office of the Attorney
General.
Members of the board serve without salary but are paid a per diem
of $20 for each day spent on official duties and are reimbursed for
traveling expenses.19
Members of the advisory committee to the board receive no com-
pensation for their services but when called into meetings on other
duties by the board, they are reimbursed for actual and necessary
expenses.20
The total actual cost for the operations of the California Veterans
Board is $48,911 per year.21 The true cost is much higher considering
the per diem and traveling expenses of the board counsel, board secre-
tary, and the department staff members who regularly attend meetings
of the California Veterans Board.
Advisory Committee to the California Veterans Board
The Advisory Committee to the California Veterans Board was ap-
pointed pursuant to Section 73 of the Military and Veterans Code.
The advisory committee functions as a " Little Veterans Board ' ' within
the Department of Veterans Affairs. There are 11 members on the
advisory committee.22 They are to be permitted to sit in on any
veterans ' hearings at the California Veterans Home and are authorized
to make inquiries into various situations at the home. The advisory
committee is then to report back to the board.23
CALIFORNIA VETERANS BOARD
Actual per diems claimed by individual board members from July 1,
1965, through May 1966 (claims are not as yet processed for June
1966) are as follows:
17 Ibid., Sec. 702.
18 Office of Legislative Analyst, July 20, 1966.
19 Military and Veterans Code, Sec. 68.
20 Ibid., Sec. 73.
21 Office of Legislative Analyst, July 1966.
22 Minutes, California Veterans Board, January 29, 1966.
23 Ibid., February 19, 1965.
CALIFORNIA VETERANS BENEFITS
PER DIEMS FOR BOARD MEMBERS
13
Per diems at $20
Amount
Board member No. 1 ___
58
30
41
127
101
67
19
$1,160
Board member No. 2 _ _ _ _ .
600
Board member No. 3 _ _
820
Board member No. 4 _____ __
2,540
Board member No. 5 _
2,020
Board member No. 6__
1,340
Board member No. 7* _ _
380
* No per diems claimed from January 1966 to June 1966. Resigned on June 8, 1966.
Source: Office of the Legislative Analyst, July 1966.
Actual Annual Cost — 1965-66
Board Members
Per diems
Actual traveling expenses
Actual secretary salary
Actual counsel salary (part time)
$10,020
*23,859
8,366
6,666
f$48,911
* Includes expenses for Advisory Committee.
t To this total should be added the per diem and travel expenses for department
staff members who regularly attend meetings of the California Veterans Board.
Source: Office of the Legislative Analyst, July 1966.
The California Veterans Board has approved travel expenses in con-
nection with attendance by advisory committee members at various
department conventions of veterans' organizations.24 A member of
the advisory committee went out of state to Reno, Nevada, for a meet-
ing and was paid travel expenses.25
The advisory committee meets for approximately two days each
month. It makes a statement to the California Veterans Board at each
board meeting. The substance of its remarks are generally commenda-
tions for the department 26 and for the Veterans Home.27
The advisory committee has recommended to the board that in-
dividual servings of condiments be made as far as possible to home
members in the dining room 28 and that consideration be given to the
construction of a fishing lake at the Veterans Home for the recreation
of the home members.29
There is also a Veterans Home Committee of the California Veterans
Board which does essentially the same thing as the advisory committee,
that is report back to the California Veterans Board about the policy
and operation of the California Veterans Home.30
^Ibid., May 21, 1965.
25 Office of Legislative Analyst, July 20, 1966.
20 Minutes, California Veterans Board, July 17, 1964, September 25, 1964, March 26,
1965, April 23, 1965, May 21, 1965, August 27, 1965, October 22, 1965, November
19, 1965, April 29, 1966, May 20, 1966.
27 Ibid. October 23, 1964, February 19, 1965, July 16, 1965.
28 Ibid., December 10, 1965.
28 Ibid., April 29, 1966.
80 Ibid., January 29, 1966.
14
COMMITTEE ON MILITARY AND VETERANS AFFAIRS
It may be argued that the Advisory Committee to the California
Veterans Board is a mere paper compliance with the idea of involving
"the people' ' in the decision making process. Good intentions mark
both the selection of the committee and acceptance by the members but
little that is really significant ever takes place.
California Veterans Board as a Policymaker
Who sets the policy for the administration of the California Depart-
ment of Veterans Affairs? Consideration of that question involves
recognition that basically three agencies may be involved in setting
policy for the department. They are the Legislature, the department
itself and the California Veterans Board. This paper is concerned
specifically with the functions of the California Veterans Board as it
relates to policymaking for the Department of Veterans Affairs.
The California Veterans Board meets once a month. There are seven
members on the board. They reside in Fresno, Turlock, Sacramento,
Santa Rosa, San Francisco, Los Angeles and Pasadena. Two of the
seven board members reside south of Fresno.
CALIFORNIA VETERANS BOARD
MEETINGS HELD
July 17, 1964, to June 10, 1966 *
Date
City
Number
board
members
present
Number
department
staff
present
Number
visitors
present
Length
of
meetings
7/17/64
8/19/64
9/25/64
10/23/64
11/20/64
December
1/15/65
1/29/65
2/19/65
Monterey
Veterans Home
Newport Beach
San Francisco,
Santa Barbara
No meeting
Santa Rosa
Veterans Home
Fresno __
7
6
7
6
6
6
6
7
7
6
7
6
6
7
6
6
6
6
6
6
6
6
6
6
11
18
9
16
11
28
10
13
17
9
18
16
12
17
7
12
16
13
13
7
7
12
12
10
16
21
10
33
10
47
7
16
5
20
9
16
13
37
21
25
22
38
12
15
28
21
17
9
2hrs.
2 hrs. 45 min.
2 hrs. 25 min.
2 hrs.
1 hr. 45 min.
2 hrs.
45 min.
2 hrs. 50 min.
3/26/65
4/23/65
5/21/65
6/22/65
7/16/65
Sacramento
Paso Robles
San Diego _ __
Sacramento
Scotia
2 hrs.
1 hr. 30 min.
2 hrs. 15 min.
1 hr. 30 min.
2 hrs. 30 min.
8/27/65
9/24/65
Los Angeles
Anaheim
3 hrs.
1 hr. 45 min.
10/22/65
Fresno.
2 hrs. 15 min.
11/ 9/65
12/10/65
1/29/66
Sacramento
San Francisco
Fresno
1 hr. 40 min.
1 hr. 30 min.
2 hrs. 35 min.
2/25/66
3/25/66
4/29/66
Palm Springs
San Diego
Redding
1 hr. 55 min.
2 hrs. 10 min.
2 hrs. 30 min.
5/20/66
6/10/66
Pacific Palisades __
State Line
2 hrs. 35 min.
2 hrs. 20 min.
Minutes, California Veterans Board.
CALIFORNIA VETERANS BENEFITS 15
At the meetings of the California Veterans Board, the agenda con-
sists of a call to order by the chairman, the approval of minutes of the
previous meetings, reports by the divisions of the Department of Vet-
erans Affairs, board committee reports, old business, new business, and
adjournment.
The Veterans Board meets throughout the state. Anywhere from 7
to 18 officials or members of the staff of the department travel to and
attend each meeting of the board.
Anywhere from 5 to 47 visitors attend each meeting. The average
meeting lasts approximately two hours. There are usually six members
of the board present for the meetings.
The board travels extensively throughout the state to hold its meet-
ings. Northern California locations seem to be more popular by a ratio
of almost 2 to 1 to cities in the southern part of the state. It is clear,
also, that the meetings do not last very long, averaging two hours per
meeting. Further, there is a disparity between the number of staff
people that attend each meeting. (See chart "Meetings Held.")
At its meetings, the board is informed of pending legislative pro-
grams 31 which it then supports or opposes.32
The board has requested that certain study of operations be made
concerning the California veterans service officers' program,33 the Cal-
Vet loan program,34 the California Veterans Home,35 and a Veterans
Administration program.36 The board also receives annual audit reports
of the Farm and Home Purchases Division.37
Several examples illustrate how department policy is established.
For example, the board was advised of the administrative decision to
deemphasize the educational program for veterans.38 Eventually the
Educational Assistance Division was merged with another division.39
This merger was accomplished even though the Military and Veterans
Code clearly requires a Division of Educational Assistance in the De-
partment of Veterans Affairs as one of the four required divisions.40
The board ratified the action of the administration by its silence.
On another occasion the administration proposed the concept of
"part-time" farming which required the redefinition of the word
"farm" under the home and farm purchase program. The board
adopted the recommendation.41
Selection of administrative officials who will report to the board at
the meetings is determined by the administration.42
The board ratifies action previously taken by the Veteran's Finance
Committee regarding the sale of bonds.43
31 Minutes, California Veterans Board, July 17, 1964, August 19, 1964, February 19,
1965, April 23, 1965, November 19, 1965, January 29, 1966, June 10, 1966.
32 Ibid., February 19, 1965, March 26, 1965.
83 Ibid., July 17, 1964.
™Ibid., September 25, 1964, October 22, 1965, November 20, 1964, March 25, 1966.
^Ibid., March 25, 1966, April 29, 1966, September 25, 1964, August 19, 1964, July 16,
1965.
36 Ibid., May 20, 1966.
37 Ibid., September 25, 1964. n , „^ m n< Hnntf T
38 Ibid., August 19, 1964, February 19, 1965, March 26, 1965, May 21, 1965, January
15, 1965, March 25, 1966.
&Ibid., March 26, 1965, May 20, 1966.
40 Military and Veterans Code, Sec. 81.
«■ Minutes, California Veterans Board, September 25, 1964.
**Ibid., September 25, 1964, September 24, 1965, February 25, 1966.
48 Ibid., March 26, 1965, April 29, 1966.
16 COMMITTEE ON MILITARY AND VETERANS AFFAIRS
The board is informed of new programs initiated by the administra-
tion.44
The board ratifies the budget prepared and presented by the ad-
ministration without questioning performance by the administration.45
The final budget is presented for the board's information after the
same budget is submitted to the Legislature.46
The board has set some policy. For example, the board chairman
gave the other board members permission to make official visits to
veteran's meetings in the state and to attend conventions of veterans'
organizations so that they can be well informed.47 This policy relates
more to the functions of the board rather than to the performance of
the administration.
The board has set rules pertaining to the Farm and Home Purchase
Division 48 and to the California Veterans Home.49
The board frequently adopts resolutions commending the depart-
ment,50 the staff, leading citizens, a board member, and a Veteran's
Administration official.51
The board also establishes committees to study problems. One of
those committees is a Veteran's Home of Southern California Com-
mittee.52 It appears that the committee was not activated. It has not
been mentioned again in over a year.
The board also established a burial and cemeteries committee.53
Progress reports were made by this committee for four consecutive
months, during which time the administration informed the board that
the department itself was also conducting an independent study of the
same subject matter, and during this time a board member on this
committee took a trip to Washington, D.C., to discuss this problem
with federal officials.54 Finally it was announced to the board that the
study had been completed and the report would be available within
60 days.55 However, nine months later the report is not available, if
at all submitted.
The board determines the interest rate on Cal-Vet loans by adopting
the recommendation of the administration.56
The board ratifies the formula concerning contracts with counties
by adopting administration proposals.57
The board appointed a committee to study medicare and its impact
on California veterans 58 but apparently the committee was not acti-
vated.
"Ibid., December 10, 1965, January 29, 1966, March 25, 1966, April 29, 1966.
i5Ibid., September 25, 1964, November 20, 1964, October 22, 1965.
i0Ibid., January 29, 1965.
"Ibid., January 15, 1965.
iSIbid., March 26, 1965, May 20, 1966.
i0Ibid., January 29, 1966, September 25, 1964.
™Ibid., August 19, 1964.
51 Ibid., July 17, 1964, January 15, 1965, January 29, 1965, July 16, 1965, April 29,
1966, January 29, 1966, February 19, 1965, April 23, 1965, August 27, 1965, De-
cember 10, 1965, March 25, 1966.
62 Ibid., February 19, 1965.
™Ibid., February 19, 1965.
^Ibid., March 26, 1965, April 23, 1965, May 21, 1965, June 22, 1965.
55 Ibid., September 24, 1965.
58 Ibid., October 23, 1964, October 22, 1965.
57 Ibid., June 22, 1965, June 10, 1966.
5SIbid., August 27, 1965.
CALIFORNIA VETERANS BENEFITS 17
The board favors an inland veteran's administration hospital in
southern California, and it has expressed its opposition to the closing
of any VA hospitals in the United States.59
The board is informed of the consolidation of offices within a divi-
sion,60 or of plans to increase field offices,61 and about special studies the
administration may be conducting.62
CONCLUSION
It is apparent that policymaking is not a chief function of the Cali-
fornia Veterans Board. That is to say an examination of its activities
discloses that a relatively small portion of its time is ever devoted to
"policymaking." But a great deal of its time is devoted to asking ques-
tions about administrative procedures that properly should be handled
either at the division manager level, or below, or at the very least,
should be handled and resolved by the administration.
Perhaps the board should have an executive secretary to serve on a
full-time basis to help give the board an independent appraisal and an
independent view of the activities of the administration.63 As long as
the board has to depend upon the administration for its information and
for guidance in making decisions it will continue to function asa" rub-
ber stamp ' ' for the activities and policies promulgated by the adminis-
tration.
There seems to be an absence of reports from the board to the Gov-
ernor or to the legislature concerning board activities.
The board has been compared to a board of directors of a private
corporation.64 This analogy is interesting because if the Veterans Board
is truly to function as a board of directors of a corporation, it must
have some control in the budgeting of that corporation.
The principle should be one of making administrative officers the sub-
ordinates of, and subject to, the superior authority of the board. It is
unlikely that a board of directors of a corporation would allow the com-
pany to merge divisions, expand or consolidate field offices, embark on
new programs, or eliminate existing programs, without prior approval,
if not initiation, from the board of directors itself. Yet it is clear from
the reading of the minutes of the California Veterans Board that the
department policy is not initiated by the board. Thus, if no administra-
tive duties are vested in the board and if the board determines little
policy, then the present form of organization finds no case where it can
be justified. The California Veterans Board is an unimaginative, per-
haps unnecessary, appendage of state government which acts as a " rub-
ber stamp ' ' for administrative programs.
The administration could be given full legal responsibility for estab-
lishing all departmental policy and carrying out that policy. An obvious
advantage of this reorganization would be that the Legislature and the
59 Ibid., February 25, 1966.
60 Ibid., January 15, 1965.
61 Ibid., October 23, 1964.
62 Ibid., February 19, 1965.
63 John B. Wentz, "Assistance to Citizens Committees," Public Management, Septem-
ber 1963, pages 201-203.
64 Minutes, California Veterans Board, April 29, 1966. For similar analogy see: W. F.
Willoughby, "The Legislature as a Board of Didectors," Principles of Public Ad-
ministration, Johns Hopkins Press, 1927.
18 COMMITTEE ON MILITARY AND VETERANS AFFAIRS
people would be able to pinpoint responsibility for the policy and opera-
tions of the administration on a single administrative head.
More and more we have come to realize that basic policy decisions
must be made within our scheme of government by legislatures and
chief executives. The resolution of the argument in case of any particu-
lar administrative situation is a political question which must first of all
be provided by the Legislature.65
BIBLIOGRAPHY
Lloyd M. Short, The Development of National Administrative Organ-
ization in the United States, Baltimore: Johns Hopkins Press, 1923.
John D. Millett, Government and Public Administration, McGraw-
Hill Book Co., Inc., 1959.
John M. Pfiffner and Robert V. Presthus, Public Administration,
Ronald Press Co., 1960.
W. F. Willoughby, Principles of Public Administration, Johns Hop-
kins Press, 1927.
Joseph P. Harris, Congressional Control of Administration, Brook-
ings Institution, 1964.
Lyle E. Schaller, "Is the Citizen Advisory Committee a Threat to
Representative Government?" Public Administration Review, Septem-
ber 1964, pages 175-179.
John B. Wentz, "Assistance to Citizens Committees" Public Man-
agement, September 1963, pages 201-203.
State of California, Military and Veterans Code, 1966.
Minutes, California Veterans Board, 1964-1966.
California Legislature, Office of Legislative Analyst.
California Legislature, Office of Legislative Counsel.
SCOPE
SUMMARY OF CALIFORNIA STATE BENEFITS FOR VETERANS
Agency
Established in May 1946, as a consolidation of previous boards and
commissions, the Department of Veterans Affairs is headed by a direc-
tor appointed by the Governor. Policymaking responsibilities are vested
in the California Veterans Board. The department is composed of four
divisions: (1) Farm and Home Purchases; (2) Educational Assistance;
(3) Service and Coordination; and (4) Veterans Homes.
Bonus
None authorized.
Burial
Up to $250 allowance is provided by each county so that burial of any
honorably discharged veteran or widow of a veteran may not be made
65 John D. Millett, Government and Public Administration, McGraw-Hill, 1959, pages
102-103.
CALIFORNIA VETERANS BENEFITS 19
in a pauper's field. Maintenance of graves and setting of headstones are
a county charge. County burial allowance is not payable if federal
burial allowance is available.
Education
Widows of veterans who died from war (or peacetime since Septem-
ber 16, 1940) service-connected disabilities, wives of war veterans totally
disabled from service-connected disabilities, and children of veterans
who died or are totally disabled from service-connected disabilities may
be granted educational assistance. Applicants must be native of or have
five years' residence in California immediately preceding initial appli-
cations. Deceased or disabled veterans are not required to be a resident
or a native of California. Where applicable, federal benefits must be
exhausted before state entitlement can be granted.
Employment Preference
Veterans and widows of veterans receive from 3 to 15 points' prefer-
ence on examinations for state civil service positions, depending on type
of examination and disability if any. Veterans also have retention rights
on employment lists, are entitled to civil service credit for applicable
military experience, preference over nonveterans in policemen and
watchmen examinations, educational leaves of absence, rights to com-
plete examinations interrupted by military service, and seniority cred-
its. Veterans employment representatives are stationed at all local offices
of the State Department of Employment to assist veterans in obtaining
employment.
Exemptions
Certain state income, property tax, estate tax, and gift tax privileges
and exemptions are extended to California veterans. Vehicle fees are
waived for any one motor vehicle owned by a veteran who has lost the
use of both legs or is permanently blind from injury or disease during
active military service. Pensions and retirement, disability, and death
payments are exempt from execution or attachment.
Free hunting licenses and tags and fishing licenses are available to
veterans with service-connected disability of 70 percent or more,
incurred during wartime.
Guardianship
State has adopted the Uniform Veterans Guardianship Act, which
provides for appointment of a guardian or conservator by the courts to
administer the property of an incompetent veteran, or for the minor
child of a veteran to receive benefits from the Veterans Administration
on behalf of such ward. In the case of incompetent veterans committed
to state hospitals, the Department of Mental Hygiene acts as guardian
if no other interested person will serve.
Home and Farm Loans
The Farm and Home Purchase Plan financed through California
Veterans Bonds enables the department to make loans to qualified
20 COMMITTEE ON MILITARY AND VETERANS AFFAIRS
veterans of up to $15,000 on a home and $80,000 on a farm at low
interest rates. Veterans must be natives of or have been bona fide
residents of California at the time of entering the service, and served
during a wartime period or in a military campaign or expedition for
which a medal was authorized by the United States government. Re-
financing is available in cases where loans of low balance and high
rates are not guaranteed by the federal government, and the applicant
is found to be specifically in need of the low rate Cal-Vet contract.
Special consideration is to be given here to wounded and disabled
California veterans. Improvement loans are also available to current
farm and home contract holders. Income properties or properties lo-
cated outside California do not qualify for purchase.
Homes and Hospitals
The state maintains the Veterans Home of California, near Yount-
ville in Napa County. To be eligible for admission, a veteran must
have been a resident of California for at least five years immediately
prior to making application, and have honorable wartime service in
the armed forces of the United States. Veterans must have a temporary
or permanent disability to the extent that they are unable to follow a
gainful occupation, and be financially unable to provide for their hos-
pitalization or domiciliary care. A domiciliary section is operated for
women veterans.
Services to Veterans
County service officers have been appointed by boards of supervisors
in all but three of the state's 58 counties. A state subvention, admin-
istered by the Department of Veterans Affairs, pays a portion of the
cost of their offices. The department's Service and Coordination Divi-
sion maintains liaison with these offices and with community veterans
service centers. The division also provides direct assistance to veterans
and their dependents at the Veterans Administration regional offices
in California, in presenting claims against the United States arising
out of war service and in establishing their rights to privileges, benefits,
hospitalization, or compensation to which they are entitled under fed-
eral or state law.
Vital Statistics
No charge will be made by a county recorder for the recording of an
honorable discharge, certificate of service, report or notice of separation,
or for issuing a certified copy thereof. Neither the state, a county or
city, nor any public officer acting in an official capacity on behalf of
the state, county or city, including notaries public, may make any
charge for furnishing a certified copy of a marriage, death, or birth
certificate, divorce decree, deed of trust, mortgage or property assess-
ment, or for making a search of such instruments, when they are to be
CALIFORNIA VETERANS BENEFITS 21
used in making a veteran's claim for federal or state benefits. Notary
services in certifying pension affidavits also are free.M;
The Department of Veterans Affairs has begun a program of con-
tacting Vietnam veterans in VA hospitals or at home. The plan is to
provide each Vietnam casualty in Oak Knoll Naval Hospital and
Letterman Army Hospital with a new or used transistor radio. These
radios are given to the men through the generosity of the people of
California who have contributed radios and money to a special fund.
Much of the credit for the continuation of the program goes to the
Military Order of the Purple Heart.
^ In the beginning several radio stations, notably KNBR in San Fran-
cisco and KGMS in Sacramento, had their disc jockeys go on the air
and appeal to the general public to donate radios. This effort produced
a total of 263 used radios. It was necessary to throw 62 of them away
as scrap. These were sent to the State Veterans Home hobby shop. The
remaining 201 radios adequately provided for all casualties to have
radios at Christmas time in both Oak Knoll and Letterman.
Beginning December 21, each hospital has been covered each week
without fail and each new casualty admitted has been given a new
radio. The Department of Veterans Affairs has authorized the program
to be a continuing procedure subject only to the availability of funds.
Thus far, $1,103.18 has been expended for new radios. The radios
are bought direct from a bay area importer who is cooperating in this
respect. From all indications, donated funds will be available to conduct
the donations indefinitely and, hopefully, as long as the conflict in
Vietnam continues.
Radios are given to out-of-state veterans as well as California vet-
erans. However, more than 85 percent of the wounded military person-
nel in hospitals in California are actually California residents. This
is largely due to the air evacuees program in effect which distributes
the casualties to the hospital nearest their home.
Bedside counseling is provided when requested at the time the radios
are given out. Interviews are scheduled weekly by the hospital author-
ities who now depend on the Department of Veterans Affairs regular
counseling schedule. The counseling program is picking up each week
as more and more hospitalized casualties become aware of the service.
The service is, for the most part, therapeutic in value.
In addition to the radio donations and the counseling service, a
further liaison has been effected with the California military establish-
ments so that the Department of Veterans Affairs is now receiving
Separation Form DD 214s on all California veterans separated either
medically or for length of service. Each separation notice contains the
address from which the veteran will seek employment. Upon receipt
of the separation notice, the Division of Service and Coordination will
send a letter to each veteran advising him of the location of the nearest
veterans service office, either county or state.67
66 Department of Veterans Affairs, August 24, 1965.
67 Department of Veterans Affairs, April 6, 1966.
SUMMARY OF VETERANS LEGISLATION
1965 General Session
This summary is an attempt to capture the highlights of legislation
enacted during the 1965 General Session affecting California veterans.
Cold War Gl Bill
Senate Bill No. 511 (McAteer-Powers) changed the definition of
"veteran" to permit the extension of Cal-Vet benefits to California
veterans who served in campaigns for which a medal was authorized
by the Government of the United States. Such campaigns are listed in
Executive Order 10977, December 4, 1961, and include: Lebanon, Viet-
nam, Quemoy and Matsu Island, Taiwan Straits, Congo, Laos, Berlin,
and Cuba.
Informal and unconfirmed estimates are that approximately 15,000
to 25,000 additional California veterans may be eligible for Cal-Vet
benefits.
Civil Service
Assembly Bill No. 819 (Allen) provides that a person who has re-
signed from his public employment to serve in the armed forces, must
return to his position in public employment within 12 months after
the time he could terminate his active military service to exercise his
right to such a position, rather than keeping the right existing as long
as the person voluntarily requests an extension of his military service.
County Service Officers
Assembly Bill No. 1751 (Powers) changes the title of county service
officer to county veteran service officer to emphasize the type of service
rendered by the county officer.
Flood Damage Relief
Senate Bill No. 61 (Christensen) provides for reimbursement to
Cal-Vet contract holders for cost of repairs to Cal-Vet homes or farms
damaged by the recent floods in northern California.
Condominiums
Senate Bill No. 92 (McAteer) includes condominium as a home for
purposes of Cal-Vet financing.
Ca/-Vef Refinancing
Senate Bill No. 386 (McAteer) increases from $5 million to $10
million the amount of Cal-Vet funds to be used for refinancing and
converting conventional loans into Cal-Vet loans.
(22)
CALIFORNIA VETERANS BENEFITS 23
Educational Benefits
Assembly Bill No. 2085 (Greene-Powers) permits wives of totally
disabled veterans to obtain Cal-Vet educational assistance benefits.
Cemeteries
Assembly Joint Resolution No. 20 (Barnes) requests Congress to
establish a national cemetery at Camp Elliott.
Veterans Administration
Senate Joint Resolutions No. 14 and No. 15 (Sturgeon) memorialize
Congress and the Veterans Administration to provide and maintain
in California, as a minimum, the nation's average ratio of veterans
psychiatric beds to veterans in the state.
Senate Joint Resolution No. 24 (Pittman) memorializes Congress
to study the effect that will result from proposed closing of Veterans
Administration facilities upon veterans and their families before au-
thorizing the closing of those facilities.
Veterans/ Tax Exemption
Assembly Constitutional Amendment No. 41 (Z'berg) would permit
the Legislature to exempt homes of certain blind veterans from prop-
erty taxation up to $5,000.
Veterans Suggestions
The committee held a public hearing for the purpose of giving vet-
erans organizations and interest groups an opportunity to recommend
changes in the state program of benefits for veterans.
The testimony of the witnesses at the hearing may be summarized
into 10 major suggestions:
1. That the Department of Veterans Affairs be urged to conduct
an extensive public relations and publicity campaign to inform
those citizens who are eligible for Cal-Vet benefits of their eligi-
bility and how to apply for those benefits.
2. That action be taken to construct a state veterans home in
southern California. It was suggested by a member of the com-
mittee that the veterans organizations take the lead in this
issue by coming together and agreeing on a specific site for the
construction of a state veterans home in southern California.
3. That the county veterans service office program be maintained
in its present form and that the funds to support this program
be taken from the state's General Fund and not be charged
against the farm and home loan surplus.
4. That the veterans' tax exemption be continued.
5. That unused domiciliary facilities at the State Veterans Home
be converted into nursing care facilities and that the Legisla-
ture appropriate $500,000 to qualify for an additional matching
grant from the federal government to accomplish the conver-
sion.
6. That the California Medicare Program be reviewed to ascertain
its impact on veterans requiring home nursing care who are
unable to gain admittance to the State Veterans Home.
24 COMMITTEE ON MILITARY AND VETERANS AFFAIRS
7. That the committee request sufficient funds for improvements
at the State Veterans Home.
8. That the Veterans Code sections pertaining to the burial of
veterans be reviewed and brought up to date.
9. That the Cal-Vet home loan limit be increased to at least
$20,000.
10. That veterans state civil service preference points be con-
tinued.68
Proposed Revision
Following the Los Angeles hearing, the committee prepared a pro-
posed revision of the Military and Veterans Code to reflect the sug-
gestions made to the committee and also to reflect ideas developed by
committee members as a result of independent research. The proposed
revisions covered Section 690 to Section 1121 of the code.
Following is a summary of recommendations abstracted from a staff
report, "Proposed Revision of the Military and Veterans Code," June
1966:
DIVISION 4. Veterans Aid and Welfare
Chapter 1. Department of Veterans Affairs
Repeals "contract services program" whereby the department con-
tracted with veterans organizations to perform services for veterans.
Chapter 2. Repealed
Chapter 3. Repealed
Chapter 4. Educational Assistance
Article 2. Veterans Dependents
Repeals and amends sections to clarify legislative intent.
Increases monthly living expense allowance for high school students
from $20 to $30 per month.
Increases the limit on the amount that may be expended on account
of any one applicant in postgraduate studies from $1,600 to $2,000.
Requires dependents' educational program to be fully funded and
for applications to be administered on a first-come, first-served basis.
Adds section requiring educational programs to be administered by
an individual with professional educational qualifications.
Adds sections requiring department to contract with State Scholar-
ship Commission to administer dependents' educational program.
Chapter 5. Local Aid
Article 1. Indigent Veterans
Repeals and amends sections to clarify legislative intent.
Article 2. Burial of Veterans and Veterans' Widows
Repeals and amends sections to clarify legislative intent.
Increases from $150 to $250 the amount each county may pay toward
the burial expenses of a veteran.
08 See : Transcript, "Veterans Benefits," Assembly Military and Veterans Affairs
Committee, November 12, 1965.
CALIFORNIA VETERANS BENEFITS 25
Article 3. Care of Veterans' Graves
Repeals and amends sections to clarify legislative intent.
Article 4. Administration
Amends sections to clarify legislative intent.
Amends section so that the California Veterans Board instead of the
Department of Veterans Affairs regulates and sets standards for the
county veterans service officers.
Adds section requiring county veterans service officers to complete
qualifying examination administered by the State Personnel Board to
qualify for state subvention.
Chapter 6. Veterans of World War II
Article 1. Veterans
Amends definition of "veteran," permitting other definitions in the
code.
Article 2. Educational Assistance
Amends sections to clarify legislative intent.
Amends definition of "veteran" to conform to the U.S. Code
definition.
Repeals and amends section to require department to administer
applications on first-come, first-served basis.
Increases amount of payment to a student for living expenses from
$40 to $80 per month.
Deletes section permitting additional $10 per month living al-
lowance for students.
Increases limit of state expenditure for education on account of any
one veteran from $1,000 to $1,500.
Amends section to encourage veterans to pursue postgraduate
education.
Article 3. Farm and Home Purchase
Amends section to clarify legislative intent.
Increases Cal-Vet home loan limit from $15,000 to $20,000.
DIVISION 5. Veterans' Institutions
Chapter 1. Veterans' Home of California
Amends and repeals obsolete sections.
Presents issue of whether position of commandant should be abolished
or filled.
Repeals ' ' Special Deposit Fund — Spanish- American War Account —
Unclaimed Trust."
Chapter 2. W omens' Belief Corps Home of California
Repeals entire chapter which is obsolete.
Chapter 3. County Institutions
No changes recommended.
26 COMMITTEE ON MILITARY AND VETERANS AFFAIRS
COMMITTEE BILL DRAFT
The committee requested the Office of the Legislative Counsel to
draft a bill embodying the proposed changes in the Military and Vet-
erans Code. The following bill draft was then mailed to veterans
organizations, the Department of Veterans Affairs, and to the County
Veterans Service Officers Association:
LEGISLATIVE COUNSEL'S DIGEST
Veterans.
Amends, adds, and repeals various sees., M. & V.C.
Abolishes California Veterans Board and transfers its functions to Director of
Veterans Affairs.
Changes definition of "veteran" and "veterans" for veterans' benefit purposes.
Increases educational benefits and makes other changes relative to educational
assistance.
Makes changes respecting claims for educational benefits.
Provides for administration of local assistance and burial provisions through
county veterans service officers and makes other changes respecting those provisions
and officers.
Makes changes in provisions on farm and home purchases, including change in-
creasing amount of home loans from $15,000 to $20,000.
Makes other related changes.
Vote — § ; Appropriation — Yes ; State Expense — Yes.
An act to amend Sections 72, 73, 78, 80, 83, 699.5, 701, 702, 890, 894,
895, 896, 920, 921, 931, 940, 942, 945, 960, 972, 980, 981, 981.1, 981.2,
981.4, 981.6, 986, 986.3, 986.5, 987, 995.5, 996.12, 996.14, 996.37,
1014, 1030.2, and 1044 of, to add Section 897 to, and to repeal Sec-
tions 61, 64, 65, 66, 67, 68, 69, 69.5, 71, 84, 85, 922, 923, 924, 925,
926, 927, 928, 929, 941, 944, 946, 947, 948, 949, 950, 960.5, 961, 1018,
1019, 1039.5, and Chapter 2 (commencing with Section 1080) of
Division 5 of, the Military and Veterans Code, relating to veterans'
benefits.
The people of the State of California do enact as follows:
Section 1. Section 61 of the Military and Veterans Code is re-
pealed.
£ir As used i& his chapter, "board" moans the California Veterans
Board.
Sec. 2. Section 64 of the Military and Veterans Code is repealed.
Mr There shall fee i» the 4>epartmcnt e# Veterans Affairs the Ga4i-
fornia Veterans Board.
Sec. 3. Section 65 of the Military and Veterans Code is repealed.
£§t !¥he California Veterans Board shall eessist ef seven- membera
who shall fee appointed by the Qewimep subject te the confirmation
ef the Senate.
Sec. 4. Section 66 of the Military and Veterans Code is repealed.
£&■ £fe members ef tfee board sfeali fee veterans as the te^m "vet-
eran" is defined m either Section 800 e* 9SQ ef this code, an4 one mom-
fee** of the board may, m tiea thereof, fee a veteran as the term "veteran"
is defined m Section 18510.1 ef the Government Code.
Sec. 5. Section 67 of the Military and Veterans Code is repealed.
6£r Of tfee members as appointed^ ene shall fee appointed £e? a te¥m
expiring January 4&r 1917, two fe? terms expiring January 45y 1918,
CALIFORNIA VETERANS BENEFITS 27
twe fer- terms expiring January +5t 1019, an4 twe fer terms expiring
January iSy 1950. Subsequent appointments shall fee fer terms ef fe++r
years. Vacancies shaH fee immediately filled fey the Governor fer the
unexpired portion ef the terms «* which tfeey occur.
Sec. 6. Section 68 of the Military and Veterans Code is repealed.
€&■ Eaeh member ef the board shaH receive fer eaeh dr+y^ ^4-
tendance at each meeting ef the board a per- diem ef twenty dollars
($20) aftd shall receive the same pep diem- fer- eaefe day spent e»
official duties assigned fey tfee bear4r fe addition, eaefe member shaH
fee reimbursed fer his necessary traveling an4 ether expenses incurred
m the performance ef his official duties.
Sec. 7. Section 69 of the Military and Veterans Code is repealed.
£&r Tfee board shall hold meetings at such times an4 at such places
as shall fee determined fey it?
Sec. 8. Section 69.5 of the Military and Veterans Code is repealed.
69.5. All meetin-gs ef the board shall fee open- aed public.
Sec. 9. Section 71 of the Military and Veterans Code is repealed.
34r: The members ef the board sh-aH select ene ef their members te
serve as chairman, w-he shall held office as chairman at the pleasure ef
the board. The feear-d shall alse appoint anet fe the salary ef a secretary,
whe shall attend all meetings ef the board, keep a full and true record
ef aH its proceedings^ preserve at its general office aH its feeehsy docu
ments, a»d papers, a»d perform: sueh other duties as the board eaay
proscribe.
Sec. 10. Section 72 of the Military and Veterans Code is amended
to read :
72. The California Veterans Board Director of Veterans Affairs
shall determine the policies for all operations of the department.
Sec. 11. Section 73 of the Military and Veterans Code is amended
to read:
73. The California Veterans Beard Director of Veterans Affairs
may create advisory committees consisting of veterans to advise the
board director in specific fields under or relating to the jurisdiction
of the board director . The heard director shall appoint the members
thereof and they shall serve at its pleasure. The board director shall
also designate the chairman and vice chairman thereof. The committees
shall be under the direction of the board director and shall be wholly
advisory in character and shall not be delegated any administrative au-
thority or responsibility. Members of such committees shall not receive
compensation from the state for their services, but when called into
conference or session by the beard director shall be reimbursed for their
actual and necessary expenses incurred in connection with such confer-
ences or sessions, and for purposes of such reimbursement shall be
deemed to be nonsalaried commission members.
Sec. 12. Section 78 of the Military and Veterans Code is amended
to read:
78. The Director of Veterans Affairs is head of the department and,
as head of the department and subject te the policies adopted fey the
board, shall perform all duties, exercise all powers and jurisdiction,
assume and discharge all responsibilities and carry out and effect all
provisions now or hereafter vested by law in the department.
28 COMMITTEE ON MILITARY AND VETERANS AFFAIRS
Sec. 13. Section 80 of the Military and Veterans Code is amended
to read:
80. The director may employ subject to law such expert, technical,
legal, clerical, and other employees as may be necessary to carry out his
powers and duties and except as expressly otherwise provided in See-
tie** £4 el this chapter, the director shall be the sole appointing author-
ity for the department for all positions. Whenever possible preference
shall be given to veterans for employment in the department.
Sec. 14. Section 83 of the Military and Veterans Code is amended
to read :
83. Except to the extent inconsistent with the provisions of this
chapter, the provisions of Chapter 2 of Part 1 of Division 3 of Title 2
of the Government Code shall be applicable to the Department of Vet-
erans Affairs as if the provisions of said Chapter 2 were set out fully
herein.
Whenever in such chapter the term "head of the department" or
similar designation occurs, it shall mean the director 7 except tfeat le*1 tfee
purposes el Article 2 el seM Chapter 2 it sfeaH aise mean both tfee
board and any member el tfee board te whom tfee duty el conducting
any investigation is give** fey tfee feea*^* .
Sec. 15. Section 84 of the Military and Veterans Code is repealed.
84r ^Ffee director may whenever fee deems it advisable and: s**a4* wfee**
required se te de fey tfee board present reports a**d recommendations te
the board concerning any matter relating te veterans' welfare whether
e*1 net provided fey existing law-:
Sec. 16. Section 85 of the Military and Veterans Code is repealed.
&5? AH records el tfee feea*^ exeept records el eentract purchasers^
shall fee open te inspection fey tfee publie during regular office hours.
Sec. 17. Section 699.5 of the Military and Veterans Code is amended
to read :
699.5. The department may assist every veteran of any war of the
United States and the dependent of every such veteran in presenting
and pursuing such claim as the veteran or dependent may have against
the United States arising out. of war service and in establishing the
veteran's or dependent's right to any privilege, preference care, or
compensation provided for by the laws of the United States or of this
state. ¥fee department may cooperate and, with tfee approval el tfee De-
partment el Finance, contract witfe any organizaton el veterans char-
tered fey tfee Congress el tfee United States and authorized fey tfee
Veterans Administration te pursue claims before federal agencies &&&
which laas regularly, fe*1 a period el nve years next preceding tfee da4e
el such contract, maintained an estafelisfeed committee of agency, in a
Veterans Administration regional office in tfee State el California, *=en-
doring similar services te vete*=a**s and dependents as tfee scrviees *^e-
forrcd te in tfeis section and pursuant te such contract may
such organization le** se^viees within tfee scope el tfeis section
fey it te any veteran e*1 dependentr ^Pfee department a+se may cooperate
and, with tfee approval el tfee j^epartment el Finance, contract with any
other organization el vete*^ans authorized fey tfee Veterans Administra-
tien te pursue claims fecfore federal agencies and which feas regularly-?
le** a period el 43 years next preceding tfee date el such contract, main-
tained an established committee op agency, in a Veterans Administration
CALIFORNIA VETERANS BENEFITS 29
regional effiee in the State of California, rendering similar sefviees Ui
veterans and dependents as the services refci-red 4+> in this s^H-hm and-
pursuant to sneh contract way compensate sneh organ iaatien £e* wer-<r-
iees within the scope of this section rendered by it t** any veteran er
dependent. No sueh contract shaU he mnde unless the dei')ar1inent <n»-
tcrmincs thaty owing to the eenfidential relationships involved a+wl the
necessity of operating through agencies which the veterans or depend -
eeta involved wiU feel to he sympathetic towards their- problems, the
services cannot satisfactorily he rendered otherwise than through the
agency of sueh veterans organization and: that the hest interests e£ the
veterans or dependents involved wiU he served if sueh contract is made.
Sec. 18. Section 701 of the Military and Veterans Code is amended
to read :
701. In the event that the provisions of the Servicemen's Readjust-
ment Act of 1944 are amended in such manner as to make the guaran-
tees by the United States of loans to veterans for farms and homes
applicable to purchases of farms and homes from the Department of
Veterans Affairs pursuant to Chapter 3 and Article 3 of Chapter 6, the
State of California hereby accepts the benefits of such federal act, and
agrees to comply with all the requirements of said act.
The Department of Veterans Affairs is hereby designated as the
official agency of the state to apply to the United States for such guaran-
tees and to do all acts required in connection therewith. The board
director is authorized to adopt such rules and regulations and standards
as may be required by the federal act and are not in conflict with the
provisions of this division.
Sec. 19. Section 702 of the Military and Veterans Code is amended
to read :
702. The salaries and expenses of the California Veterans Board, of
the seeretary el sueh board, an4 of the director and deputy director of
the Department of Veterans Affairs and all salaries and expenses of the
Division of Farm and Home Purchases shall be paid out of the Farm
and Home Building Fund of 1943 and no part thereof shall be paid
from the General Fund.
Sec. 20. Section 890 of the Military and Veterans Code is amended
to read :
890. As used in this article :
(a) "Veterans" means any person who served: in the Army, Navy,
e^ Marine £erns of the United States and: was killed in action or died:
as a- result of war ser^iee m the World: War sinco Anril £> 1917, or any
member of the Army, Navy, Oeast Guard: of Marine Corps e£ the
United States, or any of their auxiliaries who was kiHed: in actios in
World: War Heef alter- December ^ 4944^ and: prior- to January 4^
1917, or- who died at any time as a result of war- service during such
period, or- any member el the armed ferees el the United: States who
wns killed in action during any period of hostilities m which the
United States is engagedy or who died: or was totally disabled: at any
time as a> result of active service during any suen period or- during the
induction period, died or who was totally disabled as a result of service
in the armed forces of the United States during World War I, or after
September 16, 1940, and continuing for so long as the U.S. Selective
Service is in effect.
30 COMMITTEE ON MILITARY AND VETERANS AFFAIRS
(b) "Dependent of a veteran" means the natural or adopted child
of a veteran, or stepchild of a veteran as defined by the U.S. Veterans
Administration for compensation purposes, the unmarried widow of a
veteran, or the wife of a totally disabled veteran.
-fe)- " Induction period' ' means -£4-)- the period beginning September
4eV 1910, and ending 4)eecmbor 67 1911, and: the period: beginning Janu
a?y iy 1917, and ending June 2eV 1950, and -£&}- the period beginning en
February ij 1955, and ending en %he 4ay before the ftest day thereafter
en which individual (other than individuals liable #e*» induction by
reason e-£ a prior dofegmont) ape ne longer liable £&¥ induction £&? train-
ing and service inte the a-Fincd iorccs undeg the Universal Military
Training and Service Act.
Sec. 21. Section 894 of the Military and Veterans Code is amended
to read :
894. For students of postgraduate, collegiate, junior college, busi-
ness and trade school rank the amount expended by the department as
an allowance for living expenses shall not exceed fifty dollars ($50) per
month. For students of high school rank the amount shall not exceed
twenty del-la^s -(4J&94- thirty dollars ($30) per month, during the time
the student is in actual attendance at a day school. Absence during the
month on account of illness shall be included as part of such attendance.
Sec. 22. Section 895 of the Military and Veterans Code is amended
to read :
895. For tuition and fees ;
(a) The amount expended on account of any one applicant while
pursuing a course of postgraduate college or professional school rank
shall not exceed ene thousand sis hundred: deltes ($1,600) two thou-
sand dollars ($2,000) .
(b) The amount expended on account of any one applicant of under-
graduate, collegiate, junior college, business, and trade school rank
under the provisions of this article shall not exceed the maximum rate
authorized for the regular school year under Section 31214 of the Edu-
cation Code and not to exceed one-third more for students pursuing a
summer session or full year course.
(c) For students of high school rank the sum shall not exceed two
hundred dollars ($200) a year for students pursuing a regular course
and two hundred forty dollars ($240) a year for students pursuing a
summer session or full year course.
Sec. 23. Section 896 of the Military and Veterans Code is amended
to read :
896. The department shall consider applications in the order in
which they are received. 4f -the funds available a?e insufficient to meet
j- n fv fili1i<Trilimin to 1 1 { > \ i nTnn I r\ •■ ' i m c? o tttitti tn o o*n n ad i ma o Ja n"> f\r nil '\vni"t1i xz
XTrtT UUJ-lgU-L'lUlrM TTlllCTt TTTTTXTTT rnrTryt? J.JL UJLLl XXtt? g LLtti LllltllMUl U XTT till V\ Ul Lll#y
applicants, ^e department shall assume wardship eve*1 the appMeants
w-he a#e most urgently in need e£ further edueatien^ taking inte
consideration feeth- sehelastie aehicvement and financial need. The
department shall request sufficient funds annually to assist all eligible
applicants. In the event the applications exceed available funds, the
department shall prepare a deficiency request for additional funds for
submission to the Legislature immediately.
CALIFORNIA VETERANS BENEFITS
31
Sec. 24. Section 897 is added to the Military and Veterans Code,
to read :
897. The educational assistance programs for veterans and for
dependents of veterans shall be administered by an individual with pro-
fessional educational qualifications.
Sec. 25. Section 920 of the Military and Veterans Code is amended
to read :
920. As used in this article, unless the context otherwise indicates,
"veteran" means a person who has been honorably discharged from any
branch of the United States Army, or Navy, of the American &e4 Crow.
an4 who has served m any w» in which the United Statcco has fewn
engagcd: armed forces .
Sec. 26. Section 921 of the Military and Veterans Code is amended
to read:
921. The board of supervisors of any county may grant financial
assistance, relief, and support to indigent veterans. Such assistance,
relief, and support shall be administered through and: fey any military,
naval, op marine organization created for the purpose of aiding, rclicv
ingj and: supporting sueh veterans under tfee terms and: conditions- set
forth m this article the county veterans service office .
Sec. 27. Section 922 of the Military and Veterans Code is repealed.
032t A&y organization desiring to assist indigent veterans shall
first file with- the board of supervisors of the eounty in which it is
TTTCT
to operate, a verified statement setting forth
and
purposes of the
toned in section &24t
ionr One of the
4&
and: relief committee.
urcr or financial officer in charge
Name, objects,
js shall fee that
Date of organiz;
■(e)- Names and: addresses of o:
•£&)• Name and: address of the treasure]
receipt and: disbursement of funds.
Number of members.
nai condition, showing total assets and: liabilities.
That financial assistance for indigent veterans to fee adminis-
tereet in accordance with the provisions af this article will fee req-aestedr
Sec. 28. Section 923 of the Military and Veterans Code is repealed.
023r Upon the filing of the statement the board of supervisors shall
set a 4ay rer its consideration not more than ten days after the date
of fiMngr Art least &¥& days1 notice of the hearing shall fee given fey mail
to the clerk or secretary of tfee organization?
Sec. 29. Section 924 of the Military and Veterans Code is repealed.
#24r On the day setj the board of supervisors sfeaHy after hearing
any evidence presented, determined fey resolution entered: upon its min-
utes whether tfee organization is qualified to carry out this article. ^Phe
resolution shall fee effective for a period of one year only and may fee
revoked at any timer
Sec. 30. Section 925 of the Military and Veterans Code is repealed.
&20t No money shall fee transferred to any- person under this article
except to tfee treasurer or finaneial officer whose name is given in the
statement required fey seetien &23r ^dPfee treasurer or financial officer
shall, before receiving any money hereunder, file with the beard: of
supervisors a feond: or undertaking signed fey at least two suretiesy in
32 COMMITTEE ON MILITARY AND VETERANS AFFAIRS
aa amount fixed by the board el supervisors. ¥he bond shall mure te
the benefit el the eonnty antd shall be conditioned «pen: the faithful
aad honest administration el the funds intrusted te such officer.
Sec. 31. Section 926 of the Military and Veterans Code is repealed.
OSGt Upon receipt el a request from aay organization qualified
under this article, giving the names el aH indigent veterans lei whom
relief is desired, together with the branch el service, division, regiment,
aad company, G¥ other unit e^ designation by which each el such
vete^aas may be identified, aad a further statement that the circum-
stances el each el such veterans has beea personally investigated by
fche rclicl committee el the organization, aad that each is ia aH respects
worthy aad entitled te relief hereunder, the board el supervisors may
direct the county audited te draw his wTarrant upon the county trcas
urcr lap the amount saeeiaed ia the request, er- a lesser amount. Such
warrant shall be delivered te the treasurer ar- financial efficor el the
organization.
Sec. 32. Section 927 of the Military and Veterans Code is repealed.
027t AH money paid eat by aay county under this article shall be
used by the organization geeeiving it exclusively fe^ the relief el indi-
gent veterans aaa ae part el i% shall ever be used le^ administration
eff overhead expenses.
Sec. 33. Section 928 of the Military and Veterans Code is repealed.
02&- ¥be indigent aad dependent widow, minop child, father e?
mother el aay indigent veteran may be granted rclicl by the organiza-
ties eat el the money available under this article.
Sec. 34. Section 929 of the Military and Veterans Code is repealed.
030r ¥he necessary expeasesy aet te exceed seventy five dollars- lei1
burial Q¥ cremation el aay indigent veteran may be paid out el the
money available under this article:
Sec. 35. Section 931 of the Military and Veterans Code is amended
to read:
931. Any municipal corporation may extend assistance to any e*5-
ganization under this a#tiele county government where the program is
administered by a county veterans service office or by any other county
government agency especially designated to assist indigent veterans.
fe such ease aH proceedings acquired te be had before the board el
supervisors el the county shall be had before the legislative body el
the city. ^Fhe words "board el supervisors," "county," "county auditor"
aad "county treasurer" wherever used ia this article shall mean "legis-
lative body," "city," ^ty auditor" aad -city treasurer."
Sec. 36. Section 940 of the Military and Veterans Code is amended
to read:
940. As used in this article, unless the context otherwise indicates,
"veteran" means aa a person who has been honorably discharged
soldier, sailor marine, er- aarse whe has served ia er- with the a*aay
er navy el the United States from any branch of the United States
armed forces .
Sec. 37. Section 941 of the Military and Veterans Code is repealed.
Mir This article shall aet apply te soldiers, sailors7 er- marines whe
die ia the national er- State soldiers' homes ia this State.
CALIFORNIA VETERANS BENEFITS 33
Sec. 38. Section 942 of the Military and Veterans Code is amended
to read:
942. The board of supervisors of each county shall designate *+++
honorably discharged soldier, sailor or marine in the county who b++s
served in op with the army er navy el the United States and wbe shall
cause te he decently interred the body el any veteran or widow el a
veteran who dies in the county without having sufficient means te
defray the expenses el burial, other than moneys paid of due and pay-
able by the United Statcsy pursuant te the World War adjusted com-
pensation aet the county veterans service office to administer the provi-
sions of this article. In counties without a county veterans service
office, the board of supervisors of such county shall designate an ap-
propriate county government agency to administer the provisions of
this article.
Sec. 39. Section 944 of the Military and Veterans Code is repealed.
044? fe the event a deeeased veteran er a widow el a veteran has
been interred ether than by the person designated by the board el
supervisory the person se designated may pay the sum- el twe hundred
nlty dollars^ ($250) toward the burial expense el the person whe w^ould
have been entitled te interment by the person designated by the super
visors.
Sec. 40. Section 945 of the Military and Veterans Code is amended
to read:
945. ¥he expenses te the eennty el eaeh burial er contribution shall
net exceed the sum el twe hundred nlty dollars ($250). Claims thorcfor
are governed by £art 3 -{eemmeneing with Section &QQ> and i^art 4
(commencing with Section MO-)- el Sivisien 3S el *itie 4 el the Govern
ment Code The board of supervisors of each county may contribute
the sum not exceeding two hundred fifty dollars ($250) to pay toward
the burial expenses of a veteran as defined in this article or a veteran's
widow .
Sec. 41. Section 946 of the Military and Veterans Code is repealed.
MeV Sueh claims shall be paid by the eennty in which the veteran
e^ widowr dies? £1 the decedent was a resident el any ether- county than
the one paying the elaimy the county el the decedent's residence shall
refund the money advanced by the eennty where sueh person diedr
Sueh claims shall be audited and paid by the eennty as ether accounts.
Sec. 42. Section 947 of the Military and Veterans Code is repealed.
#4£_ ifke person appointed under section MSy belere he assumes the
eharge ^^ expenses el any burial snail nrst satisly himsell by a eare-
lul inquiry inte an4 examination el aH the circumstances in the ease
£ka£ ^ family el the deeedenty i! anyr residing in the county, is unable
&*£ ^a^ el means te delray the expenses el the buriah 41 he nnds sueh
inability he shall eause the decedent te be buried as provided in this
article. Se shall immediately report his action te the elerk el the board
el supervisors el the county, stating aH the laets and that he leund the
family el the decedent in" indigent eireumstanccs and unable te pay
^ke expenses el the buriah Se shall also report the name, ranhy and
o.nTYiTTinnrl el the veteran, the date el deathy plaee el burial,- eeeupation,
and an itemized statement el the expenses el sueh burial.
34
COMMITTEE ON MILITARY AND VETERANS AFFAIRS
Sec. 43. Section 948 of the Military and Veterans Code is repealed.
M8t ^Phe clerk el the board el supervisors, upon receiving the re-
port and statement el expenses, shall transcribe in a book kept ler that
purpose aH the facts eentained in the report respecting such deeedcnt.
^Phe clerk, upon the burial of a^1 honorably discharged soldier, sailor?
er mariner shall make application te the proper authorities el the
u nixed k5 Tares, lor a suixaD lo noiiosxoner as provided dv act or congress,
and cause the same te be plaeed at the head el the grave el such soldier^
sailor, er marine^ ¥he expcnse.fr shall net exceed ten: dollars {$10) ler
cartage and: properly setting eaeh stener
Sec. 44. Section 949 of the Military and Veterans Code is repealed.
O40r ¥he board el supervisors shall perpetually maintain the grave
el any sneh- txenerahly diseh-arged se!4ierT sailerr er mariner ¥he ex-
penses thus incurred shall he andited and paid as provided in seetien
04t> £&p burial expensesr
Sec. 45. Section 950 of the Military and Veterans Code is repealed.
0&©7 3Phe person appointed unrler section 042 shall receive ne com-
pensation ler any duties h-e may perlem* in eemplianee with- this
Sec. 46. Section 960 of the Military and Veterans Code is amended
to read:
960. Whenever in any cemetery or place of burial of human re-
mains, which is established or organized under the authority of the
board of supervisors of any county or the governing body of any city,
there is any known grave of a person who ivas a former soldier mem-
ber- sailor, er marine of the United States armed forces who was not
dishonorably discharged from the service, the officers who manage such
cemetery or place of burial shall keep such grave properly marked and
identified, and free from weeds and rubbish, and keep in decent order
and repair and free from defacement, injury, and unlawful markings
any tomb, monument, gravestone, wall, or other appurtenance to such
grave.
Sec. 47. Section 960.5 of the Military and Veterans Code is re-
pealed.
960.5. Whenever- in any eemetery er place el burial el human re-
mains there is any known grave el a termer soldiery sailor, er- marine
el the United States whe was &?k dishonorably discharged Irem the
service, the beard el supervisors el any county as te territory^ whether
incorporated er &e&; within itT and the governing body el the eity as te
tcrritoi^ within itr with the eensent el the officers whe manage such
cemetery er piaee el burial, -i! any may keep sueh grave properly
marked and identified,- anel: Iree Irem- weeds and rubbish, and keep in
decent order and repair arid Iree from- defacement; injury, and unlaw-
fnl markings etf¥^ tomb- monument; gravestone^ wall, er other appurte-
nance te such grave.
Sec. 48. Section 961 of the Military and Veterans Code is repealed.
#@4t Any Iratcrnal er benevolent organization whien maintains a
plot in a place el burial mentioned in seetien £60r which is devoted
/ >~ypl n r<-i -TT/-> I -t-r ■j-r\ 4- |-» /-> r>n yi ti nf n^> 1 /I * »to ri"il r>T*ri riy tyi ivitip" nt t ri c TTti i Tori
XT^TKyZXXyTTVXTTj^ TT7 T1HJ U Hi lUi. UT HUH I IK. 1 r.T fJlillvJ. T3T Ul I1ICX1 J.1JLUH ut TT1T7 UU11U\J.
oxaxos, may appty under x ins ar-trexe re xno uoard er supervisors er xnc
county in which the plot is maintained^ Upon a showing el needy the
board may keep the plot Iree Ipem weeds and rubbish, and keep m de-
CALIFORNIA VETERANS BENEFITS 35
eei^ order im4 vefm'i* an4 free -Ffuh* dci'accmc-K4 tmd- in jury mw tomb
i j 111 * * " '
«*anumci% gravestone, wh^ e* othc-p appm-t-e-Hrt+K^ U* 4-+** ***ri-vv* m
Sec. 49. Section 972 of the Military and Veterans Code is amended
to read :
972. The board of supervisors may provide the county veteran
service officer with such assistants and facilities as it deems necessity.
If such a position is created and filled, the compensation and expenses
of the county veteran service officer shall be a county charge, bu1 the
Department of Veterans Affairs, out of state moneys available therefor,
may pay each county a portion of such costs in an amount determined
by the department, conditioned upon the observance of standards and
regulations prescribed by, and in compliance with the direction of the
department and its authorized representatives , and further conditioned
upon the county veteran service officer satisfactorily completing a state
qualifying examination to be administered by the State Personnel
Board . Contributions by the department to any county toward the
payment of the salary of the county veteran service officer shall not
exceed the sum of seventy- five dollars ($75) per month.
Sec. 50. Section 980 of the Military and Veterans Code is amended
to read :
980. As Unless otherwise noted, as used in this chapter, "veteran"
means any citizen of the United States who served in the active mili-
tary, naval, or air service of the United States on or after April 6,
1917, and prior to November 12, 1918, and received an honorable dis-
charge therefrom or was released from active duty under honorable
conditions and who was, at the time of his entry into active duty, a
native of or a bona fide resident of this state, or who, if a minor at
such time, entered active duty while in the State of California and
had lived in this state for six months immediately preceding his entry
into active duty; or any person who served in the active military,
naval, or air service of the United States for a period of not less than
90 consecutive days or was discharged from the service due to a service-
connected disability within such 90-day period, any portion of which
was on or after December 7, 1941, and prior to January 1, 1947, and
received an honorable discharge therefrom or was released from active
duty under honorable conditions and who was at the time of his entry
into active duty a native of or bona fide resident of this state, or who,
if a minor at such time, entered active duty while in the State of Cali-
fornia and had lived in this state for six months immediately pre-
ceding his entry into active duty; or any person who served in the
active military, naval or air service of the United States for a period
of not less than 90 consecutive days or was discharged from the service
due to a service-connected disability within such 90-day period, any
portion of which was on or after June 27, 1950, and prior to February
1, 1955, or in time of peace in a campaign or expedition for service
in which a medal has been authorized by the government of the United
States, and received an honorable discharge therefrom or was released
from active duty under honorable conditions and who was at the time
of his entry into active duty a native of or a bona fide resident of this
state or who, if a minor at such time, entered active duty while in
36 COMMITTEE ON MILITARY AND VETERANS AFFAIRS
the State of California and had lived in this state for six months
immediately preceding his entry into active duty.
This chapter does not include :
(a) A person who was separated from such forces under other than
honorable conditions.
(b) A person who was separated from such forces on account of
alienage.
(c) A person who performed no military duty whatever or refused
to wear the uniform.
(d) A person who has received from another state a bonus, com-
pensation, or benefit, the prerequisite of which is service in such forces,
which service is the basis for the claim of benefits under this chapter.
(e) A person who served only in an auxiliary or reserve component
of the armed forces whose service therein did not exempt him from
the operation of the Selective Training and Service Act of 1940.
(f) A person whose service with the armed forces was due to tem-
porary active duty orders for the sole purpose of training duty, proc-
essing or a physical examination.
Sec. 51. Section 981 of the Military and Veterans Code is amended
to read :
981. There is in the state government an educational institution
known as the California Veterans' Educational Institute, program
which is under the management and control of the Department of Vet-
erans Affairs. The purpose of the institute educational program is to
provide opportunities for veterans to continue their education. The
Legislature intends to indemnify the veteran for an educational op-
portunity which he may have missed through his military service. This
educational program is not to be administered on a charity or welfare
basis. As used in this article, "veteran" means any person who meets
residence requirements of Section 980 of this code and the military
service requirement of Chapter 34, Title 38 of the United States Code.
Sec. 52. Section 981.1 of the Military and Veterans Code is amended
to read :
981.1. Any veteran who desires to continue his education may ap-
ply for admission to the institute program and if, in the opinion of the
department, the educational needs and desires of the veteran can be
satisfactorily met, the department shall assume state wardship and
supervision over the education of such veteran. The department may
provide for such education in educational institutions in this state, or
in other states, or in other countries, when necessary or desirable for
postgraduate or professional college courses. The department may pro-
vide educational counsel for students and assist them in securing ad-
mission to suitable institutions of learning in either public or private
school field. The department may assist any eligible veteran who may
apply for a short intensive postgraduate or training or refresher course
in any professional field where the purposes of such course are to
prepare the veteran for a state examination which he must pass as a
prerequisite to practice his profession in the State of California or
where said course or courses will acquaint the veteran in professional
techniques developed in private practice during the time that he was in
the service.
CALIFORNIA VETERANS BENEFITS 37
Sec. 53. Section 981.2 of the Military and Veterans Code is amended
to read:
981.2. The department, insofar as the funds permit, may provide:
(a) For the payment of tuition and other fees other than for in-
dividual instruction or private lessons, except where such individual
instruction is an integral requirement of a course leading to a vocational
or professional license or to a degree from an accredited institution of
higher learning.
(b) A monthly payment of an allowance for the living expenses of
the student in an amount not exceeding forty dollars ($10) eighty
dollars ($80) per month for the time the student is in satisfactory and
actual full-time attendance at a day school, absence during the month
on account of illness to be included as a part of such attendance.
-(e)- ¥e¥ the student's beek and supply requirements, the department
may, at the student's request, increase the allowance provided under
subdivision -fb^- e# this section by an amount net to exceed ten dollars
($10) in any one month.
Sec. 54. Section 981.4 of the Military and Veterans Code is
amended to read :
981.4. The department shall consider the application of veterans
for admission to the institute program in the order in which they are
received. H the funds available are insufficient te meet the obligations
which would arise from the guardianship el aH worthy applicants, the
department shall assume wardship over such veterans as are most n*2-
gcntly in need ef further education. No veteran shall be deferred be-
cause he is applying for training or education beyond the bachelors
degree, or because he intends to enroll at a private college or university.
Sec. 55. Section 981.6 of the Military and Veterans Code is
amended to read:
981.6. No veteran who is receiving federal educational benefits shall
be eligible to receive the educational benefits provided by this article
during such time that he is receiving eligible to receive federal educa-
tional benefits.
Sec. 56. Section 986 of the Military and Veterans Code is amended
to read :
986. The department shall prescribe and determine the qualfica-
tions of all veterans. Any person deeming himself a veteran and desir-
ing to benefit hereunder, shall exercise his opportunity to acquire a
farm or home under this article within ten years from the date of hi*s
discharge from the armed forces and shall submit to the department
information, in such form as the department prescribes, which will en-
able the department to determine his eligibility and qualifications. The
department may make further inquiries and investigations in order to
determine such eligibility and qualifications. Veterans who are other-
wise qualified and who were wounded or disabled as a result of their
service shall be given preference in the benefits conferred by this article.
The department shall determine, in each case, whether or not the vet-
eran was wounded or disabled as a result of service.
Sec. 57. Section 986.3 of the Military and Veterans Code is
amended to read :
986.3. The department may acquire such farm or home from the
owner thereof or may contract with a veteran for the construction of
38 COMMITTEE ON MILITARY AND VETERANS AFFAIRS
a dwelling house and other improvements for a farm or home, upon the
terms agreed if:
(a) The department is satisfied of the desirability of the property
submitted.
(b) The veteran has agreed with the department that he or members
of his immediate family will actually reside on the property within 60
days from the date of purchase by the department, or if the residence
on the property is not complete on the date of purchase, within 60 days
after the residence is completed , except that in a case of. hardship, on
a showing of good cause, the department may waive the occupancy
requirement for a period not to exceed four years. The department
shall establish standards for the occupancy waiver and shall make these
standards known .
(c) The sum to be expended by the department pursuant to a con-
tract for the construction of a dwelling house and other improvements,
does not exceed the sum of fifteen thousand dollars ($15,000) twenty
thousand dollars ($20,000) .
(d) Where the department is to contract with a veteran for the
construction of a dwelling house and other buildings :
(1) The veteran is the owner in fee of the real property on which
the dwelling house and other buildings are to be constructed and agrees
to convey that property to the department without cost.
(2) The veteran has paid a reasonable fee set by the department to
cover the cost of such preliminary service of the department as may
be necessary to process the application.
(3) The veteran has filed with the department adequate plans and
specifications for the improvements to be constructed upon said real
property, together with a contract, executed by a contractor licensed
by the State of California for the construction of said improvements in
accordance with said plans and specifications within eight months after
the acquisition of said real property by the department, and a bond
executed by the contractor providing for compliance with the terms of
said contract and for the payment of materialmen and labor furnishing
material or labor on the job, executed by a surety company, authorized
to do business in the State of California.
(4) The plans, specifications, contract and bond are approved by the
department.
(5) The veteran has placed in escrow, all sums of money to be ad-
vanced by him where the cost is in excess of the maximum that may be
expended by the department.
As used in this section "immediate family" includes only the fol-
lowing :
Spouse, children, either natural or adoptive ; and the parents if they
are dependent upon the veteran for 50 percent or more of their support.
Sec. 58. Section 986.5 of the Military and Veterans Code is
amended to read :
986.5. The purchase price of a home to the department, shall not
exceed the sum of fifteen thousand dollars ($15,000) twenty thousand
dollars ($20,000) , and a veteran purchasing the home may advance,
subject to the provisions of Section 986.4, the difference between the
total price or cost of the home and the sum of the purchase price of the
home to the department and any amount the department is required
CALIFORNIA VETERANS BENEFITS 39
under Section 986.9 of this code to add to the purchase price of the
home in fixing the selling price thereof to the veteran. The purchase
price of a farm to the department shall not exceed eighty thousand
dollars ($80,000), and a veteran purchasing the farm may advance the
difference between the total price of the farm or cost of the dwelling
and improvements to be constructed on a farm under a contract and
the sum of such purchase price to the department or contract price to
the department and any amount which the department is required
under Section 986.9 of this code to add to such purchase or contract
price to the department in fixing the selling price of the farm to the
veteran.
Sec. 59. Section 987 of the Military and Veterans Code is amended
to read:
987. The purchaser shall make an initial payment of at least 10
percent of the selling price of the property, in case of a farm, and 5
percent in the case of a home. The department may waive the initial
payment in any case where the value of the property as determined
by the department appraisal shall equal the amount to be paid by the
department plus at least 10 percent in the case of a farm, and 5 percent
in the case of a home. The balance of the purchase price may be
amortized over a period fixed by the department, not exceeding 40
years, together with interest thereon at the rate as determined by the
department for such amortization purposes. The department shall
establish the actual interest rate to be paid. To this end the depart-
ment, by a two-thirds vote ei California Veterans Board members aed
with the approval of the Veterans ' Finance Committee of 1943, is em-
powered to establish a uniform rate of interest payable upon the amount
remaining unpaid under any veteran's purchase contract. The Cali-
fornia Veterans Board Director of Veterans Affairs and the Veterans'
Finance Committee shall periodically, at least once each year, make
a finding as to the rate of interest to be charged, not to exceed 5 per-
cent per annum, taking into consideration the current value of money
and the solvency of the Veterans' Farm and Home Building Fund of
1943. The California Veterans Board Director of Veterans Affairs
may raise or lower the rate of interest payable under such contracts
for any given period as many times and as frequently as it deems to
be for the best interests of the department, as well as the contract
holders, if in so doing its action is made applicable alike to any and
all contract holders and 90 days' advance notice be given of the time
when the new rate of interest is to become effective. Any change in
the interest rate shall not affect the total amount of any installment
payment, but the difference shall be credited to interest or principal
and accelerate or prolong the period of payment. The purchaser on
any installment date may pay any or all installments still remaining
unpaid. In any individual case the department may for good cause
postpone from time to time, upon terms as the department deems
proper, the payment of the whole or any part of any installment of
the purchase price or interest thereon.
Sec. 60. Section 995.5 of the Military and Veterans Code is
amended to read:
995.5. So long as any bonds authorized under this article may
be outstanding, the Director of the Department of Veterans Affairs
40 COMMITTEE ON MILITARY AND VETERANS AFFAIRS
shall cause to be made at the close of each fiscal year, a survey of the
financial condition of the Division of Farm and Home Purchases, to-
gether with a projection of the division's operations, such survey to be
made by an independent public accountant of recognized standing. The
results of such surveys and projections shall be set forth in written
reports and said independent public accountant shall forward copies of
said reports to the Director of the Department of Veterans Affairs 7
;the members e£ tfee California Veterans Board, and to the members
of the Veterans' Finance Committee of 1943. The Division of Farm and
Home Purchases shall reimburse said independent public accountant
for his services out of any funds which said division may have avail-
able on deposit with the Treasurer of the State of California.
Sec. 61. Section 996.12 of the Military and Veterans Code is
amended to read:
996.12. So long as any bonds authorized under this article may be
outstanding, the Director of the Department of Veterans Affairs shall
cause to be made at the close of each fiscal year, a survey of the
financial condition of the Division of Farm and Home Purchases, to-
gether with a projection of the division's operations, such survey to
be made by an independent public accountant of recognized standing.
The results of such surveys and projections shall be set forth in written
reports and said independent public accountant shall forward copies of
said reports to the Director of the Department of Veterans Affairs -
%he members e£ tfee California Veterans Board, and to the members
of the Veterans' Finance Committee of 1943. The Division of Farm and
Home Purchases shall reimburse said independent public accountant
for his services out of any funds which said division may have avail-
able on deposit with the Treasurer of the State of California.
Sec. 62. Section 996.14 of the Military and Veterans Code is
amended to read:
996.14. With the approval of the Department of Finance and the
California Veterans Board: Director of Veterans Affairs , the Public
Works Board, pursuant to the provisions of the Property Acquisition
Act, may acquire real property, and, after approval of preliminary
plans under the procedure provided by Section 6 of the Budget Act
of 1953, the department may construct and equip a building thereon,
primarily for the department's own use and make improvements to
such property, building, and equipment, not to exceed in total two
million six hundred fifty thousand dollars ($2,650,000).
Sec. 63. Section 996.37 of the Military and Veterans Code is
amended to read :
996.37. So long as any bonds authorized under this article may be
outstanding, the Director of the Department of Veterans Affairs shall
cause to be made at the close of each fiscal year, a survey of the financial
condition of the Division of Farm and Home Purchases, together with
a projection of the division's operations, such survey to be made by an
independent public accountant of recognized standing. The results of
such surveys and projections shall be set forth in written reports and
said independent public accountant shall forward copies of said reports
to the Director of the Department of Veterans Affairs - the members
el tfee California Veterans Board, and to the members of the Veterans '
Finance Committee of 1943. The Division of Farm and Home Pur-
CALIFORNIA VETERANS BENEFITS 41
chases shall reimburse said independent public accountant for his
services out of any funds which said division may have available on
deposit with the Treasurer of the State of California.
Sec. 64. Section 1014 of the Military and Veterans Code is amended
to read:
1014. The home shall be under the management and control of the
department and, subject to the policies adopted by the California Vet-
crans Beard and the direction of the Director of Veterans Affairs,
shall be administered by the commandant, Veterans' Home of Cali-
fornia, known as the Manager of the Division of Veterans Homes.
Sec. 65. Section 1018 of the Military and Veterans Code is repealed.
1018. ^Phe eommandant, executive officer, chief surgeon, quarter ■
master of supply officer^ adjutant, chaplain, physicians and surgeons,
dental officorsj hospital administrative officer, and the utilities officer
in office shall remain in office as provided in the State Civil Service
Aetr Thereafter the commandant shall appoint, subject to eivH service,
qualified persons to fin sueh offices.
Sec. 66. Section 1019 of the Military and Veterans Code is repealed.
1019. Officers ef the heme shall take the oath ef office required ef
state officers, shall file a bond in term and amount approved fey the
department, and shall reside at the home providing quarters are avail
able. Offieers may fee removed fey the Director of Veterans Affairs for
eause as provided in the State Civil Service Act?
Sec. 67. Section 1030.2 of the Military and Veterans Code is
amended to read :
1030.2. The department may enter into contracts with the United
States or any agency thereof and any other governmental agency for
the purpose of providing courses of vocational training for disabled
veterans who have been bona fide residents of this state of 40 five years.
Sec. 68. Section 1039.5 of the Military and Veterans Code is re-
pealed.
1039.5. All moneys in that eertain fund m the State treasury which
fund is known as the "Special Deposit Fund Spanish Ameriean War
Account — Unclaimed Trust," wfeieh are unclaimed and for ^¥e
last past have feeen unclaimed fey the owners thereof are hereby €H
transferred to the pest fund of the Veterans- Homo of California, to
the fullest extent that the same may fee done under the constitutions ef
this State and ef the United States.
Sec. 69. Section 1044 of the Military and Veterans Code is amended
to read:
1044. The commandant, in accordance with the policies adopted by
the California Veterans Board and subject to the direction of the
Director of Veterans Affairs, may make rules and regulations govern-
ing the admission of applicants and may prescribe the conditions upon
which they may enter and the conditions upon which they may remain.
Sec. 70. Chapter 2 (commencing with Section 1080) of Division
5 of the Military and Veterans Code is repealed.
Sec. 71. The California Veterans Board is abolished and any re-
ference in this code to the California Veterans Board shall be construed
to refer to the Director of Veterans Affairs.
42 COMMITTEE ON MILITARY AND VETERANS AFFAIRS
Testimony
After the bill draft had been distributed among interested parties,
the committee held a hearing in San Francisco to receive reactions to
the bill draft. The comments of Mr. Keith Garrison, representing the
California Association of County Veterans Service Officers, were gen-
erally concurred with by the other witnesses. The gist of Mr. Garri-
son 's remarks follow :
MR. KEITH GARRISON: We do not feel that Sections 1 through 9
should be proposed for favorable enactment as we feel that there is
the definite need for the California Veterans Board. There are times
when the county service officers do not agree with the California Vet-
erans Board nor do veterans within the state agree with the board but
they have been a great assistance to the veterans in the state in setting
policies. We feel that the board as now set forth in the code as adopted
by the Legislature was intended to be a watchdog to provide counsel
and assistance in various investigations to be conducted by the director
or by various subcommittees of the board. There have been many
criticisms of the current membership of the board and the most frequent
observation has been that the board has been politically oriented and
served only as a rubber stamp for the actions of the director in ad-
ministering the department. While this may or may not be correct,
we feel that the California Veterans Board should continue to func-
tion, as most of the large state agencies have boards such as the Board
of Education, State Welfare Board, State Highway Commission, to
name a few, and by putting into the hands of one man, it would un-
fairly subject that one person to pressures which can far more easily
be resolved by a democratic representative group and do a good job.
We do not feel that favorable action should be taken with respect to
Sections 10 and 11. It would allow one man too great dictatorial powers
to exist in a state where the democratic processes are of primary im-
portance.
Sections 12, 13, 14, 15, 16, 18 and 19 should not be approved for the
reasons as noted previously that our association feels there is the great
need for the California Veterans Board and not the undemocratic
processes which may arise out of having just one man direct the entire
department.
With respect to Section 20, we concur with the thought of the re-
vision. However, we suggest that the wording be changed to read : " Vet-
erans" means any person who died or who was totally disabled or has
been rated with a disability or disabilities of 50 percent or more in
effect for at least one year as a result of service in the armed forces of
the United States during World War One, or after September 16, 1940,
and continuing for so long as the United States Selective Service is in
effect. We feel that the 50-percent criterion should be the effective
guideline and not be changed by the director with or without the bless-
ing of the board. Recent changes have been made by administrative
interpretation and many dependents who were previously entitled to
educational benefits are now denied because of the revision to a greater
degree of disability than that required when other members of their
family were allowed schooling benefits. This will stabilize our counseling
of veterans concerning these educational benefits.
CALIFORNIA VETERANS BENEFITS 43
We heartily approve the recommendations as made in Sections 21,
22 and 23, especially that portion of Section 23 wherein it notes: "In
the event the applications exceed available funds, the department shall
prepare a deficiency request for additional funds to the Legislature
immediately. ' '
With respect to Section 25, we feel that Section 920 of the Military
and Veterans Code should be amended to read:
920. "As used in this article, unless the context otherwise indicates,
1 veteran' means a person who has been honorably discharged, sepa-
rated or retired (italic denotes added words) from any branch of the
United States armed forces."
Our reason for this change is that in many cases all requirements for
"veteran" status have been met, except that the man may not have a
discharge but has an honorable ' ' separation from active duty, ' ' or has
been honorably retired with some document, not a discharge. Section
940 should have inserted after "honorably discharged" the words, "re-
tired or separated from any branch of the United States armed forces."
In Section 40, in which Section 945 of the Military and Veterans
Code is proposed to be amended, it is felt by our association that the
amount of $250 as noted in the code should be increased to $500. Many
of our members at the present time are acting as burial officers within
their respective counties and they report that the $250 is not an ade-
quate sum under the conditions that exist today. Section 49 in which
it is recommended that Section 972 of the code have the additional italic
wording added, which is: liand further conditioned upon the service
officer satisfactorily completing a state qualifying examination to be
administered by the State Personnel Board." It is felt that this Section
972 is quite ambiguous in its nature and with the additional words, it
does not meet with our approval. We further feel that the county
should retain control of the tests to be given its employees and free of
any Department of Veterans Affairs control within the office function.
In Section 53, wherein Section 981.2 of the code is amended to read :
981.2. "The department, insofar as the funds permit, may provide";
may we suggest that this be changed to read: "The department shall
provide." With respect to Section 981.4, we suggest that the amend-
ment read as follows : ' ' The department shall consider the applications
of veterans for admission to the program in the order in which they
are received. The department shall request sufficient funds annually to
assist all eligible applicants. In the event the applicants exceed avail-
able funds, the department shall prepare a deficiency request for addi-
tional funds for submission to the Legislature immediately. We suggest
these amendments in order that the veterans' education can be placed
on the same level as education for dependents. It would be a futile
gesture to add another group of eligible veterans with no funds avail-
able to administer the program. For this reason we heartily recommend
the change from permissive language to mandatory language. We feel
that it is a useless gesture to add another class of veterans to a situation
where the Department of Veterans Affairs has eliminated the program
by failure to make application to the Legislature for funds to admin-
ister it. The interim committee should ask, "How many veterans are
now in training under existing legislation?" The answer is "none."
44 COMMITTEE ON MILITARY AND VETERANS AFFAIRS
Section 56 — Section 986 proposes within its contents to require the
veteran to exercise his opportunity to acquire a home or a farm within
10 years from the date of his discharge. Our association is opposed to
this revision. We feel that the Cal-Vet farm and home loan has been
the greatest piece of legislation ever enacted. The benefits provided by
this legislation have not been considered as a bonus; however, if a
delimiting date would be set, it is felt it would be an opening for bonus
legislation. In all of the published literature as well as counseling inter-
views, the veteran has been advised that there is no delimiting date to
this benefit. Upon separation from the service, adjusting to civilian life,
marrying, starting a family and then thinking about buying a home in
most cases takes more than 10 years which we feel would make the
change most discriminatory. This great loan benefit has not cost the
California voter one cent; it has accumulated a surplus out of which
other programs within the Department of Veterans Affairs are opera-
ting, and it is a benefit that the eligible California veteran should have
to use at anytime during his lifetime.
Section 57 — Section 986.3, paragraph (b) adds an underlined por-
tion which begins: "except that in a case of hardship, etc., etc." We
wish to take exception to having this italic portion added to para-
graph (b). We feel that any addition of this sort would tend to
open the door for investment purposes and defeats the very nature of
the benefits which is to enable the eligible veteran to obtain a home for
him and his family. Our association does approve the increase in the
amount of the home loan as noted in paragraph (c) of Section 986.3
up to $20,000, as well as it is noted in Section 58 — Section 986.5. We
feel that the increase is timely as the cost of living, construction and
land values has increased to such a level as to make the present $15,000
not adequate to successfully maintain the program to its fullest value.
Section 59 — Section 987 ; Section 60 — Section 995.5 ; Section 61 —
Section 996.12; Section 62 — Section 996.14; Section 63 — Section
996.37 ; Section 64 — Section 1014. It is proposed to amend the Military
and Veterans Code by striking out the California Veterans Board and
in some sections inserting Director of Veterans Affairs. May I repeat
that our association goes on record of opposing such action or legisla-
tion. Section 71 abolishes the California Veterans Board and any refer-
ence in the code shall be construed to refer to the Director of Veterans
Affairs which is in direct conflict to our previous opinions expressed in
this matter.
BRIEF SUMMARY OF VETERANS BENEFITS PROVIDED BY THE
1966 Gl BILL ENACTED BY CONGRESS
Since December 7, 1941, the number of veterans in the United States
has increased sixfold. There are now 3.2 million men and women in
the armed forces of the United States. There are now about 25.66 mil-
lion veterans on the rolls of the U.S. Veterans Administration, includ-
ing veterans of World War II, the Korean conflict, the Vietnam conflict,
and service during the "cold war" years.
CALIFORNIA VETERANS BENEFITS 45
The Veterans Administration estimates the veteran population will
number 28 million by 1975 and 30 million by 2000 if present federal
veterans benefits continue.69
The new GI Bill provides a permanent program of benefits to veterans
serving in the Armed Forces after January 31, 1955. They are :
EDUCATIONAL ASSISTANCE
Eligibility — Minimum of 181 days on active duty, any part of which
occurred on or after February 1, 1955, and no dishonorable discharge ;
or discharge for service-connected disability.
Benefits — Veterans will be eligible to make a guaranteed home or
farm loan or to make a direct home loan in the areas where such loans
are authorized. Eligibility period is for 10 years after the date of dis-
charge, plus an additional year for each three months of active service.
Under the new bill, the 5J percent statutory maximum rate of interest
is removed and the Administrator of Veterans Affairs is authorized to
establish interest rate as he determines loans market demands but not
to exceed the FHA rate. The maximum loan possible in the direct loan
program is raised from $15,000 to $17,500.
MEDICAL BENEFITS
Eligibility — Veterans who served after January 31, 1955, will be eligi-
ble for care and treatment in VA hospitals on the same basis as wartime
veterans. The priorities are as follows :
1. Veterans needing hospitalization due to injuries or diseases
incurred or aggravated in line of duty in active service.
2. Veterans who were discharged or retired for disability incurred
or aggravated in line of duty and who need treatment for some
ailment not connected with their service.
3. Veterans with service during any war not discharged or retired
for disability and who apply for treatment of a non-service-
connected disability may be admitted to VA hospitals if all
three of the following conditions are met :
a. Hospitalization is deemed necessary.
b. They state under oath they are financially unable to defray
the cost of the necessary hospital charges elsewhere.
c. If beds are available.
Other benefits — Veterans described above as eligible for medical bene-
fits will also be eligible for domiciliary care, outpatient medical treat-
ment, outpatient dental treatment, medical examinations, and prosthetic
appliances.
JOB COUNSELING
Full details as to the operation of this program is now being worked
out. It will probably be carried on in connection with the Veterans'
Employment Service of the U.S. Department of Labor.
69 "Vets Total Has Risen Sixfold Since December 7, 1941," Associated Press release,
Sacramento Bee, December 5, 1966.
46 COMMITTEE ON MILITARY AND VETERANS AFFAIRS
JOB PLACEMENT
This program already administered by local state employment offices
in cooperation with the Veterans ' Employment Service of the U.S.
Department of Labor will now include those veterans with service after
January 31, 1955.
FEDERAL EMPLOYMENT PREFERENCE
Eligibility for 5-Point Preference — Honorable discharge.
Eligibility for 10-Point Preference — Honorable discharge; and Pur-
ple Heart for wound received in action; present existence of a service-
connected disability; or receipt of compensation, disability retirement
benefits, or pension.
BURIAL FLAGS
Eligibility — The deceased veterans must have been honorably dis-
charged.
Benefit — American flag to drape casket of veteran, after which it may
be given to next of kin or close friend or associate of the deceased.
COMPENSATION
Consists of monthly payments to veterans with service-connected dis-
ability and honorable discharge. Monthly payments range from $20
to $250, depending on the degree of disability. Allowances are made for
dependents, widows, children, and parents.
ADDITIONAL BENEFITS AVAILABLE TO VETERANS
Several benefits already exist for veterans who have been in service
since January 31, 1955. They can be divided generally into the follow-
ing two types :
1. Benefits for Veterans with Service-connected Disabilities —
These benefits include aid for the blind, aid to homes where
a wheelchair veteran resides, and reimbursement of burial
expenses.
2. Benefits to Veterans Without Service-connected Disabilities —
These benefits include burial in national cemeteries, a six-
month death gratuity in some cases, and social security wage
credits of $160 for each month of military service. The social
security wage credits are not actually listed on social security
earnings record until applied for.
This summary is intended to focus attention on the major provisions
of the 1966 GI Bill. It provides general information only. Local VA
offices will provide more information.70
70 For a strong argument against veterans welfare legislation see : Edwin P. Neilan,
"Let's Say No to the Veterans," Saturday Evening Post, November 30, 1963.
CALIFORNIA VETERANS BENEFITS
47
Department of Defense
NUMBER OF CASUALTIES INCURRED BY U.S. MILITARY PERSONNEL
IN VIETNAM
Cumulative from January 1, 1961, through June 11, 1966
Army
Navy
Marine
Corps
Air
Force
Total
A. CASUALTIES RESULTING FROM ACTIONS BY HOSTILE FORCES
1, Kilted ___ _
2,100
196
13,917
179
19
22
1
3
14
25
203
2,248
87
8
503
28
1
58
61
3
59
941
71
5,977
5
25
1
13
43
961
71
8
585
108
4
113
1
21
165
2
21
3,199
283
20,982
320
24
218
2
3
36
264
251
2. Wounded or injured
a. Died of wounds
b. Nonfatal wounds
3. Missing
a. Died while missing
b. Returned to control
c. Current missing
4. Detained
a. Died while detained
b. Returned to control
c. Current detained. _
5. Deaths
a. From aircraft accidents/
incidents
Fixed Wing
Helicopter.
b. From ground action
3,289
Total deaths8
*2,476
123
1,017
188
3,804
B. CASUALTIES NOT THE RESULT OF ACTIONS BY HOSTILE FORCES
6. Current missing
12
53
123
310
5
3
38
1
3
28
158
46
58
13
7. Deaths
a. From aircraft accidents/
incidents
Fixed Wing
Helicopter
107
154
b. From other causes
564
Total deaths
486
46
189
104
825
» Sum of lines 1, 2a, 3a and 4a.
* Includes 104 Special Forces personnel.
SOURCE: Directorate for Statistical Services, Office of Secretary of Defense, June 15, 1966.
printed in California office of state feinting
L-1828— 100 12-66 1M
MEMBERS OF THE
COMMITTEE
CARLEY V. PORTER
Chairman
HALE ASHCRAFT
Vice Chairman
FRANK P. BELOTTI
EUGENE A. CHAPPIE
JOHN L. E. COLLIER
WILLIAM E. DANNEMEYER
PAULINE L. DAVIS
HOUSTON I. FLOURNOY
CHARLES B. GARRIGUS
BURT M. HENSON
HARVEY JOHNSON
RAY E. JOHNSON
FRANK LANTERMAN
CHARLES W. MEYERS
ROBERT T. MONAGAN
JOHN P. QUIMBY
NEWTON R. RUSSELL
JOHN C. WILLIAMSON
EDWIN L. Z'BERG
STAFF
RONALD B. ROBIE
Committee Consultant
JACI DeFORD
Committee Secretary
JOHN J. WAELTI
Legislative Intern
DANYA MAIER
Secretary
December 1966
ASSEMBLY INTERIM COMMITTEE REPORTS
1965-1967
VOLUME 26
NUMBER 15
RECREATION COSTS AT
WATER PROJECTS
A REPORT OF THE
ASSEMBLY INTERIM COMMITTEE ON WATER
TO THE CALIFORNIA LEGISLATURE
Published by the
ASSEMBLY OF THE STATE OF CALIFORNIA
JESSE M. UNRUH
Speaker
GEORGE ZENOVICH
Majority Floor Leader
CARLOS BEE
Speaker pro Tempore
ROBERT T. MONAGAN
Minority Floor Leader
JAMES D. DRISCOLL
Chief Clerk
LETTER OF TRANSMITTAL
California Legislature
Assembly Interim Committee on Water
December 13, 1966
Honorable Jesse M. Unruh
Speaker of the Assembly
Members, of the Assembly
State Capitol
Sacramento, California 95814
Gentlemen :
In accordance with, the provisions of House Resolution 710 of the
1965 Regular Session, the Assembly Interim Committee on Water here-
with submits a record of committee activities and its report entitled
Recreation Costs at Water Projects.
This report combines the committee's studies with regard to state
recreation expenditures at federal, state and local water projects in
California. Recreation has become an increasingly important element
of water projects in California, as is indicated in this report, and repre-
sents a substantial state financial obligation.
Part I of the report considers the Davis-Grunsky Act, the state's
program of financial assistance for local water projects.
Part II discusses the subject of cost allocations of the state's
Feather River Project. These cost allocations are now subject to legis-
lative review under recently enacted legislation providing for reim-
bursement of recreation and fish and wildlife enhancement expendi-
tures for the project from tidelands oil revenue.
Part III considers the state's new program of financial participation
for recreation at federal water projects under the Cobey-Porter Fed-
eral Water Project Recreation Act,
Draft legislation to implement the committee's recommendations is
found in the appendix of this report.
Respectfully submitted,
Carley V. Porter
Chairman
Hale Ashcraft
Vice Chairman
Frank P. Belotti Harvey Johnson
Eugene A. Chappie Ray E. Johnson
John L. E. Collier 1 Frank Lanterman 4
William E. Dannemeyer Charles W. Meyers
Pauline L. Davis Robert T. Monagan
(with a few reservations) John P. Quimby
Houston I. Flournoy 2 Newton R. Russell x
Charles B. Garrigus John E. Williamson
Burt M. Henson Edwin L. Z'berg 3
1 With reservations as to recommendation A4 of Part I.
2 With reservations as to Part II.
3 Mr. Z'berg does not concur with Part II.
* With reservations as to recommendation A4 of Part I, Mr. Lanterman does not con-
cur with recommendation A3 of Part I.
(3)
TABLE OF CONTENTS
Page
Letter of Transmittal 3
Summary of Recommendations 7
Part I — Local Projects and the Davis-Grunsky Act
Introduction 9
Proposed Changes in the Loan Program 10
The Role of the California Water Commission and the Legislature 20
Administrative Provisions 22
Part II — Allocation of Costs of the State Water Project
Introduction 31
Explanation of Terms 34
Description of Cost Allocation Process 37
Problem Areas 40
Conclusions 47
Part III — Federal Water Project Recreation in California
Introduction 50
Background 50
Problems under the State and Federal Acts 55
Recommendations 60
Appendix — Proposed Legislation
1. Recodification of the Act 65
2. Site Acquisition Loans 76
3. Modifications in Loan Program 79
4. Role of California Water Commission 81
5. Reserve Account and Escrow Provisions 84
6. Comments of other State Departments 85
7. Review of Auditor General 87
LIST OF TABLES
Table 1. Potential Use of Dam Repair Loans 13
Table 2. Potential Use of Special Distribution System Loans and
Assessment Data 16
Table 3. Summary of Onshore Facilities in Connection with
Davis-Grunsky Grants 26
Table 4. Authorized and Proposed Bureau of Reclamation
Projects in California Subject to PL 89-72 56
Table 5. Authorized and Proposed Corps of Engineers Projects
in California Subject to PL 89-72 57
(5)
2— L-1737
SUMMARY OF RECOMMENDATIONS
PART I. LOCAL PROJECTS AND THE DAVIS-GRUNSKY ACT
A. Proposed Changes in Loan Program
The committee :
1. Recommends against enactment of a program of loans for re-
pair of dams.
2. Recommends against enactment of a program of special distribu-
tion system loans for State Water Project contractors.
3. Recommends expansion of the act to provide loans for advanced
reservoir site acquisition.
4. Recommends reduction in the Davis-Grunsky loan interest rate
to2i%.
Recommends extension of total loan repayment period from 50
to 60 years.
Recommends that if interest is deferred for the loan development
period that no interest be charged on the deferred interest.
B. The Role of the California Water Commission and the Legislature
The committee :
1. Recommends clarification of existing law to provide Department
of Water Resources and California Water Commission review
of all loan and grant applications.
2. Recommends amendment to the act requiring that full informa-
tion, including a feasibility report, be in the hands of the Legis-
lature before it authorizes increased grants or loans.
C. Administrative Provisions
The committee :
1. Recommends further committee and Department of Water Re-
sources study of the definition of "statewide interest."
2. Recommends further study by the committee and the Depart-
ment of Water Resources of procedures to better coordinate
Davis-Grunsky expenditures with other state recreation pro-
grams.
3. Recommends amendment of the act to provide for either an
escrow arrangement or a reserve account at the discretion of
the Department of Water Resources to assure onshore develop-
ment.
4. Recommends recodification of the act.
5. Recommends against providing additional funding, at this time,
for the Davis-Grunsky Act.
6. Recommends that the Department of Parks and Recreation and
Department of Fish and Game comment on all Davis-Grunsky
reports prepared by the Department of Water Resources.
(7)
8 ASSEMBLY INTERIM COMMITTEE ON WATER
Recommends that Davis-Grunsky project reports and other de-
partmental comments be sent to the Legislature when completed,
rather than on annual basis.
7. Recommends that the Auditor General be authorized to post-
audit Davis-Grunsky recipients.
PART II. COST ALLOCATIONS OF THE STATE WATER PROJECT
A. The committee recommends approval of the first cost allocations
reimbursable under AB 12 (1966 First Extraordinary Session) in
the amount of $454,082.
PART III. FEDERAL WATER PROJECT RECREATION
The committee :
A. Recommends that the Porter-Cobey Federal Water Project Rec-
reation Act not be amended and that "letters of intent" continue
to be issued only upon specific authorization of the Legislature.
B. Recommends that the Resources Agency and federal agencies work
together to develop more definitive interpretations of the Federal
Water Project Recreation Act.
C. Recommends continued study by the Resources Agency and the
committee of problems raised by the Federal Water Project Rec-
reation Act and the Porter-Cobey Act in order that this new
service of recreation can be properly integrated into overall state
recreation planning.
PART I
LOCAL PROJECTS AND THE DAVIS-GRUNSKY ACT
INTRODUCTION
In its report to the 1965 Legislature1 this committee reviewed in
considerable detail the history of the Davis-Grunsky Act and particu-
larly the changes made in the act at the 1963 session. These amend-
ments greatly broadened the concept of the act by placing new em-
phasis on recreation. In that report, the commitee recommended that
in view of the limited experience under the 1963 amendments no addi-
tional legislation modifying the act was needed at that time. Thus,
at the 1965 session of the Legislature no legislation was enacted
amending the Davis-Grunsky Act although there were additional bills
enacted providing, on individual projects, for grants in excess of the
maximum permitted without approval of the Legislature.
During the current interim period, the committee has again re-
examined the Davis-Grunsky Act. In this regard it also had before it
a series of bills which were introduced at the 1965 Session and referred
to interim study. These bills and the changes proposed by them are
discussed in the report which follows and recommendations are made
as to each proposal.
One of the principal emphases of the committee during its current
study has been an examination of the administrative aspects of the
act to determine whether or not the act is satisfactory in this respect.
The Department of Water Resources made an extensive statement to
the committee on the operation and administration of the Davis-
Grunsky program at the hearing on September 22, 1965. A complete
review of each step involved in the department's review of Davis-
Grunsky loans and grants is included in the transcript of that com-
mittee hearing. (See pages 3-7, Exhibit 3.) This transcript includes
other informative background material on the act.
To conduct this study, Chairman Porter appointed a subcommittee
on the Davis-Grunsky Act consisting of the following: Assemblyman
Carley V. Porter, chairman; Assemblywoman Pauline Davis; and
Assemblymen Hale Ashcraft, Frank Belotti, John L. E. Collier, Wil-
liam E. Dannemeyer, Harvey Johnson, Frank Lanterman, John Wil-
liamson, and Edwin Z'berg. The subcommittee met as follows:
September 22, 1965 — Sacramento — hearing.
November 15, 1965 — Sacramento — hearing.
August 30, 1966 — Sacramento — executive session.
1 State Financial Assistance for Local Water Projects Under the Davis-Grunsky Act,
Assembly Interim Committee Reports, Vol. 26, No. 1, November 1964 (hereafter
cited as 19 6 k Report).
(9)
10 ASSEMBLY INTERIM COMMITTEE ON WATER
PROPOSED CHANGES IN THE LOAN PROGRAM
Throughout the history of the Davis-Grunsky Act repeated concern
has been expressed over the fact that the largest portion of the $130
million set aside for loans and grants is being utilized for the grant
program with only a very small portion being made available in the
form of loans.
As of August 15, 1966, $76,283,300 in grants and $1,260,000 in loans
had been authorized by the Legislature. As of this same date, 20
grants, for a total of $30,340,100 had been approved by the Department
of Water Resources and 12 loans, for a total of $3,843,000 had been
approved by the department.
The 1963 amendments to the act included several changes which were
an attempt to make loans under the act more attractive to local public
agencies and to obtain more widespread use of the loan program. These
changes included deferment of interest during the development period
and adoption of a new interest rate formula which was more equitable
than the flat rate then in effect. Nevertheless, continued experience with
the act has shown that the loan program has not received the additional
use expected after the 1963 amendments.
Three major bills were introduced at the 1965 session which would
have approached this lack of use by providing additional purposes for
which loans may be made. These bills included (1) loans for repair
of dams, (2) loans for distribution facilities not otherwise eligible
when the public agency was a contractor for water from the Feather
River Project, and (3) loans for advance reservoir site acquisition.
All of these bills were referred to interim study by this committee
on the understanding that before major new extensions of the Davis-
Grunsky Act were made a full study would be undertaken and an
additional attempt would be made to make more usable the existing
loan provisions.
This committee has long believed that the original basic intent of the
Legislature in enacting the Davis-Grunsky Act was to develop new
water supplies for local areas. Inasmuch as the Davis-Grunsky Act
loan program serves only public agencies which are unable to finance
such facilities from other sources, it was felt that the Davis-Grunsky
Act would fill a specific need in local areas which had not achieved
sufficient economic development to construct local water projects with-
out state assistance.
The Legislature modified the original concept of the act somewhat
in 1963 by making projects primarily for recreation eligible for both
Davis-Grunsky loans and grants (recreation had previously been lim-
ited to an incidental purpose). However, no recreation loans have been
made and the basic emphasis of the loan program is still to provide an
additional means of financing water development facilities. Limitations
were placed administratively, and then by statute, preventing the use
of such loan funds for distribution facilities, with certain exceptions
in case of hardship.
At this point the committee should reiterate the statement in its
last report to the Legislature that
RECREATION COSTS AT WATER PROJECTS 11
". . . it is through loans that water supply projects are developed
and local projects needed for strictly local purposes can be made
more easily available to the local people in areas with limited
present economic resources. This committee is concerned lest the
original concept of state assistance for local projects be over-
shadowed by the availability of nonreimbursable grants."2
In spite of what the committee considers a rather clear and well
understood legislative intent, the Department of Water Resources has
continued to interpret the legislative intent broadly and has given
its support to a number of proposals which would greatly expand the
purposes of the act and depart substantially from its original concept.
The department has consistently held that such obvious departures
from the original intent are nevertheless consistent with the policy
provisions of the Davis-Grunsky Act which read as follows:
12880. In furtherance of the development, control, and con-
servation of the water resources of the state and the state water
resources development system it is the policy of the state to pro-
vide financial assistance to public agencies for the construction
of water projects to meet local requirements in which there is a
statewide interest by making grants or loans, or both, and by
participating in the construction and operation of water projects,
and also to provide financial assistance to public agencies for the
publication of certain feasibility reports on such water projects
by making loans, in accordance with this chapter . . . (emphasis
added ) .
The department, in interpreting this section in support of expansions
of the act for such purposes as repair of dams, has wrenched part of
Section 12880 from context and relies only on the first sentence of the
policy statement :
"The introductory provisions of the act indicate that its specific
objective is to further 'the development, control, and conservation
of the water resources of the state ....'"
The committee does not concur with the department's interpretation
of the policy provision of the act.
Representatives of the Department of Finance testified before the
committee and reviewed the original concept of the Davis-Grunsky
Act in terms consonant with the committee's understanding of the
act. The department concluded,
". . . It does appear to us that the original purpose of the act,
mainly, the development of new basic water supplies, is being lost
in the rush for recreation and fish and wildlife enhancement
grants. Under current ground rules, it is unlikely that as much as
20 percent of the $130,000,000 Davis-Grunsky financing capacity
will ultimately be disbursed in the form of loans."
The Department of Finance went on to recommend that a limit of
two-thirds of the $130 million be established on grants to assure loan
2 1964 Report, op. cit., page 21.
12 ASSEMBLY INTERIM COMMITTEE ON WATER
utilization of the remaining amount. In view of the fact that consid-
erable legislative authorization has been made for grants to date, and
in view of the fact that future use of the loan program under proposals
elsewhere in this report are unknown at this time, the committee
recommends against such an arbitrary limit. It is expected that the
recommendations in this report will provide for additional use of the
loan program. If such use eventuates the committee can then re-
evaluate the suggestion that a limit be placed on the grant program
but no limit seems warranted at this time.
It is against this background of the committee's understanding of the
act that attention is now turned to consideration of several proposals
under which loan funds would be used for new purposes.
7 . Loans for repair of dams
Senate Bill 597 (McCarthy) of the 1965 session provides for loans
of up to $4 million (without legislative approval) to public agencies
for repair of dams. This legislation was developed by the Department
of "Water Resources and was complementary to its then concurrent
study of California's laws relating to safety of dams. In supporting
this legislation, the department indicated that a great many dams
throughout the state were in need of repair and in the department's
opinion the repair of dams already constructed was as important to
the development of water resources of the state as was the construction
of new facilities.3
The committee believes extension of the act in this manner is not
desirable.
First, as proposed, the loans for dam repairs would not in fact, be
subject to the general financial eligibility requirements of the act. The
department indicated to the committee that such financially secure en-
tities as the Los Angeles County Flood Control District would be
eligible for loans to repair dams.
An examination of the list of dams which the department felt were
in need of immediate repair (and would be eligible for such loans)
shows that few of those on the list would qualify if the normal Davis-
Grunsky standards of financial eligibility were applied. The districts
which the department indicated would qualify for such loans are
listed in Table 1.
Senate Bill 597 did not differentiate between loans for (1) repairs
which were necessitated by a failure to provide adequate periodic
maintenance of the facility and (2) catastrophic damage to dams not
attributed in any way to acts or omissions by the district. (See
Table 1.)
In addition, we believe that the use of Davis-Grunsky funds for the
repair of dams is not consistent with the original policy intent of the
Legislature in enacting the Davis-Grunsky Act. It is quite true that
the safety of the dams of our state is essential to the well-being of
the people of California, and the committee cannot understate its
desire that agencies maintain dams in a safe manner at all times. Use of
3 Transcript, September 22, 1965, pages 31-38.
RECREATION COSTS AT WATER PROJECTS
TABLE 1
POTENTIAL USE OF DAM REPAIR LOANS
L3
Condition requiring
Name of dam
Owner
repair or alteration
of cost
A or B
Shasta River
Montague Water Con-
servation District
Structural cracking in spillway tunnel.
$25,000
B
Paicines . __
San Benito County
Flood Control and
Water Conservation
District
Embankment and foundation in
need of strengthening
50,000
B
Phoenix Lake
Marin Municipal
Water District
Questionable embankment stability..
200,000
B
Harold Reser-
Palmdale Irrigation
Dam located on San Andreas fault...
3,000,000
15
voir
District
Atascadero Park
County of San Luis
Obispo
Outlet inoperable; requires replace-
ment of conduit
8,000
A
Alvord
City of Riverside .
40,000
B
dam saturated to high level
Matilija _.
Ventura County Flood
Control District
Progressive deterioration due to
alkali-aggregate reaction
565,000
B
Murray
City of San Diego
Strengthening of dam is needed
210,000
B
Pacoima
Los Angeles County
Flood Control Dis-
trict
Stability of left abutment is question-
able
150,000
B
Ruth.
Humboldt Bay Munic-
Scour at terminal structure; stability
of hillside at right abutment is
825,000
A
ipal Water District
questionable
A — Periodic operation and maintenance.
B — Major structural defects not susceptible to correction by periodic maintenance.
Davis-Grunsky funds, however, to repair existing projects will not
develop new economic benefits to local areas and will not develop water
supplies for local communities. In addition, the state should expect
prompt maintenance of dams and reservoirs and should not, by making
available loan funds at exceptionally low interest rates, encourage local
public agencies to permit dam and reservoir facilities to fall into dis-
repair with the knowledge that Davis-Grunsky act funds would be
available for later repairs.
We are convinced that once the department's complete reevaluation
of dams under the accelerated dam safety program enacted by the
1965 Legislature is completed there will not again in the future be a
situation where a large group of dams require repair or large-scale
maintenance at a single time.
The committee recommends that the Legislature not enact legis-
lation providing for expansion of the loan program to cover dam
repairs as evidence presented to date does not justify such a program
at this time. However, if future events and a specific documented need
develops and is presented to the Legislature, the committee's rec-
ommendation should be reexamined. The committee has not examined
the possibility of such a loan program outside of the Davis-Grunsky
Act.
2. Loans for distribution systems for agencies having
state water service contracts
Assembly Bill 2255 (Williamson) was introduced at the 1965 session
of the Legislature and provides that distribution system projects would
be eligible for Davis-Grunsky loans of up to $10 million for any one
3— L.-1737
14 ASSEMBLY INTERIM COMMITTEE ON WATER
distribution system when the department determines that more than
50 percent of the estimated amount of water to be distributed by the
project in the year 1990 would be water that would be supplied indi-
rectly from the State Water Project.
The department indicated that it supported this legislation "antic-
ipating the possibility that some State Water Project contractors
might possibly encounter difficulties in obtaining the necessary fi-
nancing to construct distribution systems in timely fashion. ' ' 4
The department appropriately indicated that the inability of a con-
tractor to repay the state has a direct bearing upon the successful
functioning of the State Water Project.
The proposal in Assembly Bill 2255 raises problems in two major
policy areas in which this proposal would be contrary to existing
policy. First, a key feature of the legislation was that projects eligible
under this proposal for distribution system loans need not demonstrate
extreme hardship as a condition precedent, which is the only exception
today to the ban on distribution system loans. The 1961 amendments
to the Davis-Grunsky Act limited distribution system loans to situations
involving extreme hardship which jeopardizes the public health, safety
or welfare.5
The committee does not agree with the department that this proposal
is consistent with the basic objectives of the act as discussed above.
The characterization by the department of the State Water Project as
an example of a new basic water supply in the context of the Davis-
Grunsky Act seems inappropriate. Therefore, these loans would not
qualify as distribution systems which are an integral part of an
overall water development project.
Second, the proposal establishes a special category of beneficiaries
of the Davis-Grunsky Act consisting of water service contractors, and
the proposal does not make similar loans available on a statewide basis.
There is no precedent to date for limiting in such a manner the recip-
ients of Davis-Grunsky assistance. Indicative of the possible ramifica-
tions of this proposal was the comment by the chief engineer of the
Sonoma County Flood Control and Water Conservation District:
"I do not recommend the expansion of the loan provisions of the
Davis-Grunsky program to this select group of agencies in the
State of California unless similar provision is made available to
all water agencies within the State under a uniform set of re-
quirements. The $130 million originally available to the Davis-
Grunsky program would not begin to cover the cost of expanding
the distribution systems. For example, in Sonoma County alone
we are planning the construction of approximately $40 million
of water conveyance facilities within the next 10 years and a
similar situation must, most certainly, exist in most areas of the
state."0
Such an argument is logical and reasonable, yet such an expansion
of this proposal would completely deplete Davis-Grunsky funds in
short order. This possibility was the reason the Legislature and the
administration have consistently supported the strict limitations of
existing law on distribution system facilities.
i Ibid., page 38.
5 For discussion, see 1964 Report, op. cit., pages 11-13 (Water Code Section 12880.2).
6 Transcript, November 15, 1965, page 55.
RECREATION COSTS AT WATI.R PROJECTS L5
The department indicated to the committee that the total value of
loans anticipated under AB 2255 would be $41,000,913.7 This would
include three loans for a maximum of $10 million and three additional
loans ranging from 2.6 million to $5 million. The total estimated cost
of the distribution systems involved would be $65,533,500. These loans
represent contractors in the San Joaquin Valley for approximately
400,000 acre-feet of state project water, or 10 percent of the projecl
yield.
Subsequent materials prepared for the committee by the Kern
County Water Agency indicate additional member units of the Agency
have need for similar funding. The total project cost for distribution
systems of all member unit agencies of the Kern County Water
Agency is estimated at $194,101,000. The amount of this total which
would be financed under this proposal is not known. It should be
pointed out that since the original proposal was made many of the
districts in the area are in the process of attempting to finance as
much of their program as possible from other sources. In several dis-
tricts, voters have approved bond issues. In other areas Public Law
566 or Public Law 984 financing have been requested. Other federal
programs have also been investigated, including use of the funds
available from the Department of Housing and Urban Development.
At a later date, following further efforts by the local districts more
accurate estimates of the total amounts involved in the proposal will
be available.
Although inability to finance was cited as a factor by supporters of
the legislation it should be pointed out that this problem is partly a
result of inadequate assessed values at the present time in several of
the districts. This has resulted in an unusually low ability to repay
and difficulties in bonding sufficiently at the present time. However,
when water deliveries begin to the districts, the estimated assessed
value per acre in all cases will increase two to three times.
As an example, land in the Berrenda Mesa Water District presently
has an estimated market value of $169 an acre. The average assessed
value per acre for 1965-66 of land in this district is $5. The ability
of the users to finance distribution systems from other sources is based
on these figures. Yet, as soon as water deliveries begin, this land is
estimated to be worth $327 an acre.
Similarly, land in the Dudley Ridge Water District is presently car-
ried on the assessment rolls at approximately $10 an acre, while the
estimated market value of the land today is $180 per acre and will
rise to an estimated $600 per acre after water is delivered.8
The present value of the lands in districts cited by the department
range from $57 an acre to $250 an acre while the assessments on such
land range from $5 an acre to $77 an acre. The minimum estimated
market value of the land in the districts involved after delivery of
water was $180 and the maximum $800 an acre.
Finally, the committee is concerned that under this proposal a large
amount of Davis-Grunsky money (approximately 33 percent of the
7 Letter to Chairman Porter dated January 19, 1966. This, however, considers only
San Joaquin Valley contractors. Other contractors, including- the Metropolitan
Water District, might possibly be eligible under such a program.
8 See Table 2 for data on assessments provided by the Department of Water Re-
sources.
16
ASSEMBLY INTERIM COMMITTEE ON WATER
TABLE 2
POTENTIAL USE OF SPECIAL DISTRIBUTION SYSTEM
LOANS AND ASSESSMENT DATA
Distribution system
Estimated '
market value*
per acre
State
water
As-
utilized
sessed
After
(full en-
Cost
value
water
Estimated
title-
per
per
Pres-
is de-
Davis-
ment)
Acres
acre
acre
ent
liv-
Grunsky
Agency
a-f/yr.
served
Total cost
ered
loan
Dudley Ridge Water Dis-
57,700
29,916
$4,220,000
$141
$10
$180
$600
$4,220,000
trict
Berrenda Mesa Water
97,000
62,000
15,000,000
242
l5
169
327
10,000,000
District
Cawelo Water District —
57,600
46,277
24,620,500
532
'45
2250
2800
10,000,000
Lost Hills Water District.
129,100
65,112
14,000,000
215
16
57
180
10,000,000
Rosedale-Rio Bravo Water
35,000
43,000
2,693,000
63
367
2250
2800
2,693,000
Storage District
Tehachapi-Cummings
20,000
196,000
5,000,000
26
77
2250
2800
5,000,000
Co. Water District
Totals
$65,533,500
$41,913,000
1 1965-66 average assessed value of land.
2 Estimate by Department of Water Resources.
3 1963-64 average assessed value of land.
total) may be utilized for a purpose not originally contemplated at
the time of the financing of the act in 1959. There is no indication
how many loans other State Water Project contractors may request
under such a program.
In summary, the committee recognizes the vital need for complete
financing of distribution systems for all state water service contractors,
and particularly those in the agricultural areas of the San Joaquin
Valley for whom this legislation is principally intended. The committee
believes that further study of this matter should be undertaken and
the committee should watch closely the progress being made by the
local districts in their attempt to provide local financing for these
projects. However, the committee recommends that no further action
be taken upon the proposal of Assembly Bill 2255 at this time. Other,
means of financing these from state, federal and local funds should
be explored.
3. Provision of loans for advance reservoir site acquisition
At the 1965 session of the Legislature, Senate Bill 200 (Lunardi)
and Assembly Bill 2429 (Chappie) were introduced providing for
advance reservoir site acquisition loans under the Davis-Grunsky Act.
Senate Bill 200 authorized loans up to a maximum of $400,000. Ap-
proval by the department was to be based only on a reconnaissance
report. From this report the department was required to determine
the public necessity of the project, the extent of statewide interest
in the proposed project and whether it "appears probable in a pre-
liminary way that the proposed project is engineeringly feasible, eco-
nomically justified, and financially feasible." 9
9 Transcript, September 22, 1965, pages 26-27.
RECREATION COSTS AT WATER E'ROJECTS 17
The bill also provided that if the project is not constructed by the
agency within 10 years it must sell the lands acquired with the loan
funds and use the proceeds to repay the loan and all accrued intercut.
The department pointed to the difficulties of the El Dorado County
Water Agency in acquiring a reservoir site in the Texas Hill area in
advance of project construction and cited this project as the principal
impetus behind the proposed legislation.10
The committee agrees that the experience throughout the state on
other water projects indicates that the upward trend of real estate
prices (and particularly after dam sites are selected) often makes the
final cost of reservoir land substantially in excess of original estimates.
The department estimated that the maximum number of loans which
would be required for land acquisition for all of the 102 preliminary
requests for assistance under the Davis-Grunsky Act would total about
$5 million, or approximately $500,000 a year for 10 years.
The committee believes that legislation to provide advance reservoir
site acquisition for Davis-Grunsky projects is desirable, provided that
sufficient safeguards are included to prevent speculation and to guar-
antee, as far as possible, final construction of the project. These safe-
guards were not provided in the 1965 legislation.
The committee believes that reservoir site acquisition loans, subject
to all the other eligibility criteria of the Davis-Grunsky Act and re-
quiring the submission of a feasibility report prior to approval by the
Department of Water Resources, will insure that such loans are made
only for projects which local agencies are seriously determined to con-
struct. Legislation implementing such a reservoir site acquisition loan
program appears as Draft Bill No. 2 in the appendix of this report.
The department has appropriately pointed out that advance reser-
voir site acquisition loans would permit public agencies to buy reser-
voir sites before land values become so inflated as to make the cost
of the water project extremely high or prohibitive.
It has been pointed out that this savings in land costs would decrease
the project cost to the local agency, thus preserving Davis-Grunsky
funds which, in the absence of advance acquisition loans, would have
been required to supply a larger loan or grant in subsequent years.11
This modification represents only a limited new use of Davis-
Grunsky funds which is sufficient on an experimental basis. Further
extension of the site acquisition loans concept is not warranted at this
time.
We should point out that possible alternative arrangements to solve
site acquisition needs are available to local agencies, including ju-
dicious use of zoning ordinances.
The Housing and Urban Development Act of 1965 (PL 89-117) in-
cludes a provision (Section 704 et seq.) under which the federal gov-
ernment, through the Departmnet of Housing and Urban Development
and its Community Facilities Administration provides ' ' grants to local
public bodies and agencies to assist in financing the acquisition of a
fee simple estate or other interests in such land." Five million dollars
is made available nationwide for the current fiscal year for this pro-
gram. The federal government will grant the amount of the reasonable
10 Ibid., page 26.
" Loc. Cit.
18 ASSEMBLY INTERIM COMMITTEE ON WATER
interest charges on the loan or other financial obligation incurred by
the local agency to finance the acquisition of such land. Loans are
limited to a five-year period by the end of which construction must be
initiated.
Since projects for which reservoir site acquisition loans are avail-
able under the committee proposal must meet the general eligibility
criteria under the Davis-Grunsky Act, the site acquisition loan pro-
gram is consistent with the basic objectives of the act. These loans will
assist the development of such projects in the same manner as feasi-
bility study loans (which are also made in advance of construction).
Sufficient safeguards are provided by (1) basing eligibility on a feasi-
bility report, (2) requiring an election in the local agency, (3) limit-
ing such loans to districts which otherwise qualify for Davis-Grunsky
loans, (4) providing mandatory sale of land if project is not con-
structed within 10 years, and (5) limiting such loans to $400,000
unless specific legislative aproval is received.
The committee recommends such a loan program*
4. Proposals to reduce the effective cost to public agencies
under the existing loan program
Assembly Bills 1958 and 2183 (Davis) were introduced at the 1965
session of the Legislature and provide a series of possible changes in
the Davis-Grunsky Act to reduce the cost to water users. The main
objective of these bills was to provide repayment based on "ability to
pay."
The Department of Water Kesources indicated that the following
projects could be benefited by any measures which would reduce the
effective cost of loans under the Davis-Grunsky program :
Name of project Stream County
Hulen Cottonwood Creek Shasta
Dippingvat Cottonwood Creek Tehama
Grenada Ranch Shasta River Siskiyou
Millville South Cow Creek Shasta
Paskenta Thomes Creek Tehama
Newville Thomes Creek Glenn-Tehama
Mill-Deer Mill & Deer Creeks Tehama
Pete's Valley Willow Creek Lassen
San Juan Ridge Grizzly Creek Nevada
Agua Fria Mariposa Creek Mariposa
Hardin Flat Tuolumne River Tuolumne
Duck Lake Duck Creek Alpine
Mariposa
Bean Creek Bean Creek Mariposa
Coulterville__. Maxwell Creek Mariposa
Upper Bear Bear Creek Mariposa
The committee has made an extensive study and considerable re-
search into a variety of possible modifications of the act to reduce the
effective cost per acre-foot of water under the loan program. A great
many possible alternatives were considered.12
* Mr. Lanterman does not concur.
12 See Transcripts, September 22, 1965, and November 15, 1965 ; and Department letters
to Chairman Porter dated January 19, 1966 and June 16, 1966, for detailed repay-
ment schedules, etc.
RECREATION COSTS AT WATER PROJECTS If)
The committee has come to the inescapable conclusion that rach
devices as extension of the loan repayment period and extension of the
development period, for example, in and of themselves, are not suf-
ficient to reduce appreciably the overall effective cost to the local
agency of loans under the Davis-Grunsky Act.
We reject any attempt to provide different interest rates for differenl
projects based on ability to pay. However, it is the conclusion of the
committee that the best means of actually reducing the cosl of loans
is to reduce the interest rate charged which will, in turn, bring the
loan program within the repayment capacity of more districts.
Attempts to change the interest rate have been rejected several times
in the past.13 As an alternative, in 1963, the Legislature replaced the
old formula (which provided for an interest rate "equal in interest
cost to the state on the last sale of general obligation bonds") with
one based upon the average cost of bonds to the state over a five-year
period immediately preceding the issuance of the loan. The old formula
provided wide fluctuations in the interest rate and left districts to
chance in the determination of their interest rate.
But the 1963 amendments were disappointing and did not result in
increased use of the loan program. Obviously, other approaches were
necessary.
In the past, proposals to reduce the interest rate to a flat amount
have been criticized on the basis that full repayment of Davis-Grunsky
loans should be required since Burns-Porter Bond funds are pledged to
these loans. This reasoning, however, overlooks the fact that under
the existing average interest rate program the interest charged on an
individual Davis-Grunsky loan may actually be below the actual cost
to the state of current bonds.
Objections to reducing the interest rate also do not take into con-
sideration the fact that Davis-Grunsky grants are made today at a
ratio of approximately 10 to 1 to loans. No repayment whatsoever is
provided for grants. Also, grants frequently go to agencies which do
not meet the basic financial eligibility requirements of the Davis-
Grunsky Act loan program since the state assumes a financial obliga-
tion for recreation and fish and wildlife at local agency projects re-
gardless of the financial condition of the agency.
Under the grant program considerable benefits accrue to public
agencies which have adequate financing for their project but which
qualify for large grants for fish and wildlife and recreation, thus
reducing reimbursable costs and, in effect, lowering the price of water
and power to users. To object to a reduction in the Davis-Grunsky
loan rate as a "subsidy" is a semantic obscuration of the facts. The
committee, after considerable deliberation and study believes very
strongly that the basic objective of the act as originally enacted — the
development of new basic water supplies in local communities ivith
limited financial resources — can best be served at this time by reduc-
tion of the project interest rate to 2\% percent per year.11*
The committee further recommends the following changes in the
loan program in order to provide the maximum net reduction in the
13 1964 Report, op. cit., page 18.
u Mr. Collier, Mr. Lanterman and Mr. Russell accept this recommendation "with
reservations."
20 ASSEMBLY INTERIM COMMITTEE ON WATER
effective cost of loans under the Davis-Grunsky Act and thus, to pro-
vide the maximum incentive to local project construction :
1. Extension of the total repayment period from the existing maxi-
mum of 50 years to a new maximum of 60 years by providing
that the 10-year development period (permitted at the option
of the department) shall be "in addition to" rather than "within"
the 50-year repayment period.
2. Eliminate the requirement that if interest is deferred during the
first 10 years, interest be paid upon the deferred interest.
Draft legislation accomplishing these recommendations can be found
in the appendix as Draft Bill No. 3.
THE ROLE OF THE CALIFORNIA WATER COMMISSION
AND THE LEGISLATURE
1. The California Water Commission 15
Under Water Code Section 12883, the department is authorized to
make construction loans not to exceed $4 million, "subject to the pro-
visions of the act, and to the prior approval of the California Water
Commission." Grants for water supply and sanitary facilities and
loans (except feasibility report loans) are subject to similar procedures.
However, the statutory language referring to grants and loans made
in excess of statutory limits and on specific authorization of the Legis-
lature is ambiguous as to the role of the commission. For some time
grants in excess of the $400,000 amount (no loans have been made
in excess of $4,000,000) had been subject to the same review proce-
dures by the Department of Water Resources and the California Water
Commission as grants made within the statutory limit.
However, the California Water Commission recently raised the legal
question as to whether or not its concurrence and comments should
be made on grants in excess of the statutory limit in the same manner
as it reviews the department's reports on those grants and loans under
the statutory limit.
Representatives of the Department of Water Resources, the De-
partment of Finance, the California Water Commission and the Re-
sources Agency agreed that the law was unclear and that it is appro-
priate for the Legislature to clarify the law and provide a clear
direction to the commission and the department in this regard.
Under existing procedures the department conducts staff review of
grant and loan applications and transmits its recommendations to the
California Water Commission.
The committee believes it is desirable that the procedures utilized
by the department and the commission be uniform throughout the
administration of the act and that the law should not distinguish be-
tween projects for which the maximum grants or loans have been
increased by legislative act.
Since the principal reason for the existing confusion in this area
is the language of the act, the committee has redrafted the sections
of the law relating to the responsibilities of the department and the
commission to provide a single uniform procedure.
15 Additional recommendations as to the commission are included in another report of
this committee, State and Local Responsibilities for Water Resources, Vol. 26,
No. 17.
RECREATION COSTS AT WATER PROJECTS 2 1
This procedure will, in fact, be substantially the same as the proce-
dure utilized by the commission and the department prior to when the
commission asked for clarification of the law. (Draft legislation is found
in the appendix as Draft Bill No. 4.)
2. Legislative approval of larger grants or loans
It has been the practice in the past for the Legislature to enact bills
making available grants in excess of the statutory maximum well in
advance of the submission to the department of a formal application
for a project. Thus, the Legislature generally has little or no informa-
tion on a project before it when increasing the statutory maximum.
Little review is given to the project itself. At the 1965 session, in
fact, legislation was enacted for one project even before preliminary
application had been made to the department. In some cases it has
been necessary to enact subsequent legislation increasing the total
amount of the grant available when a project is changed between
authorization and construction.
Considerable concern has been expressed over the fact that this
method of legislative authorization involves only the most cursory
legislative review. As Chairman Porter indicated,
"... our problem has been in the Legislature that we felt that
we were making utterly no review, because I do not recall ever
making a review of any project and I do not recall that we have
ever rejected one. We do not even wait for the witness to finish
his explanation of the number of his bill. If he mumbles that the
XYZ project has been approved by the Department of Water
Resources and has been screened ... we move it out 'do pass.'
So we have presumed that there was a very great amount of care-
ful screening. ' ' 16
The committee feels that it is appropriate that more data be avail-
able when it considers these bills.
The Director of Water Resources strongly endorsed better committee
review procedures and told the committee :
"We have the mechanics set up but you have not permitted the
mechanics to operate. This is the fact. . . . There is not a single
one of these projects that could not have been brought in, reviewed
by the department, taken to the commission and then referred to
the Legislature as was contemplated. The Legislature then could
act with full information before it, and place limitations or com-
pliment us or do anything else that it might like in authorizing
these projects. But that has not been the way it has gone. . . . As
soon as the name of the project becomes known, the Legislature
has enacted a bill authorizing it and says 'if the department ap-
proves it, go ahead'. Well, at this point I say we need a review.
... If I had anything to do, which I haven't, I would adopt a ride
in this committee saying you would authorize no project without
a project report before you.11 1T
10 Transcript, September 22, 1965, pages 53-54.
17 Ibid., page 54.
22 ASSEMBLY INTERIM COMMITTEE ON WATER
If the statutory limitations on grants and loans are to be mean-
ingful, the Legislature must be fully informed at the time it takes
such action. Such a procedure has been used very successfully in Con-
gress where the requirement that a project report be available before
committee consideration is vigorously enforced.
The committee therefore recommends that legislation be enacted pro-
viding that legislative authorization for increases in the maximum
grant or loan for a project be made only when the project report has
been processed by the administrative agency and placed before the
Legislature.
It is the committee's understanding that such a procedure will not
impede departmental approval or disbursement of Davis-Grunsky
funds.
It should be emphasized that this recommendation represents a desire
by the Legislature to improve its own procedures of review in keeping
with its original intent in providing for legislative authorization to
increase the statutory maximum on a project-by-project basis.
ADMINISTRATIVE PROVISIONS
During the interim the committee has given particular attention to
administrative aspects of the act and recommends a number of tech-
nical changes to improve its administration by providing better report-
ing procedures and spelling out more clearly the responsibilities of the
State Department of Water Resources and the local agencies.
I . Definition of statewide interest
The committee expressed concern during the interim over the inter-
pretation given by the department to "statewide interest" (see Water
Code Section 12880). Each proposed project must be of "statewide
interest" to qualify for participation under the act. The committee
questioned whether, in order to maximize the benefits from state grants,
the department should determine the specific extent of statewide
interest and the extent of local interest in each project. Existing pro-
cedures merely establish general statewide interest which is sufficient
for full eligibility for both loans and grants.
It appears reasonable that the features allocable to recreation and
fish and wildlife enhancement in a given project, although perhaps
largely of statewide interest, may be also, to some degree, of local
interest.
The Department of Water Resources provided the committee with
the definition of statewide interest it now utilizes :
"A project shall be considered to be of statewide interest if any
of its features, in a substantial degree, provide protection from
damage to public or private property, or protect natural resources
against loss and waste or foster their conservation and proper
utilization, or promote the economic development of undeveloped
areas, or produce benefits which are disbursed generally through-
out the community or area. In case of a grant under subdivision
(c) (2) of this section a project shall be considered to have recre-
ational functions of statewide interest if in addition to meeting
any of the above requirements the project has recreational fea-
RECREATION COSTS AT WATER PROJECTS
tures which are open and accessible to the general public on a
nondiscriminatory basis. ' ' 18
The department indicated that "although it may be argued thai
one project may have greater statewide interest than another, the
department has never subscribed to the concept that statewide interest
in a project can be less than 100 percent." The department stated that
its definition ' ' expresses the concept that a finding of statewide interest
may be based on any one of these factors or a combination thereof."
The committee is not convinced that this definition is completely
adequate. For example, the Department of Finance indicated to the
committee that,
"Since this expression [statewide interest] has been broadly inter-
preted in other areas to encompass such things as municipal swim-
ming pools, it is difficult to conceive of any project which would
not qualify under present interpretations. We choose to believe
that the Legislature had something more restrictive in mind and
would recommend that the Legislature amend the act to clarify
this aspect by incorporating Davis-Grunsky recreation projects
into a statewide plan of recreational development. These proposed
projects could be considered as to their priority in this plan,
instead of just the broad California Water Plan. Recreation wa-
ter projects would be based upon their ability to meet the increas-
ing recreational needs of the entire state and then could truly
be said to be serving a statewide interest."19
The committee has not been able to resolve this difference in inter-
pretation to its satisfaction.
The committee therefore recommends that continued study be made
by the affected state departments and this committee in order to
develop a more adequate and meaningful definition of "statewide
interest."
2. Coordination of Davis-Grunsky Activities with other
state recreation activities
In the last few years, the state has greatly accelerated its financial
commitment to recreation development. Approximately $6 million a
year is appropriated from the General Fund to the Division of Beaches
and Parks for the California State Parks System, and the voters of
the state approved a $150 million bond issue for state and local park
development.20
In addition to this ongoing program of the division, the entrance
of the state, through the Department of Water Resources, into the
construction of a major statewide water project represents a state
commitment of considerable additional recreation expenditures. For
example, the five dams and reservoirs of the Upper Feather River
Project will be primarily for recreation use. Also, recreation facilities
will be provided at Oroville Dam, the other reservoir facilities of the
Feather River Project, the delta facilities and the California Aqueduct
and other transportation facilities.
is s«e letter from William E. Warne to Chairman Porter dated October 15, 1965.
i9 Transcript September 22, 1965, page 78 (emphasis added).
20 There are other state recreation activities not described here, such as the Department
of Fish and Game, Wildlife Conservation Board, and Department of Harbors and
Watercraft programs.
24 ASSEMBLY INTERIM COMMITTEE ON WATER
At its 1966 First Extraordinary Session, the Legislature enacted
into law Assembly Bill 12 (Porter) (sponsored by this committee)
providing for annual appropriations of $5 million from tidelands oil
revenues for reimbursement of recreation and fish and wildlife con-
struction costs and recreation land expenditures of the Feather River
Project.21 In addition to this expenditure for recreation construction
costs, extensive onshore recreation facilities will be required, with total
recreation and fish and wildlife expenditures in the next decade or
so for the Feather River Project alone estimated to be in excess of
$200 million. None of these recreation costs are reimbursable by proj-
ect water and power users.22
At the 1966 First Extraordinary Session of the Legislature, state
participation as a local agency in recreation development at federal
water projects was authorized.23 State participation at future federal
projects will be only upon specific authorization of the Legislature.
However, full state participation (at an estimated cost of approxi-
mately $6 million) has been authorized24 for the Auburn-Folsom South
Unit of the Central Valley Project and a "letter of intent" was au-
thorized for the Marysville Project of the United States Army Corps
of Engineers.
The Davis-Grunsky Act fund of $130 million was appropriated in
1959 by the Legislature as part of the Burns-Porter Act and is avail-
able on a continuing basis not subject to appropriation by the Legis-
lature. Davis-Grunsky funds, therefore, are not "in competition" with
the other elements of state recreation funding. Similarly, only onshore
development of the State Water Project is in competition for the
General Fund dollar since project recreation costs are met by the
annual tidelands appropriation.
As a result, review by the Legislature of recreation expenditures is
fragmented and incomplete, with some areas (such as the budget of
the Division of Beaches and Parks) receiving considerably more atten-
tion than others.
The committee is concerned over the need for better coordination
of all recreation activities in order that the state may receive the
maximum benefit for each recreation dollar spent. Elsewhere in this
report the committee recommends review of onshore recreation require-
ments and cost allocation data by the Departments of Parks and Recre-
ation and Fish and Game. The Davis-Dolwig Act, which controls state
water project recreation, requires similar review by these two depart-
ments of cost allocations prepared by the Department of Water Re-
sources.25
The committee believes that to assure adequate coordination and
maximum utilization of available funds, better review procedures than
now required by law must be developed.
Accordingly, the committee requested the Resources Agency and the
Department of Water Resources to study the desirability of modifying
the Davis-Grunsky Act to provide for better coordination. The act
today only requires that a project proposed for Davis-Grunsky assist-
21 See Part II of this report.
-- Transcript, July 22, 1964.
^Assembly Bill 118 — "Porter-Cobey Federal Water Project Recreation Act" (see Part
ITI of this report).
-' Senate Bill 26 (1966 1st Ex.).
-•" See Assembly Bill 12 (1966 1st Ex.).
RECREATION COSTS AT WATER PROJECTS 25
ance " substantially conform to the California Water Plan" (Water
Code Section 12880(b)) and, of course, be of statewide Ln1
It may well be that such coordination will be mandatory before
legislative authorization can be achieved for permanent long-term
financing of the Davis-Grunsky Act. For example, the Department of
Finance indicated to the committee that it would not support perma-
nent financing of the act until such changes were made.26
The committee requested the agency and the department to deter-
mine what procedures could be devised to evaluate the relationship
between the need for each local water development project and the
recreational activities which each local project will provide the people
of the state.
The Administrator of Resources told the committee,
"The main concern in all this, as we see it, is to assure ourselves
that the dollar spent for local projects will not only develop the
valuable water resources, but at the same time, will also provide
adequate recreational opportunities to be enjoyed by the people
of the state who might otherwise get no benefit at all from the
expenditure of public funds. ' ' 27
The Resources Agency and the Department of Water Resources rec-
ommended legislation to the committee to provide that evaluation of
a Davis-Grunsky application include consideration of whether or not
the project would "carry out the objectives of the California Recrea-
tion and Park Plan and the California Fish and Wildlife Plan. ' '
The committee agrees that coordination of Davis-Grunsky projects
with established recreation and park plans of the state would be an
important first step in obtaining the committee's objective.
However, until the Fish and Wildlife Plan and the Recreation and
Park Plan are officially adopted by the Legislature as state policy it
would be premature to require such conformity.
Therefore, the committee recommends that no action be taken with
regard to this matter until the state policy documents have been adopted
by the Legislature. However, the committee should continue its study of
this vitally important matter.
26 Transcript, September 22, 1965, page 78.
27 Transcript, November 15, 1965, pages 4-5.
26
ASSEMBLY INTERIM COMMITTEE ON WATER
TABLE 3
SUMMARY OF ONSHORE FACILITIES IN CONNECTION
WITH DAVIS-GRUNSKY GRANTS
Recreation facilities
Grants
Esti-
mated
cost
(present
worth)
Esti-
mated
expend-
itures
Per-
cent
com-
plete
Agency-
project
(date approved)
Recrea-
tion
IWS &
SF
Scope1
Humboldt Bay
MWD-Ruth
Project
(11/4/60)
$300,000
$0
$47,000
$54,269
100
1 stage
21 camp units
7 picnic units
1 boat ramp
(2-lane)
1 swimming beach
Georgetown
Divide PUD-
Stumpy Meadows
Project
(6/15/61)
300,000
0
212,900
170,000
95
5 stages2
110 camp units
1 group camp
(100 persons)
20 picnic units
1 boat ramp
Alameda Co.
FC & WCD-Cull
Creek Project
(11/9/62)
184,250
0
323,900
3498,449
100
1 stage
50 picnic units
swimming lagoon
and beach
Monterey Co.
FC & WCD-San
Antonio Project
(10/5/62)
3,820,000
0
3,815,000
1,496,015
20
1 stage
450 camp units
125 trailer units
145 picnic units
3 boat ramps
City of Santa
Cruz-Newell Cr.
Project
(2/1/63)
149,300
0
106,600
3250,000
100
1 stage
80 picnic units
1 boat dock
Sacramento
MUD-Loon Lake
Project
(3/1/63)
300,000
0
148,000
0
0
1 stage
12 camp units
10 trailer units
20 picnic units
1 boat ramp
(2-lane)
1 swimming beach
Sacramento
MUD-Gerle Creek
Project
(3/1/63)
275,000
0
131,000
0
0
1 stage
6 camp units
6 trailer units
25 picnic units
1 swimming beach
Sacramento
MUD-Union
Valley Project
(3/1/63)
300,000
0
143,000
4145,000
80
1 stage
13 picnic units
1 boat ramp
(2-lane)
1 swimming beach
Sacramento
MUD-Ice House
Project
(3/1/63)
300,000
0
145,000
137,000
99
1 stage
37 camp units
15 picnic units
1 boat ramp
(2-lane)
1 swimming beach
RECREATION COSTS AT WATER PROJECTS
TABLE 3— Continued
SUMMARY OF ONSHORE FACILITIES IN CONNECTION
WITH DAVIS-GRUNSKY GRANTS
27
Grants
Recreation facilities
Esti-
mated
cost
(present
worth)
Esti-
mated
expend-
itures
Per-
cent
com-
plete
Agency-
project
(date approved)
Recrea-
tion
IWS &
SF
Scope1
Browns Valley
ID- Virginia
Ranch Project
(5/3/63)
700,000
0
217,000
33,000
40
3 stages5
65 camp units
60 picnic units
2 boat ramps
1 swimming beach
Helix ID-Chet
Harritt Project
(10/17/63)
537,000
0
207,000
3127,000
25
3 stages
44 camp units
34 trailer units
22 primitive camp
units
1 boat ramp
South Sutter
WD-Carap Far
West Project
(5/1/64)
1,323,200
240,000
742,200
720,000
95
2 stages7
306 picnic units
1 swimming beach
2 boat ramps
(6-lane)
Jackson Valley
ID- Jackson
Creek Project
(4/3/64)
343,000
42,000
186,000
2,000
0
3 stages8
14 camp units
18 trailer units
25 picnic units
3 swimming beaches
1 boat ramp
(2-lane)
1 All projects include necessary water supply and sanitary facilities, roads, parking areas, etc.
2 Cost for initial stage of recreation facilities was estimated to be about 80 percent of total cost.
3 Facilities installed are more elaborate and costly than those presented in the feasibility report.
4 The U.S. Forest Service, in an agreement with the district, is constructing additional facilities beyond the require-
ments of the grant contract.
B Cost for initial stage recreation facilities is estimated to be about 50 percent of total cost.
6 Cost for initial stage of recreation facilities is estimated to be about 75 percent of total cost.
7 Cost for initial stage of recreation facilities is estimated to be about 85 percent of total cost.
8 Cost for initial stage of recreation facilities is estimated to be about 70 percent of total cost.
3. Onshore fa citifies
The chairman of the California Water Commission expressed concern
to the committee over the need for additional policy to assure adequate
onshore construction by the agencies receiving Davis-Grunsky Act
grants. He told the committee,
"It is the practice of the department, once the amount to be
authorized is determined, to prepare a contract with the applicant
under which the applicant binds itself to the construction of such
[onshore] facilities in addition to the primary structure as may
be essential to the realization of the statewide benefits to be gained,
and to the operation and maintenance of such additional facilities
for the life of such contract. Upon completion of construction of
the dam and reservoir the amount of the grant is paid over to the
applicant. The commission is concerned that in some instances —
28 ASSEMBLY INTERIM COMMITTEE ON WATER
and this is not a criticism of the department but rather it is from
the very nature of the situation what mechanics are available —
the expectancy of the grant is a governing factor in determining
the financial feasibility of the construction of the primary structure
of the project and little or no consideration is given to the cost of
construction and operation of the additional facilities required to
realize the benefits which are the real consideration of the grant. ' ' 28
The committee is aware of this concern and is in agreement that
adequate procedures are necessary to insure that the statewide interest
in a project is reflected in construction of adequate onshore facilities.
A table listing the agencies that have actually received grant dis-
bursements and the approved grant amount is included in Table 3. The
table also lists the estimated costs and the estimated expenditures to
date for onshore recreation facilities.
As a result of the commission's concern a task force of department
personnel was established to consider this matter. The task force report
of January 20, 1966, indicated that,
"In view of the financial burden caused by the implementation of
these recreation plans [at Davis-Grunsky Projects], it is not suf-
ficient merely to exact a contractual promise from grant recipients
to carry them out. Protection of the state's investment requires
reasonable assurance the grant recipients will have the funds to
implement these recreation plans when needed. ' '
The task force concluded that, pending legislative action to revise
the act, it would establish an administrative procedure to provide such
protection to the state, including sufficient flexibility that the financial
capabilities of each applicant could be taken into consideration.
The task force recommended a "recreation reserve fund concept."
This concept was included in contracts for the first time in Placer
County Water Agency and Nevada Irrigation District grants.
As described by the task force, the reserve fund concept
"Requires the public agency to establish a 'recreation plan re-
serve fund' which specified amounts must be on deposit at speci-
fied times. The amount required to be on deposit is scaled so
that sufficient funds are in the account at the time when they are
needed for the timely construction of the onshore recreation fa-
cilities. Provision would also be made for deposits to assure the
payment of operation and maintenance costs where the agency's
ability consistently to cover such costs through current taxes and
charges when in doubt.
"In the case of a recreation plan consisting of several stages, the
amounts which the agency would be required to have on deposit
would be scheduled so that the total amount needed for the con-
struction of such facilities is on deposit approximately 18 months
before the construction completion date. ' ' 29
In view of the fact that the recreation benefits which are established,
and which, in turn, determine in large measure the cost allocation of
the project and the size of the Davis-Grunsky grant, are dependent
28 Transcript, September 22, 1965, page 72.
20 See the task force report for actual language of Placer County contract and for addi-
tional background on the task force's operation.
RECREATION COSTS AT WATER PROJECTS 29
upon, the construction of onshore facilities, such protection is abso-
lutely essential if the objective of the Davis-Grunsky Act in providing
for recreation development of statewide interest is to be met.
An escrow requirement was suggested by the Chairman of the Water
Commission as an alternative procedure to the reserve' Fund concept.
Such an escrow procedure would permit the department to set aside
portions of the grant to be released to the public agency at stated
intervals in order to accomplish the objectives of the reserve account
if the account procedure did not provide full protection. Such an
escrow procedure is not authorized by existing law.
The reserve fund concept appears sufficiently flexible to guarantee
adequate onshore recreation facilities in most circumstances. It is
possible, however, that the nature of the situation would require an
escrow arrangement. In order to make certain that public agencies
dealing with the department are aware in advance of the require-
ments which may be made upon them the committee recommends that
the Davis-Grunsky Act be amended to provide, at the discretion of the
department, the use of either (a) the reserve fund concept or (b) an
escrow provision. Full administrative discretion will allow the proce-
dures to be tailored to meet the specific needs of the local agency and
at the same time provide full assurance of the necessary onshore
development. Draft legislation is found in appendix as Draft Bill
No. 5.
4. Recodification of the act
The Davis-Grunsky Act itself (Water Code Sections 12880 et seq.) is
noted for the length of its sections and the cumbersome organization
of its text. Early in the interim the committee commissioned the Legis-
lative Counsel to draft a nonsubstantive revision of the act. A draft
was prepared for the committee and released to the general public in
late 1965.30
The bill received wide distribution and all affected state officials
and public agencies which have examined it have endorsed it. The
committee therefore recommends that the nonsubstantive revision be
enacted at the earliest possible date in the 1967 session. It appears in
the appendix as Draft Bill No. 1. In the interest of clarity all bills
proposed in this report have been drafted as amendments to the
revised law.
5. Additional financing for the act
Assembly Bill 1147, which this committee sponsored at the 1965
session of the Legislature, was amended in the Senate to provide (in
addition to the purpose for which it was introduced) $5 million an-
nually from tidelands oil revenues for permanent financing of the
Davis-Grunsky Act, The additional money under the bill was not to
be available until the $130 million in authorized funds were exhausted
but the Governor pocket-vetoed the bill. According to representatives
of the Department of Finance, reservations over the advisability of
extending the Davis-Grunsky program in its present form resulted in
the Governor's decision to veto AB 1147.31
30 Preprint Assembly Bill 1 (1967 Regular Session)
31 Transcript, September 22, 1965, page 77.
4— L-1737
30 ASSEMBLY INTERIM COMMITTEE ON WATER
Current annual expenditures under the Davis-Grunsky Act are
estimated to total approximately $10 million at this rate. It will be
several years before it will be necessary to provide additional funding
for the act. In view of the possibility that the state revenue picture
may be changed considerably before new funding is needed, the com-
mittee recommends that no additional legislation be introduced at this
time providing for long-term financing for the act.
6. Departmental reports on pending projects
Under the existing law the Department of Water Resources is re-
quired to report to the Legislature on each formal application for a
Davis-Grunsky loan or grant. It has been the department's practice
to submit these reports annually in January, together with its annual
report to the Legislature. In order to facilitate legislative review on
a more current basis, the committee recommends that the act be
amended to require that such reports be transmitted to the Legislature
upon completion. It is the committee's understanding that this proce-
dure will not involve substantial change in the procedures already
established by the department. It is recommended that the report to
the Legislature clearly indicate the onshore facilities which the depart-
ment will require. (See Draft Bill No. 6 in Appendix.)
Also, under the existing procedures set up by the Department of
Water Resources, Davis-Grunsky reports prepared by the department
are reviewed by the Departments of Fish and Game and Parks and
Recreation.
In view of the need of overall coordination of state efforts in rec-
reation and fish and wildlife enhancement it is appropriate that the
comments of these departments be available to the applicant, the depart-
ment, and the Legislature.
When it enacted the Davis-Dolwig Act providing for financing of
recreation development at the Feather River Project the Legislature
was careful to provide for review of the Department of Water Re-
sources cost allocations by the Departments of Parks and Recreation
and Fish and Game.32
The committee recommends that language similar to that of the
Davis-Dolwig Act be added to the Davis-Grunsky Act providing that
the report to the Legislature from the Department of Water Resources
and the California Water Commission be accompanied by comments of
the Department of Parks and Recreation and the Department of Fish
and Game. Language similar to that in the Davis-Dolwig Act is in-
cluded in Draft Bill No. 6 in the appendix of this report.
7. Audits of Davis-Grunsky recipients
The existing Davis-Grunsky Act provides for an audit function by
the State Controller.33 The committee feels that it is appropriate to
also provide authority for periodic audits of the books of public
agencies receiving state loans and grants by the Auditor General, the
Legislature's auditor. Language providing for this is found in Draft
Bill No. 7 in the appendix of this report.
32 See Water Code Sections 11900 et seq.
83 Water Code Section 12891. For comments of State Controller on audit progress see
letter to Chairman Porter dated November 2, 1965.
PART II
ALLOCATION OF COSTS OF THE
STATE WATER PROJECT
Costs for planning, construction, operation and maintenance of the
State Water Project are divided or allocated as equitably as possible
among the various purposes or services provided by the project. This
cost allocation is peculiarly complex for the State Water Project be-
cause it includes pioneering work with respect to certain project pur-
poses, because of the complexity and variety of the facilities involved,
and because of many difficult provisions of law and water service con-
tracts which must be observed. Problems associated with recreation and
fish and wildlife enhancement are some of the most difficult in this
area.
Chairman Porter assigned the subject of cost allocations of the State
Water Project to the full committee during the interim. In the latter
part of the interim a special subcommittee on cost allocations was cre-
ated to consider specific details of the overall problem. This subcom-
mittee included Assemblyman Porter, Chairman, and Assemblywoman
Davis, and Assemblymen Ray Johnson, Russell, and Williams, mem-
bers.
The full committee met on this subject as follows :
Date City Subject
January 14, 1966 Los Angeles Nonreimbursable costs
of the State Water Project
October 19, 1966 Sacramento Executive session
The special Subcommittee on Cost Allocations met as follows :
Date City Subject
October 10, 1966 Sacramento Cost allocations of the
State Water Project
The committee wishes to express its appreciation to the committee
staff and the office of the Legislative Analyst for their assistance in
the preparation of this report.
INTRODUCTION
The Burns-Porter Act authorizes the construction of the State Water
Project but is silent on cost allocation, that is, the division of costs
among different purposes of the project, and the payment of nonreim-
bursable costs. The Davis-Dolwig Act makes it clear 1 that recreation
and fish and wildlife enhancement are nonreimbursable project pur-
poses to be paid from the General Fund and declares that water and
power contractors shall not pay such costs. This implies the necessity
to determine an equitable apportionment of the costs attributable to
these purposes in order that they be financed from proper sources and
not charged to the water and power contractors.
1 See Water Code Section 11912.
(31)
32 ASSEMBLY INTERIM COMMITTEE ON WATER
At the time the Burns-Porter Act was enacted and when approved
by the voters in 1960, it was generally understood that nonreimbursable
costs would be paid by the state (probably from the General Fund, as
subsequently provided by the Davis-Dolwig Act, Water Code Sec. 11900
et seq.) since this is inherent in the concept of nonreimbursable costs.
As of 1964, due to shortages of General Fund money, the Davis-Dolwig
Act, in practice, had been used to finance only the onshore recreation
facilities constructed by the Department of Parks and Recreation at
features of the State Water Project. The remaining features involving
nonreimbursable recreation and fish and wildlife enhancement costs
(except for certain expenditures made prior to passage of the Burns-
Porter Act) have been constructed with moneys made available through
the Burns-Porter Act. Until additional financing was provided by the
Legislature, the policy of the Davis-Dolwig Act, therefore, remained
only partially implemented.
In 1964, after considerable study of the fiscal and legal problems
involved, the committee prepared and Chairman Porter introduced
AB 17 to provide the funding for recreation and fish and wildlife
enhancement to make the capitalization of the State Water Project
complete. AB 17 was a complex and difficult bill because it attempted
to provide legislative control over the extent to which recreation and
fish and wildlife enhancement would be included in the State Water
Project. When AB 17 was not enacted, the committee held extensive
interim hearings on the bill in Santa Monica on July 22, 1964.
A simplified version of the bill was prepared which Chairman Porter
introduced at the 1965 General Session as AB 1147. During the process
of legislative consideration, AB 1147 was amended to include additional
financing for the Davis-Grunsky program. For this reason, the bill
was not signed by the Governor.
A bill similar to AB 1147, but pertaining only to water project
nonreimbursable costs, was introduced at the 1966 First Extraordinary
Session. This bill, AB 12, was sponsored by this committee and intro-
duced by Chairman Porter. The bill passed and was signed by the
Governor.2 It provides five million dollars per year from tidelands oil
revenues to pay for that portion of State Water Project costs which
are allocated to recreation and fish and wildlife enhancement at the
dams, reservoirs, and appurtenant facilties of the State Water Project,
exclusive of the onshore recreation facilties. While the onshore recrea-
tion costs can be identified by the very nature of the facilities con-
structed, costs paid under AB 12 can only be determined as a result
of a cost allocation process.
The Cost Allocation Process
Cost allocation in the State Water Project treats the project as two
relatively separate but related parts. First are the transportation facili-
ties, that is, the aqueducts, pumping plants, power drops and terminal
reservoirs south of the San Luis Dam and Reservoir. The department
has not officially allocated costs for those features and, therefore, their
allocation has not been the subject of committee study to date. Instead,
the committee has concentrated its attentions on the second part, which
2 Chapter 27, Stats, of 1966.
RECREATION COSTS AT WATER PROJECTS
is the allocation of costs for the conservation features of the project,
primarily the multiple purpose dams and reservoirs od the Upper
Feather River, the Oroville Project, the Delia Water Projed and the
San Luis Dam and Reservoir.
In any method of allocating costs, the primary objective is to char
as much of the costs to each project purpose or product (in the case
of a business) as can reasonably be identified to that purpose or prod-
uct. This minimizes the amount of remaining costs which, by definition,
cannot be logically or directly associated with any particular purpose
or product. Therefore, these remaining costs must be distributed on
the basis of some arbitrary but rational formula which is generally
acceptable to the parties involved. In the case of the "separable costs-
remaining benefit" method, this arbitrary distribution is made pri-
marily on the basis of economic benefits computed for each purpose.
The difficulty in cost allocation arises because costs, such as those
for the acquisition of the reservoir land and the construction of the
dam itself, generally cannot be directly related or distributed to the
individual purposes being served. For example, reservoir space used
for flood control storage during the winter may be used in the spring
and summer to store water for subsequent power generation and de-
livery of irrigation and urban water supplies. Similarly, water stored
and released for power generation may also provide doAvnstream recrea-
tion values, enhancement of fish and wildlife, or even be sold to water
contractors. Thus, the water stored in the reservoir can be used for
several purposes, depending on conditions at any given time of one
year or a period of years, as natural streamflows and the demand for
project services may vary.
If it is assumed that flood control, power, or water conservation,
either separately or in conjunction, are the basic purposes of the
project, an incremental approach to the allocation of costs results.
The difficult}' then is to determine which are the basic purposes and
which are the incremental purposes, because under an incremental
approach the basic purposes will bear the major portion of the project
costs and the incremental purposes are added to those basic purposes
at a negligible cost. If a project is formulated to serve all legally
authorized purposes which are appropriate for the site and the demands
to be served, a policy decision must be made that one or more purposes
are paramount to the others and should, therefore, bear the major
portion of the project costs.
In view of this difficulty, the most widely accepted approach devel-
oped to date is that all project purposes should share in the costs of
the project in some equitable proportion related to the services each
purpose derives from the construction of the project. Obviously, the
determination of the equitable proportion is related to the planning
process. Project formulation presumably attempts to evaluate the best
methods of storing and releasing the streamflows at the project site
in order to achieve the maximum combined advantage for all project
purposes. If this evaluation is expressed in terms of computed or esti-
mated economic benefits, consistency requires that the cost allocation
be based on the same economic benefits. The separable costs-remaining
benefit method of cost allocation is based on such an approach.
34 ASSEMBLY INTERIM COMMITTEE ON WATER
The separable costs-remaining benefit method is complex and involves
considerable opportunity for judgment and dispute over the individual
steps and computed benefits. Furthermore it has the major disadvantage
that several of the steps involved and the final cost allocation are
computed figures which cannot be directly related to physical, visual
or operational aspects of the project. The end result is a theoretical
figure which must be judged largely in terms of general reasonableness
as well as acceptance or rejection of the many premises and assump-
tions involved in its computation.
EXPLANATION OF TERMS
With this background, a number of terms which require careful
definition should now be discussed:
Project Purpose
A project purpose is a type of service rendered by a water project.
Customarily these services are electric power generation, conservation
and/or delivery of water for irrigation and urban uses, flood control,
recreation, fish and wildlife enhancement, and, occasionally, navigation
or water quality maintenance.
Project Costs
Project costs are all of the costs of a project. These frequently con-
sist of planning, design, land acquisition, construction supervision, con-
tract construction, operation, maintenance, replacement of worn out
parts, etc. Depending on the individual agency constructing the project
and the individual statutes, contracts and precedents defining the proj-
ect costs, substantial variation can occur in the definition of costs which
are charged to the project.
For cost allocation purposes, only those costs which are properly
chargeable to the project are of concern, and any costs which may
relate to the project but are not defined as project costs do not become
involved in the cost allocation process. While there may be disagreement
over the extent of project costs and while this may affect the amount
of costs allocated, it does not change the cost allocation process or
method.
Reimbursable and Nonreimbursable Costs
Certain costs of the project are classified as reimbursable and are
directly repaid by project beneficiaries. Other project costs are non-
reimbursable and are generally the responsibility of the general public
to finance. Federal water projects are constructed using the general
funds of the United States government and, therefore, there is no
repayment of nonreimbursable costs involved. In the case of the State
Water Project, where general obligation bond financing is primarily
used, the principal and interest on water bond proceeds expended for
nonreimbursable purposes must, nevertheless, be paid by some means
even though the expenditure was for a purpose designated nonreim-
bursable. In these cases, repayment is required by law from some source
other than the water and power contractors. Thus, nonreimbursability
in the State Water Project does not necessarily mean nonrepayment.
RECREATION COSTS AT WATER PROJECTS 35
Water Code Section 346 is an example. It authorizes the expenditure
of Burns-Porter Act general obligation bond proceeds for the acquisi-
tion of project lands to be used for recreation purposes. This is done
in order that recreation lands can be acquired at the same time as other
project lands to achieve a more economical and efficient land acquisition
program. The funds expended under Section 346 are nonreimbursable
by the water and power contractors but, in the sense of the above
discussion, must still be repaid, since they are a loan or advance of
water bond proceeds.
Specific Costs
Specific costs or features refer to any feature or physical portion of
a dam and reservoir which can be identified as to both its cost and the
project purpose involved. Since these specific costs are normally such
a small portion of the total multiple purpose project costs, they do not
constitute a satisfactory basis for the allocation of costs whenever
several project purposes are involved.
Separable Costs
Separable costs are a derived or computed cost figure representing
a portion of the project costs related to, but not directly identified
with a project purpose. The extent of the relationship is indirect, com-
puted and without physical means of identification. The concept, there-
fore, creates major difficulties in understanding the cost allocation
process.
The separable cost is defined as the difference between the cost of
the total project and the cost of a similar project except that the pur-
pose whose separable cost is being computed has been excluded. The
project must be reformulated for each separable cost. This is a complex
and difficult operation. Furthermore, it is subject to judgment re-
garding the project features and costs assumed to be excluded each
time the project is being reformulated. Sometimes the exclusion of a
project purpose is determined to result in no significant change in the
project and there is no separable cost. It should be emphasized that
because the separable cost is a purely derived or computed cost, it has
no direct relationship, nor can it be directly compared with, or com-
prehended in relationship to the multiple-purpose project actually
constructed.
Remaining Joint Costs
The sum of the separable costs for all the purposes of a project will
normally be less than the total cost of the project. The difference be-
tween the total of the separable costs and the costs for the complete
project is known as the remaining joint costs.
As in the case of separable costs, the remaining joint costs are a
computed figure. In any cost allocation process, and in any business
cost accounting system, the heart of the allocation problem is to find
an equitable basis on which to distribute these remaining joint costs to
the various purposes of a water project or, in the case of a business,
to the products manufactured. In this respect, there is no difference
between a water project and a private business.
Since, by definition, joint costs cannot be directly related to specific
project purposes, they must be distributed on a relatively arbitrary
36 ASSEMBLY INTERIM COMMITTEE ON WATER
basis. Customarily, businesses distribute them on the basis of accounting
studies, earning capacity or similar factors which attempt to establish
some average or overall guide which is judged to be reasonable. In
water projects, the separable costs-remaining benefit method attempts
to distribute those remaining joint costs based on the economic benefits
computed for the various purposes of the project.
The committee has found important and confusing differences in
the terminology pertaining to joint costs as presently being applied
to the State Water Project. Clarification and more precise definition
is needed if misunderstanding, and perhaps serious error, is not to
occur. Initially, there is the meaning of joint costs as used in standard
cost accounting. This is a term applied to costs which are not capable
of being charged directly to a given purpose, although they may be
chargeable to several purposes.
Secondly, there is the concept of remaining (or residual) joint costs
used in the Federal Green Book.3 This publication states, "residual
costs (remaining joint costs) are here defined as the difference between
the cost of the multiple-purpose project as a whole and the total of
the separable costs for all project purposes. Residual costs thus repre-
sent a remaining joint cost attributable to all or several purposes.7'4
The Green Book definition of remaining joint costs is used by the
Department of "Water Resources.
A third use of "joint costs" has been employed by the Department
of Water Resources in Section 2 of xlB 183 5 to designate those project
costs for which it is seeking reimbursement. The costs involved, how-
ever, are actually the total costs allocated to recreation and fish and
wildlife enhancement minus the specific costs of land purchased for
the same purposes under authority of Water Code Section 346. While
these are technically joint costs, under a cost accounting definition,
the emphasis here is on repajnuent under AB 12 rather than cost allo-
cation since the money involved is sought for repayment of Burns-
Porter Act funds already expended. The use of the term "reimburse-
ment" or "repayment" or some similar term would be less confusing
and more meaningful to the average person.
Because the remaining joints costs are frequently a substantial part
of total project costs and because they are distributed to each purpose
according to project benefits, it is, therefore, important to understand
the above definitions in order to comprehend various difficulties in
this distribution process which will be discussed below.
Economic Benefits
The Green Book specifies that economic benefits are basic to project
formulation and to the allocation of costs. These benefits are computed
dollar figures which attempt to express in dollar terms the value of a
project purpose when no revenues are realized. These economic bene-
fits, unfortunately, are not only difficult to compute but are not subject
to audit or other forms of verification. As a consequence, it is possible
in the cost allocation process to attribute large benefits to a project
3 Proposed Practices for Economic Analysis of River Basin Projects, prepared by Fed-
eral Subcommittee on Evaluation Standards, May 1958.
4 Ibid., page 49.
5 This bill, which was introduced at the 1966 Extraordinary Session, is the first bill to
release funds under AB 12. It was referred to interim study.
RECREATION COSTS AT WATER PRO.JK< 37
purpose so as to influence the allocation of costs in a si it manner
Attributing large benefits to nonreimbursable pu lch as
reation, flood control and fish and wildlife enhancemi ,. resull in
large portions of the remaining joint costs bein
purposes. Economic benefits are computed for all p purposes even
when revenues or repayment are secured for a projed purpose. There-
fore, the distribution of costs is substantially dependent on the validity
of the computation of benefits.
Alternative Justifiable Expenditure
In order to limit the benefits attributed to any particular purpose,
the separable cost-remaining benefit method also requires computing
the alternative justifiable expenditure and utilizes whichever figure is
less in making the cost allocation. The alternative justifiable expendi-
ture is a cost estimate of a single purpose alternative which, it is as-
sumed, would provide service equivalent to the purpose the benefit of
which is being computed. It is apparent that major differences in
opinion can occur regarding the appropriate alternative justifiable ex-
penditure to be used in any particular instance.
Equal Annual Equivalent
In order to place all benefits and costs of the cost allocation process
on an equivalent basis of time and to include future operation and
maintenance costs, the cost allocation process reduces all dollar values
to an equal annual equivalent. This means that a future dollar expendi-
ture made in 50 years, or at some other future date, will be included
at a discounted value compared to an expenditure of a dollar at the
present time, and the total of this discounted value is averaged over
the repayment period.
Total Allocated Costs
Total allocated costs for each purpose are the sum of the separable
costs for that purpose plus that portion of the remaining joint costs
which have been distributed to that purpose. The total allocated cost
for each purpose of a project is then expressed by the Department of
Water Resources as a percentage of the total project cost and this per-
centage can, therefore, be applied to actual project costs in order to
arrive at revised repayment and cost allocation figures for customer
billing purposes.
DESCRIPTION OF THE COST ALLOCATION PROCESS
The separable costs-remaining benefit method of cost allocation was
developed by the federal government in order to allocate costs on a
common basis when marketable (revenue producing) services such as
water and power are included in a project which also contains non-
marketable services such as flood control, recreation and fish and wild-
life enhancement. It does this by attempting to handle marketable serv-
ices the same as nonmarketable services. In other words, the computed
benefits for each project purpose become the basis for the allocation of
remaining joint costs rather than revenues, even where revenues are
pertinent and available.
38
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o
Remaining Revenues Used to Repay
California Water Fund and thereafter
Deposited in Bond Fund to Construct
Additions to System
J
5
E
•si
**" "n —
o e
oil
"Sg-S
° ° 5
sis-
— O Q.
"° E-S
1 S a
..J I
5J1
40 ASSEMBLY INTERIM COMMITTEE ON WATER
In brief, the separable costs-remaining benefit method of cost alloca-
tion can be described as follows :
The benefits for each purpose are computed. The alternative justifi-
able expenditure for each purpose is then computed. The lesser of the
benefits, or the alternative justifiable expenditure for each project pur-
pose, is selected in order to limit benefits to an amount no greater than
the assumed lowest cost justifiable alternative expenditure. The separa-
ble cost for each project purpose is computed. The separable cost is de-
ducted from the lesser of the benefits or alternative justifiable expendi-
ture for each purpose. This gives the remaining justifiable costs. The
total of the separable costs is deducted from the total project costs to
give the remaining joint costs. The remaining joint costs are distributed
to the various project purposes in proportion to the remaining justifi-
able costs. The portion of the remaining joint costs distributed to each
project purpose is added to the separable costs for that purpose to give
the total allocated cost of the purpose. (This is graphically shown
on the accompanying chart on p. 42-43.)
This approach to cost allocation has generally been preferred be-
cause :
1. It results in the smallest amount of project costs being designated
as joint costs.
2. It distributes joint costs on the basis of economic benefits which is
believed by many persons to be the most equitable basis for such
distribution.
3. It can handle a variety of project purposes.
Its main disadvantages are :
1. It is theoretical and therefore difficult to comprehend and apply.
2. There is no means of physical inspection, audit or other verifica-
tion of the results in the conventional sense of these terms.
3. It is expensive and time consuming to gather the extra data for
the various computations.
4. It requires major assumptions regarding project benefits and
alternative costs.
5. It is difficult to justify computing benefits for project purposes
which produce revenues.
PROBLEM AREAS
After several years of experience in applying the separable costs-
remaining benefits method in California a number of specific problem
areas have been identified by the committee as a result of hearings and
staff investigations. The following are the most important :
1. There is no agreement among any of the purported authorities
on an acceptable method to compute certain project benefits. As various
methods to compute recreation and fish and wildlife benefits have be-
come more widely understood, they have been subjected to increasing
criticism among theoretical and academic economists as well as those
economists working for the various water resources agencies who make
the computations. After 10 to 15 years' study of various methods to
compute these benefits and in view of the increasing rather than
diminishing difference of opinion, there is room to speculate whether
agreement will ever be reached and even whether computing such bene-
RECREATION COSTS AT WATER PROJECTS 11
fits is feasible. The use of benefits in lieu of revenues and the computing
of dollar benefits when no dollars are involved e ' revenues
with fictional or computed dollars.
2. Inadequate attention has been given to the definition of an alter-
native justifiable expenditure. For example, must an alternative project
be one that is found feasible of being constructed in both an econoi
and engineering sense? How much work must be done to prove this
feasibility? Must the alternative project be one that provides identical
features to the project proposed for construction?
For example, in the Clifton Court Forebay, which is located at the
end of the Peripheral Canal, is the provision of beach area, campsites,
picnic tables and marina facilities the alternative which should be used
for comparison, or is the provision of additional water surface the
alternative? The decision as to which alternative to choose involves ;t
difference of about $30 million in the cost of the alternative project.
In other instances, should the alternative justifiable project be con-
sidered to be the identical project that is being planned for construc-
tion if no similar water project site is available in the area? Is such a
project a true alternative? Or, if a natural lake in an adjacent area is
available for recreation development, is this a justifiable alternative
or should another dam and reservoir constructed for recreation be con-
sidered the alternative? How far can a project be geographically re-
moved and still be close enough to be an alternative? Since it is not
possible to verify the computation of benefits for recreation or fish
and wildlife enhancement and since the alternative justifiable expendi-
ture usually provides a ceiling or limitation on those benefits, it is
apparent that the assumptions made in selecting an alternative project
can be extremely important and in fact sometimes controls the distribu-
tion of remaining joint costs.
Finally, the logic of limiting benefits by alternative costs is uncertain,
not only because it limits fictional dollar benefits by estimated real
dollar costs but also because the estimated alternative justifiable ex-
penditure is normally not a true alternative since it is not being
considered for construction under any circumstances.
3. With the recent expansion in the scope, size and number of
purposes of water projects being planned and constructed, the deter-
mination of whether a purpose has really been included in a project
is not as clear as it originally was. During the preparation of the
Green Book, federal projects usually included major purposes such as
flood control, power, irrigation and urban water supplies. Generally,
other project purposes such as recreation and fish and wildlife were
classified as "incidental" purposes, or by-products, to which project
costs were not allocated. In the State Water Project, under the Davis-
Grunsky Act, and more recently for federal projects under Public
Law 89-72, the Federal Water Project Recreation Act, recreation and
fish and wildlife enhancement have been raised to the status of major
project purposes. In many instances no significant change in the for-
mulation, design, sizing or operation of the project has occurred. In
some instances, by merely designating recreation and fish and wildlife
enhancement as major project purposes, a distribution of remaining
joint costs is now made to these purposes which is proportional to
the computed benefits. To a considerable extent, this is a change in
42
ASSEMBLY INTERIM COMMITTEE ON WATER
ILLUSTRATIVE ALLOCATION OF COSTS
When no separable costs exist for a purpose.
Total cost of Project ABC
having three purposes
designated as A, B, and
C is $100 million.
▲
ABC
$100M
minus
Project A is reformulated
3 times to exclude each
purpose in succession
and the cost of the re-
formulated project is
estimated.
The cost of Project ABC
minus the cost of each
reformulated project gives
the separable cost for
each purpose.
The total of the separable
costs is $60 million.
Deducting the total of thtl
separable costs from the
total costs of Project AB
gives $40 million.
The $40 million is the re1
maining joint costs.
equals
Purpose A
$20 M
ABC
$100M
Purpose B
minus XA(^quals $4Q M
$60M
A
ABC
$ 100 M
/ AB \equals
r$iooivr
$60 M
RECREATION COSTS AT WATER PROJECTS 43
8
Project benefits for each Project benefits for each The separable cost is The remaining joint The allocated costs are
purpose are estimated by purpose are limited by deducted from the benefits costs are distributed to the sum of the separable
various methods. The the cost of the lowest for each purpose giving the three purposes in costs and the distributed
benefits are shown below, cost alternative which the remaining justifiable proportion to the remain- remaining |oint costs.
could provide the same cost for each purpose as ing justifiable costs
service. (Not shown here shown below. shown in step 7.
in order to simplify the
chart.)
$40 M $20 M $8 M $28 M
$80 M $40 M $16 M $56 M
$40 M $40 M $16 M $16 M
$160 M $100 M $40 M $100 M
NOTE: This chart has been prepared primarily to show
how large sums can be allocated to a project purpose,
such as purpose C, even though no separable costs for
that purpose have been identified. The triangular repre-
sentation of projects in steps 1 and 2 are sized propor-
tional to costs.
44 ASSEMBLY INTERIM COMMITTEE ON WATER
cost allocation based on adding in more computed benefits which results
in a change in repayment policy without any corresponding physical
changes in the plans for the construction and operation of the project.
The Department of "Water Resources follows the practice of allocat-
ing remaining joint costs to a purpose even though there may be no
specific costs identified or no separable costs allocated to the purpose.
Essentially, this means that the project need not contain an expendi-
ture or any physical facilities which can be identified with or demon-
strated to serve the purpose in order to have remaining joint costs
allocated to the purpose so long as benefits for the purpose can be
computed by some means.
The basic question is whether it is logical to allocate construction
costs in the form of remaining joint costs to a project purpose where
it cannot be demonstrated that any investment has been made in the
project for this purpose but only that a useful and beneficial byproduct
has resulted. To date, this condition has occurred at Lake Davis
(Grizzly Valley Project) and it is likely to occur to a major extent at
the terminal reservoirs in southern California. In addition, as noted
below, the separable costs for all purposes except power at Oroville are
so small that they do not have any significant impact on the Oroville
cost allocation. The preliminary cost allocation for the Clifton Court
Forebay shows no separable costs for water conservation, which is its
justification for construction, while showing major separable cost for
recreation. An allocation of remaining joint costs or of separable costs
to a purpose should be justified by demonstrating that sufficient oper-
ating or other limitations, such as maintaining a minimum pool for rec-
reation or fish and wildlife, have been imposed on the project to
justify the cost allocation. The Department's cost allocations to date
do not demonstrate limitations appropriate to the sums being allocated
to recreation and fish and wildlife enhancement.
4. The onshore recreation facilities at the State "Water Project are
being constructed by the Department of Parks and Recreation under
appropriations made by the Legislature from the General Fund to
the Department of Parks and Recreation. These onshore facilities con-
stitute the principal identifiable investment at the State Water Project
in behalf of recreation and fish and wildlife enhancement and, as such,
are specific costs and constitute, along with access roads, a major
portion of separable costs for this purpose. However, they are not essen-
tial to the dam and reservoir, as illustrated by the fact that the state
added a major recreation area at Folsom Dam after that project was
constructed by the U. S. Bureau of Reclamation even though recreation
was never included in the project design or cost allocation.
Similarly, onshore recreation is being added at this time to the Oro-
ville project by the Department of Parks and Recreation without any
physical change in the design or reallocation of construction costs of
the dam and reservoir. It is customary for the agency constructing a
dam and reservoir to provide essentially a wholesale service, that is,
water is distributed to a local agency for retail to the ultimate user.
Similarly, the electric power is wholesaled to distribution agencies.
Flood control provides a relatively direct public service which can be
related to the dam and reservoir sizing and operation. The recreation
RECREATION COSTS AT WATER PROJECTS 45
facilities at units of the State "Water Project also provide a dired serv-
ice to the public or ultimate consumer but with only limited relation-
ship to sizing and operation of the dam and reservoir.
It is the policy of the Department of Water Resources to allocate
only state expenditures irrespective of which state depart incut incurs
them or how they are financed. This policy does not appear to be fully
consistent when it is applied across the board to the different purpo
of the project and it may therefore introduce elements of bias in the
cost allocation because it results in different boundaries for computing
benefits and including project costs between the different project pur-
poses. In particular, the inclusion of at site, onshore recreation facili-
ties in the project costs to be allocated and as a major portion of sepa-
rable recreation costs, needs to be given careful evaluation and study
because these facilities are not necessarily parts of the dam and reser-
voir. They appear to be more nearly similar to project aqueduct costs
which are allocated separately from the dam and reservoir.
5. As noted above, only project costs directly expended by the state
in construction of the project are allocated. In computing benefits,
however, the benefit is computed as far as the ultimate beneficiary after
an allowance is made for nonstate costs for distribution facilities, etc.
There is a tendency to claim most of the excess of total benefits over
total costs exclusively for the state features being constructed.
6. In allocating costs, the remaining joint costs are allocated in pro-
portion to the remaining justifiable costs (after separable costs have
been deducted from the benefits). Where a purpose has no separable
costs, the remaining joint costs are allocated based on all the benefits
for the purpose rather than a reduced portion, as occurs when separable
costs exist. This appears to introduce a bias in favor of the purpose
having a separable cost which the Department of Water Resources has
not been able to explain in its testimony.
7. The Department of Water Resources has indicated that revised
cost allocations will be made as appropriate. This introduces questions
as to when and under what circumstances such revisions might be
made. The provisions of AB 12 make it clear that in the event of a dis-
agreement between the Legislature and the Department of "Water Re-
sources over costs allocated to recreation and fish and wildlife en-
hancement, the allocations of the department govern repayment by the
water service contractors. This provision presumably was added to the
bill in the event that nonreimbursable allocations would be reduced
with a concomitant increase in reimbursable costs. If, however, further
experience should indicate that the pattern of recreation use at projects
such as Frenchman exceeds the original estimates for the cost alloca-
tion, should the cost allocation be revised in favor of the water con-
tractors if this is permissible under AB 12?
8. A basic premise of the Green Book has been that project features
will be formulated in order to maximize project benefits over costs. The
separable costs-remaining benefit method of cost allocation is based on
this approach and this is one reason why benefit evaluation plays such
an important role in the cost allocation process. However, in the State
Water Project, various features of the project have been sized on the
basis of executed contracts and without regard to the theory of maxi-
mized benefits which is basic to the Green Book and to the separable
46 ASSEMBLY INTERIM COMMITTEE ON WATER
costs-remaining benefit method of cost allocation. While this is not a
vital deficiency in the application of the separable costs-remaining bene-
fit method to the State Water Project, it does introduce an element of
inconsistency and perhaps bias in the allocation process.
9. The Green Book contemplates that project benefits would be
evaluated by the agency planning and formulating the project. This
means that these benefits are computed without regard to the benefits
which an equivalent expenditure of funds might create for highways,
education, public health, or other programs. In the case of the State
Water Project, the state is developing methods for an "across the
board" evaluation of its park and recreation facilities and, under
terms of various federal statutes, is required to develop a comprehen-
sive plan for fish and game and the state park system. AB 12 directs
the Department of Parks and Eecreation and the Department of Fish
and Game to review the water project cost allocations for recreation
and fish and wildlife enhancement. Presumably, therefore, the benefits
attributable to recreation and fish and wildlife enhancement at the
State Water Project will eventually no longer be prepared without
comparison to the benefits to be derived from an equivalent expenditure
for state parks and fish and wildlife programs which are not parts of
the State Water Project. While this is a preferable method for evaluat-
ing each project purpose, it does not contemplate maximizing benefits
derived from an expenditure at an individual project as the Green
Book prescribes, but rather contemplates maximizing the benefits de-
rived from the total of all state recreational and fish and wildlife
expenditures.
10. The committee has partially reviewed the cost allocation for the
Oroville Dam and Reservoir which was jointly prepared by the U.S.
Corps of Engineers and the Department of Water Resources. In gen-
eral, the computed benefits appear to be high and the alternative jus-
tifiable expenditures do not appear logical or consistent.
The following table compares the alternatives used in the cost alloca-
tion with the actual capacity being constructed at Oroville :
Cost of
Oroville Alternative alternative
constructed justifiable justifiable
Purpose capacity capacity capacity
Flood control 750,000 AF 847,000 AF $189,000,000
Irrigation 364,000 AF 1,200,000 AF 138,000,000
M. &I. water 506,000 AF 600,000 AF 87,000,000
It is apparent that there is no consistency in selecting the alternative
capacity and its cost. As a result, the computed benefits controlled the
cost allocation for flood control, the alternative for M. & I. water was
the same as the benefits while the benefits controlled irrigation. More
importantly, a significant separable cost was found only for the power
features. The other purposes had such minor separable costs in com-
parison to total project costs that approximately 35 percent of the
project costs were allocated as remaining joint costs.
In view of the fact that one of the claimed advantages for the sepa-
rable cost-remaining benefits method of cost allocation is that the
separable cost tends most nearly to identify project costs with each
purpose and minimizes the amount of remaining joint costs which
RECREATION COSTS AT WATER PROJECTS 47
must be distributed arbitrarily, it appears that this advantage lias not
materialized at Oroville.
11. The water service contracts for the State Water Projecl specify
the separable costs-remaining benefits method of cosl allocation for the
State Water Project but only for the conservation facilities. Other
methods are used for the aqueduct transportation facilities. The result
is to divide the project into two parts, which is inconsistent with the
separable costs-remaining benefits method and the computation of
benefits.
Thus, at Lake Davis, the water conservation benefits had to be
plugged into the cost allocation for the dam and reservoir because all
the benefits for water conservation were measurable only by the pipe-
line. Since the pipeline was concluded to be a transportation facility,
whose costs^ under the contract are allocated separately from the dam
and reservoir and no separable costs for water conservation were identi-
fiable at the dam and reservoir, no costs of the dam and reservoir could
be properly allocated to water conservation even though a water service
contract had been signed and water revenues would be received. The
department's solution was to make a trial cost distribution with the
pipeline included in the conservation features and then to plug this
figure into the final cost allocation. Any plugged figure is inconsistent
with the principle of the separable costs-remaining benefits method but
appears to be the only solution to the Lake Davis problem under the
circumstances. A somewhat similar problem of benefit evaluation occurs
on a large scale on the aqueduct. The benefits for conserved water are
evaluated at the place of use and then apportioned along the aqueduct
proportional to construction costs. In this case economic benefits are
apportioned by construction costs, rather than economic costs, which
represents a mixing of unlike values.6 Furthermore, the allocation of
benefits in proportion to costs is the equivalent of making benefits or
worth equal to cost irrespective of the cost.
CONCLUSIONS
In view of the foregoing difficulties with the separable costs-remain-
ing benefits method of cost allocation, the committee believes that the
intervening years have justified its original recommendation contained
in its February 1, 1960, report, "Economic and Financial Policies for
State Water Projects." 7 At that time the committee recommended the
use of revenues in lieu of benefits for project formulation and cost
allocation. Where revenues were not involved, the allocated costs were
to have been the Legislature's determination of the justifiable invest-
ment based on the same study, evaluation, and debate as used in deter-
mining other state expenditures and investments.
The committee realizes that the Department of Water Resources and
the water service contractors are committed by contract to the sepa-
rable costs-remaining benefits method. This need not preclude the Legis-
lature from evaluating recreation and fish and wildlife enhancement
features in comparison to other uses for the money. In particular, the
Legislature should require sound evaluations of these costs from the
G See Bulletin 153-66. page 53.
7 Assembly Interim Committee Reports, Vol. 26, No. 1.
48 ASSEMBLY INTERIM COMMITTEE ON WATER
Department of Fish and Game and the Department of Parks and
Recreation, as provided in AB 12. These evaluations should cover not
only the computation of benefits, but the evaluation of the alternative
justifiable expenditure and a general comparison of the worth of the
allocation in relationship to other uses of the money by these depart-
ments. This will require that recreation costs be compared separately
from fish and wildlife enhancement costs. This will produce additional
difficulties in the cost allocation process which, it appears, cannot be
avoided.
The committee has no significant criticism of the efforts of the De-
partment of Water Resources in attempting to apply the separable
costs — remaining benefits method of cost allocation. The problems are
in the method itself. The department has diligently attempted to re-
solve these problems but the basic deficiencies in the method cannot be
overcome. Perhaps one reason the problems in the cost allocations made
to date are becoming clear is because of the detailed reporting on cost
allocations the department has published, which the committee believes,
are substantially more complete and thorough than the cost allocations
previously published by other agencies.
Legislative Approval of Cost Allocations
AB 183 (Porter, 1966 First Extraordinary Session) was referred to
interim study as the first bill pursuant to AB 12 which would provide
legislative approval for the costs allocated to recreation and fish and
wildlife enhancement by the Department of Water Resources. Legisla-
tive approval of the bill or similar annual bills would release the $5
million per year provided by AB 12 for reimbursement of expenditures
made on the State Water Project in the amounts and for the projects
specified in the bill.
When the Legislature passed AB 12, it intended in general to pro-
vide supplemental financing for nonreimbursable costs in order to make
whole the financing of the State Water Project. The exact extent of the
costs to be covered by AB 12 is not stated in the legislation but as a
minimum the legislation was to secure a source of funds for repayment
of water bond proceeds used to construct recreation and fish and wild-
life enhancement features in order that these costs not be paid by the
water and power contractors who are the underwriters of the bonds.
Whether the reimbursement included nonbond constructions funds is
now open to question.
AB 183, as introduced, includes approximately $8 million in costs
originally appropriated from the General Fund, the Investment Fund
or the California Water Fund and this creates a problem. Additional
similar costs at other project features may be identified and requested
for repayment in the future.
The water service contractors have informally indicated to the com-
mittee their understanding that under AB 12 the state would repay
all recreation and fish and wildlife enhancement costs irrespective of
the original source of the construction funds. This assumption arises
from the contractor's view that the state has an obligation similar to
their obligation to repay all costs allocated to them irrespective of the
original source of construction funds. Such a repayment of General,
Investment and California Water Fund expenditures would both in-
RECREATION COSTS AT WATER PROJECTS !!•
crease immediately the capital available to constrad the State Water
Project and after the year 2030 would increase the surplus revenues
to construct future projects.
Since the General, Investment and California Water Fund mone;
are all essentially general funds of the state, the committee docs qo1
believe any repayment of these is justified. Any re pay incut could be
considered double payment.
However, the water service contractors have a legitimate concern.
They would have no statutory protection if by administrative action
(1) any of the other remaining appropriations from the above sou;
previously charged to water conservation purposes or (2) future ex-
penditures of California Water Fund money were separately or jointly
recharged to water bond proceeds and the resulting funds so made
available were used to write off the state 's obligation for recreation and
fish and wildlife enhancement in lieu of AB 12 money. These appro-
priations prier to 1960 amount to more than $100 million and Cali-
fornia Water Fund appropriations under the Burns-Porter Act to date
add almost $160 million more.
The committee believes that these funds totaling approximately $260
million were a state contribution to the project and the water contrac-
tors in view of the fact that the Burns-Porter Act is silent about return
to the General Fund of prior state expenditures on the State Water
Project. It also believes that the state should continue the administra-
tive practice of earmarking future California Water Fund revenues of
$11 million per year for Davis- Grunsky Act grants because there is no
other source of funds to repay these grants.
With the California Water Fund being used to finance the Davis-
Grunsky grants and AB 12 available to repay bond proceed expendi-
tures used for recreation and fish and wildlife enhancement, the
financing of the State Water Project is complete.
The Department of Parks and Recreation has not completed its
review and given unqualified approval to the cost allocation at French-
man Dam and Reservoir. In addition, the committee does not believe
the Legislature should approve land acquisitions for recreation on a
piece by piece basis in advance of the submission of a complete cost
allocation for approval. Therefore, the committee can only recommend
approval at this time of the $454,082 in water bond proceeds which
were expended at Antelope Dam and Reservoir.
PART III
FEDERAL WATER PROJECT RECREATION
IN CALIFORNIA
INTRODUCTION
The final section of this report approaches federal water projects in
California and discusses the Federal Water Project Recreation Act and
the Porter-Cobey Federal Water Project Recreation Act. The former,
a comprehensive federal policy statute on recreation was enacted by
Congress in 1965.1 The latter, a state enabling statute setting forth
procedures for the state's participation under the federal act, was
enacted by the State Legislature in 1966.2
During the current interim the committee followed closely the fed-
eral hearings and enactment of the Federal Water Project Recreation
Act and the subsequent steps taken to implement it at the federal and
state levels. This study was assigned by Chairman Porter to the Davis-
Grunsky subcommittee.
A hearing on the newly enacted Federal Water Project Recreation
Act was held in Sacramento on November 15, 1965, in conjunction
with the Davis-Grunsky hearing of that date. In addition, hearings
held during the 1966 First Extraordinary Session during the con-
sideration of Assembly Bill 118, the Porter-Cobey Act, included dis-
cussion of the federal act.
Following adjournment of the 1966 session, members of this com-
mittee and the Davis-Grunsky subcommittee participated in a hearing
of the Senate Fact Finding Committee on Water Resources held in
Visalia on September 21 and 22, 1966, on the subject of the federal
and state acts, and, specifically, the need for changes in the Porter-
Cobey Act.
In this brief report the committee will consider only the major
problems raised by the state's early experience in administering the
Porter-Cobey Act.
BACKGROUND
Federal Wafer Project Recreation Act
The enactment by the United States Congress in 1965 of Public Law
89-72, the Federal Water Project Recreation Act, culminated several
years of study by Congress of the problem of the role of recreation at
federal wTater projects.
One of the major sponsors of the legislation was Congressman Wayne
Aspinall, Chairman of the House Interior and Insular Affairs Com-
mittee. In that committee's report on the Federal Water Project Rec-
reation Act, the problem facing the Congress in enacting the bill was
pla'ced in perspective :
For many years, federal water projects have been providing
outdoor recreation to the increasing millions who visit them. All
1 PL 89-72 (S. 1229).
2 AB 118 (Chapter 143, Statutes of 1966).
(51)
52 ASSEMBLY INTERIM COMMITTEE ON WATER
indications are that this trend will continue in the years ahead.
A difficult policy question which the committee has regularly faced
in its consideration of water projects has been that of determining
to what extent and under what conditions the federal government
should include recreation development as a part of such projects.
During the last several Congresses, this question has been dealt
with in various ways in connection with individual project au-
thorizations to the Bureau of Reclamation and the Corps of Engi-
neers. This has resulted in inconsistencies and inequities among
projects and differences in agency procedure.
The fact that there has been no consistent congressional policy
on recreation has been a matter of concern to the committee . . .
The nation's needs for outdoor recreation opportunities have
mushroomed in recent years as our population and available
leisure have burgeoned. Growing recreation use of federal reser-
voirs is only one indication of these increasing recreation de-
mands. This intensive recreation use demonstrates that many
recreation needs — particularly those for fishing, hunting, and
water-oriented recreation — can be met satisfactorily and economi-
cally through appropriate development and management of federal
water resource developments. Such development, however, raises
further questions: What standards shall be followed in allocating
project costs to recreation and to fish and wildlife enhancement?
How much of these costs shall be treated as nonreimbursable?
What allotments, for cost sharing are feasible and fair in these
circumstances ? How can the practices of the various federal water
resource agencies be reconciled with each other and placed on a
uniform footing? How much of it should be left to local under-
taking and how much is proper for federal undertaking?
These vexing questions have troubled both the Congress and
resource agencies of the executive branch ever since it became ap-
parent that recreation should be recognized as a proper and im-
portant purpose of federal water resource projects wherever pos-
sible. They have prompted the quest of the past several years for
a viable, uniform policy to insure that proper recreation develop-
ment of federal water resource projects is achieved on terms that
are equitable to all interests that share in the costs and benefits of
federal multiple-purpose projects. It is the hope of the committee
that . . . [this legislation] will supply reasonable answers to these
and other questions and will thereby permit progress to be made
on an understandable and coherent basis.3
The Federal Water Project Recreation Act, in attempting to answer
these questions and provide congressional solutions to them, has posed
a number of new questions to nonfederal agencies, including the states.
In fact, experience to date indicates the act and all ramifications have
not been administratively resolved with regard to the role of federal
agencies themselves. It is, however, a step forward in federal policy.
It should be pointed out that Public Law 89-161, the authorizing
legislation for the Auburn Dam-Folsom South Unit of the Central
Valley Project, was pending in the Congress while the Federal Water
3 89th Congress, First Session, House of Representatives Report No. 25b, pages 6 and 7.
RECREATION COSTS AT WATER PROJECTS 53
Project Recreation Act was being considered. As a result, this project
is not governed by the Federal Water Project Recreation A-i. Bow-
ever, provisions very similar to those of PL 89-72 are included in the
Auburn Dam authorizing legislation. For the purposes of this report,
they shall be considered the same.
With the basic objective of providing uniform rules for the treat-
ment of recreation and fish and wildlife benefits and costs in connection
Avith federal projects, the principal policy provisions of the federal ad
are as follows :
First, full consideration shall be given to recreation and to fish
and wildlife enhancement as project purposes in federal water
resources projects; general cost-sharing and reimbursement policy
for these purposes is established.
Second, planning with respect to the recreational potential of
any project is to be coordinated with existing and planned Fed-
eral, State, and local public recreation developments.
Third, nonfederal administration of the recreation and fish and
wildlife enhancement features of most federal water projects is
to be encouraged by federal agencies, and both nonfederal and
federal responsibilities with respect to the provision of outdoor
recreation opportunities and fish and wildlife enhancement are to
be recognized.4
The following very briefly summarizes the procedures established by
the Federal Water Project Recreation Act.
As the first step of project development the federal government
agency (such as the Bureau of Reclamation) obtains from a nonfederal
public agency prior to authorization an expression of intent to contract
to administer land and water areas of the project. The nonfederal pub-
lic agency must also express an intent to contract to pay one-half of
the separable capital costs allocated to recreation and/or fish and wild-
life enhancement and all of the operation, maintenance and replace-
ment costs associated with them.
Next, after obtaining such indication of intent the federal agency
may (1) take in account recreation and fish and wildlife enhancement
benefits in determining the economic benefits of the project; (2) allo-
cate costs to recreation and/or fish and wildlife enhancement; and (3)
pay one-half of the separable costs and all of the joint costs allocated
to recreation and fish and wildlife enhancement.
The act provides that the nonfederal share of the separable costs
(which will be borne by the nonfederal public agency) can be assumed
by the nonfederal agency either (1) by payment through contribution
of lands, interest in lands or facilities; or (2) by repayment within 50
years with the source of repayment designated as entrance and user
charges.
The bill also provides that in the event no nonfederal public agency
issues a "letter of intent," before project authorization lands may be
purchased for the federal project to preserve recreational and fish and
wildlife enhancement potential at the project.
The law provides further that on projects without nonfederal par-
ticipation, if a nonfederal agency executes a contract within 10 years
i Ibid., page 5.
54 ASSEMBLY INTERIM COMMITTEE ON WATER
after the initial operation of the project and the nonfederal agency
agrees to administer the project and to pay the applicable nonfederal
costs of the project (including operation and maintenance) joint fed-
eral-state recreation participation can be undertaken in a manner simi-
lar to that which would have been accomplished had nonfederal par-
ticipation been agreed to prior to construction. In this circumstance,
however, the federal government would bear up to one-half of the cost
of the lands, facilities and project modifications but there would be
no reallocation of joint costs. That is, the joint costs which would have
been allocated to nonreimbursable recreation would be borne by other
project beneficiaries.
As the final step, a contract or agreement would be executed between
the federal agency and the nonfederal agency after project authoriza-
tion by the Congress.
Porter-Cobey Federal Water Project Recreation Act
Following enactment of the federal act there was considerable ex-
pression within California that local agencies (such as counties and
public districts) would be unable to bear the full costs of nonfederal
participation in federal projects in California and that the State
should be called upon to meet the requirements of the federal act,
including financial participation.
In order to provide an orderly procedure of state participation as
a nonfederal agency, Chairman Porter authored Assembly Bill 118, the
Porter-Cobey Federal Water Project Recreation Act (Public Kesources
Code Sees. 5094 et seq.) at the 1966 First Extraordinary Session of
the Legislature.5
The Porter-Cobey Act declares that it is in the public interest for
the state and local public agencies to participate with the federal
government with respect to recreation and fish and wildlife enhance-
ment facilities at federal water projects "to the extent that such
facilities are deemed necessary and desirable by the state and the
local public agency participating. ' '
State participation is permitted to the extent "that it is of statewide
importance and the local public agencies are unwilling or unable to
do so." The act also provides that the State and local agencies may
jointly participate with the federal government.
As enacted, the Porter-Cobey Act provides that the Administrator
of the Resources Agency, with the approval of the Director of Finance
and upon specific authorization by the Legislature, may indicate in
writing the state's intent to agree to administer the project and to pay
the applicable costs. Thus, a separate bill enacted by the Legislature is
required to authorize a letter of intent for each federal project.
The Porter-Cobey Act requires that the administrator, before re-
questing authorization, "shall determine that the proposed state par-
ticipation in the project is in compliance with all comprehensive water,
recreation, and fish and wildlife plans of the state, and to the extent
that the state intends to participate . . . that the state's participation
alone or in cooperation with local public agencies is justified on the
basis of statewide importance."
5 Coauthored by Senator James A. Cobey, Chairman of the Senate Pact Finding Com-
mittee on Water Resources.
RECREATION COSTS AT WATER PROJECTS 55
The Porter-Cobey Act further requires that the Resources Agency,
through the Department of Parks and Recreation and the Department
of Fish and Game, conduct an investigation and study of the projed
and prepare plans for proposed state participation. This report must
be submitted to the Governor and the Legislature together with the
determinations required regarding statewide interest, etc., of the act.
On projects for which the letter of intent has been given, another
specific authorization by enactment of a bill by the Legislature is re-
quired before the Resources Agency may contract with the federal
government to actually participate in the project.
At the 1966 session, concurrently with the enactment of the Porter-
Cobey Act, the Administrator of the Resources Agency was authorized
(by AB 118) to send a letter of intent to the United States Army Corps
of Engineers for the Marysville Dam and Reservoir Project on the
Yuba River.
Also, at the 1966 session, state participation in the Auburn Dam-
Folsom South Project (under the specific provisions of PL 89-161)
was authorized by Senate Bill 26 (no letter of intent was required on
this project).
PROBLEMS UNDER THE STATE AND FEDERAL ACTS
The enactment of the federal law, and the Porter-Cobey Act to imple-
ment it in the State of California, has raised a number of policy ques-
tions.
Financial Considerations
The principal question before the committee is to what extent the
state shall participate in Federal Water Projects in California and how
can such participation be coordinated with other state recreation ex-
penditures ?
One of the major implications of the Porter-Cobey Act is that a po-
tentially considerable state financial obligation may be incurred, in view
of the considerable federal water project development authorized and
proposed for California.
For example, current estimates of nonfederal costs of authorized and
proposed programs of the Bureau of Reclamation and the U. S. Corps
of Engineers show $53,198,500 in initial separable costs and $4,128,000
in initial annual operating, maintenance and replacement costs (see
Tables 4 and 5).
In commenting on basic policy areas involved in the Porter-Cobey
Act, the Legislative Analyst has pointed out,
It appears that the major area of discussion should be upon the
ability of the state to continue to fund at present levels established
and continuing state programs while at the same time assuming a
portion of the financial responsibility for the development for
recreation and fish and wildlife enhancement facilities at federal
water projects . . . our office pointed out to the Legislature that
the state was developing or had established policies which would
require it to finance nearly all of the recreation and fish and wild-
life enhancement costs at local and state water projects and that
[the Porter-Cobey Act] involved similar but more limited obliga-
56
ASSEMBLY INTERIM COMMITTEE ON WATER
tions for federal projects. We noted [during the consideration of
the Porter-Cobey Act by the Legislature that] the end result
could be a major financial burden on the State to meet these costs
as well as to continue financing other needs such as the develop-
ment of our greatly expanded state park system.6
6 Statement to Senate Fact Finding- Committee on Water Resources, September 22, 196 fi,
page 1.
TABLE 4
AUTHORIZED AND PROPOSED BUREAU OF RECLAMATION PROJECTS
IN CALIFORNIA SUBJECT TO PL 89-72
Feature
Cosumnes River Division
Nashville
Irish Hill
Aukum
Pi-Pi
Sopiago
Capps Crossing
Kellogg Unit
Kellogg
Herdlyn
Contra Loma.
Peripheral Canal Unit.
Pit River Division (Allen Camp
Unit)..
West Sacramento Valley Canal
Unit
Oat
Cannon
Sites
Funks
Washoe Project
Stampede
Watasheamu.
East Side Division
Knights Ferry
Montgomery
Figarden
Little Dry Creek.
Hungry Hollow..
Total..
Nonfederal share.
Separable costs
Initial
§7,587,000
2,502,000
2,597,000
991,000
926,000
768,000
15,393,000
7,034,000
300,000
1,227,000
8,561,000
6,610,000
578,000
502,000
645,000
1,791,000
600,000
3,538,000
1,000,000
60,000
1,060,000
611,000
1,676,000
7,987,000
1,350,000
3,088,000
14,712,000
$50,452,000
$25,226,000
Incremental
$10,300,000
2,022,000
2,920,000
737,000
1,260,000
916,000
18,157,000
2,420,000
155,000
285,000
2,860,000
4,864,000
1,600,000
660,000
1,815,000
2,035,000
4,510,000
3,100,000
170,000
3,270,000
472,000
1,206,000
1,406,000
1,024,000
2,000,000
6,108,000
$41,369,000
$20,684,500
Ultimate
$17,893,000
4,524,000
5,517,000
1,728,000
2,186,000
1,684,000
33,532,000
9,454,000
455,000
1,512,000
11,421,000
11,474,000
2,178,000
1,162,000
2,460,000
3,826,000
600,000
8,048,000
4,100,000
230,000
4,330,000
1,133,000
2,882,000
9,393,000
2,374,000
5,088,000
20,870,000
$91,853,000
$45,926,500
O., M. & R.
Initial
$283,000
97,000
97,000
33,000
35,000
28,000
573,000
373,000
26,000
42,000
441,000
392,000
31,000
38,000
42,000
106,000
44,000
230,000
62,000
7,000
69,000
13,000
67,000
118,000
53,000
159,000
413,000
,146,000
,146,000
Ultimate
$813,000
178,000
238,000
63,000
81,000
63,000
1,436,000
506,000
35,000
57,000
598,000
820,000
136,000
115,000
211,000
300,000
44,000
670,000
281,000
24,000
305,000
33,000
148,000
236,000
133,000
308,000
858,000
$4,823,000
$4,823,000
SOURCE: Statement to Senate Fact Finding Committee on Water Resources, September 21, 1966.
RECREATION COSTS AT WATER PROJECTS
57
The committee should emphasize thai nonfederal publi
ticipation in a federal project results in a reduction in eosta to the
water and power users of the federal project, since the separable and
joint costs allocated to recreation and fish and wildlife arc nonreim-
bursable to water and power users. Thus, indirectly, state participation
in recreation aspects of the project will reduce the repayment burden
on the water and power users. In many cases a virtually identical proj-
ect will be constructed with or without recreation. This must be ,
sidered in evaluating state participation.
TABLE 5
AUTHORIZED AND PROPOSED CORPS OF ENGINEERS PROJECTS
IN CALIFORNIA SUBJECT TO PL 89-72
Project
Lakeport Reservoir, Lake County
San Francisco Bay to Stockton Channel (navigation) __
Marys ville Reservoir, Yuba River
Isabella Reservoir, Kern River (modification)
*Poso Creek Reservoir, Kern County
*Merced County Reservoirs
Knights Valley Reservoir, Russian River
Big Sulphur Creek Reservoir, Russian River Basin
Worley Flat Reservoir
*Etsel-Franciscan Reservoir, Eel River
*Dos Rios Reservoir, Eel River
*Sequoia Reservoir, Eel River
*Butler Valley Reservoir, Mad River
Cottonwood Creek Reservoirs, Shasta and Tehama Coun
ties
Total
Nonfederal share
Separable costs for
Recreation
Fish and
wildlife
enhancement
$620,000
1,360,000
2,080,000
4,550,000
(2,510,000
(9,285,000
(11,700,000
(2,300,000
(4,800,000
(4,200,000
(2,500,000
(4,600,000
(2,800,000
$2,640,000
combined)
combined)
combined)
combined)
combined)
combined)
combined)
combined)
combined)
(No data yet available)
$55,945,000 (combined)
$27,972,500
Annual
O., M. & R. costs
for recreation
and fish and
wildlife
facilities
$23,000
124,000
100,000
70,000
150,000
237,000
137,000
46,000
115,000
300,000
90,000
450,000
140,000
$1,982,000
$1,982,000
* (Preliminary Data).
SOURCE: Statement to Senate Fact Finding Committee on Water Resources, September 21, 1966.
For example, at the Auburn Dam Project the joint costs allocable
to fish and wildlife enhancement and recreation (and borne by the
federal government as nonreimbursable costs) are $32,782,000.7 with-
out recreation participation by a nonfederal agency, much or all of this
would be transferred to other project beneficiaries (irrigation, power,
municipal and industrial water) .
Under proposed arrangements 8 with the federal government the
state share (nonfederal) of the separable costs of the Auburn project
will be $8 million. The state will transfer our state owned recreation
facilities at Folsom Dam to the federal government as part payment.
It should be recognized that if the state also dedicates the project
revenues to repayment to the federal government, this will reduce the
state's General Fund revenues by that amount, since project revenues
7 89th Congress, First Session, Senate Report No. 312, page 10.
8 For details, see Auburn-Folsom Inter-Agency for Force, Auburn-Folsom Recreation
Plan, October 1966.
58 ASSEMBLY INTERIM COMMITTEE ON WATER
normally go to the General Fund. (This would be true on any project
where the state chose to pledge revenues.)
With regard to fish and wildlife enhancement costs, the Department
of Fish and Game has already indicated that the estimated annual
cost of fisheries management of the State Water Project ($1 million a
year and ultimately $2 million) cannot be borne today by the Fish
and Game Preservation Fund without " really reducing or eliminating
other valuable programs that are in the public interest".9 The De-
partment of Fish and Game, therefore, is requesting General Fund
financing for these costs of the State Water Project.
Any costs of fish and wildlife enhancement undertaken with regard
to federal projects will be in addition to these fish and wildlife costs of
the state 's Feather River Project.
Although the federal government is financing a major portion of
recreation capital costs under the Federal Water Project Recreation
Act, this can be misleading. For example, the Department of Fish and
Game estimates that annual fish and wildlife operation, maintenance
and replacement costs (noncliscounted) could far exceed capital costs
at many federal projects (over the 50-year project repayment period).
These costs would place a severe, if not prohibitive, burden on state
funds.
A similar statement was made by the State Department of Parks and
Recreation. The department estimated that the operation, maintenance
and replacement costs of a project such as the Auburn-Folsom Project
would far exceed "the development capital costs over a period of
years". Although the state participation for separable capital costs of
the Auburn Dam-Folsom South Unit would be approximately $8 mil-
lion, the operation and maintenance costs of this project are estimated
at $1,500,000 a year (when the project is in full operation) or $75
million over a 50-year period.
Tables 4 and 5 indicate a potential similar experience will be re-
flected on other projects proposed or authorized by the federal agencies
in California. Thus, the Legislature cannot limit its consideration
merely to the initial capital expenditures which must be made on
federal projects under the Porter-Cobey Act, but must also consider
even more carefully the impact of maintenance, operation and replace-
ment costs of such projects.
From the review of the financial implications noted above, considered
together with the state's financial responsibilities for local projects
under the Davis-Grunsky Act and for the State Water Project under
the Davis-Dolwig Act and AB 12 (as described in Parts I and II of this
report) the committee believes that in the immediate future the Legis-
lature must find significant new sources of funding if it intends to fully
meet our already committed recreation needs and to fully meet ex-
panded commitments under the Federal Water Project Recreation Act.
The Legislature, in enacting the Porter-Cobey Act, attempted to
provide a measure of coordination with other state recreation expendi-
tures by requiring that both "letters of intent" and agreements to
participate under the Federal Water Project Recreation Act be specif -
9 Statement to Seriate Fact Finding Committee on Water Resources, September 22,
1966, page 20.
RECREATION COSTS AT WATER PROJECTS 59
ically authorized oy the Legislature. Thus, each project, will be sub-
jected to individual review by the Legislature, including consideration
of the financial implications.
Letters of Intent
The Porter-Cobey Act became effective when signed by the Governor
on July 1, 1966, and the Federal Water Project Recreation Act became
effective on July 9, 1965. The state's experience to date has, therefore,
been limited.
In addition, recent statements of federal agencies indicate consid-
erable differences in interpretation and administration on their part
as well.
One major area of uncertainty involves the implication of "letters
of intent." Under Public Law 89-72, letters of intent from nonfederal
agencies are to accompany the federal agency reports when they are
submitted to Congress. However, an administrative decision on the
federal level has advanced this to the time at which the federal reports
are submitted to the Bureau of the Budget in the executive office of
the President. The Bureau of the Budget requested this change so it
would have the letter while reviewing these reports.
With regard to the letter of intent, the Bureau of Reclamation has
indicated that the letter ' ' in itself is not legally binding on the agency
which issued it. It constitutes a declaration of intent given in good
faith, to enter into a contract which would be legally binding upon
reaching agreement on details which the contract embodies".10
The United States Army Corps of Engineers has interpreted the
letter of intent as an expression of "an intention to enter into an agree-
ment, or to make an attempt to obtain assurances for an agreement by
some other agency for administration of project land and water areas
for recreation or fish and wildlife." The corps does not consider the
letter of intent "to legally bind such agencies to actually enter into
such agreement or undertake such administration. Rather, it is con-
sidered to constitute a responsible expression endorsing the project
and indicating intent to make every practicable effort to fulfill the
pertinent nonfederal requirements. ' ' n
The Administrator of the Resources Agency has stated that
the letter of intent would have no effect in obligating its initiator
to assume any financial responsibility . . . the letter could hardly be
construed as a contract since none of the terms or costs involved
could be defined at the time the process requires the letter. All
parties contacted look upon the letter as a simple expression of
local interest in the fish, wildlife and recreation enhancement
potential of the project.12
A letter of intent surely is a promise by the state which in return
receives a specific federal project authorization based upon reliance on
the state letter, or else the letter of intent serves no observable purpose.
10 Testimony to Senate Fact Finding- Committee on Water Resources, September 21, I960,
page 5.
u jf^Qc cit
12 Testimony to Senate Fact Finding Committee on Water Resources, September 22,
1966, page 2.
60 ASSEMBLY INTERIM COMMITTEE ON WATER
The administrator recommended to the Legislature that the Porter -
Cobey Act be amended to permit the administrator to issue letters of
intent on proposed federal projects without specific legislative approval.
The administrator based his recommendation on the fact that the
letter of intent is not legally binding on the state and that the letter
of intent is required at such an early stage in federal planning that
he does not feel it will be possible to provide the Legislature with a
detailed report on the proposed project prior to the submission of a
request for a letter of intent. The administrator indicated that full
data for justification should be provided to the Legislature after the
letter of intent is sent but prior to legislative action specifically author-
izing execution of an agreement actually binding the state. The com-
mittee does not believe that the apparent emergency need for letters
of intent as indicated by the Congress' prompt action on the Marys-
ville Dam in late 1966, will continue in the future. All testimony has
indicated that the federal agencies together with the state will be
planning future federal projects so that authorization of letters of
intent by the Legislature can be done sufficiently in advance of their
need in Washington.
The committee notes, however, that testimony by the State Depart-
ment of Parks and Kecreation and State Department of Fish and
Game to the Senate Fact Finding Committee on Water Resources
reflected a need for the state to move slowly into this new field in view
of the possible serious financial implications of large scale state
participation. Both departments indicated a lack of experience to
date with the act and did not endorse amendment of the act.
Considerable work also must be done within the State to develop a
dialogue and cooperative planning between local public agencies, the
state and the federal government in order to assure maximum local
agency participation in these projects and agreement on recreation
plans. The Porter-Cobey Act specifically recognizes this need for local
participation. Local agencies frequently have indicated that they do
not have sufficient funds to participate fully. Undoubtedly, however,
joint arrangements and local participation in a variety of forms can
be undertaken at future federal projects in California.
RECOMMENDATIONS
In view of the above, the committee believes that it is essential that
as full and complete data as possible on proposed federal projects be
available to the Legislature, including estimates of long-term operation
and maintenance costs, before commitments are made to participate
under the Porter-Cobey Act.
Although the committee concurs in the administrator 's interpretation
of a letter of intent as not being legally binding and enforceable upon
the state in a court of law, we feel that a letter of intent issued by the
State of California goes much further than merely indicating "an in-
terest" on the part of the state. In addition, there is no firm federal
policy on the import of such a letter.
To permit the Administrator of Resources to issue letters of intent
on a large number of federal projects at the very early stages of plan-
ning could well lead others to interpret the state's action as a com-
RECREATION COSTS AT WATER PROJECTS 6]
mitment, albeit a tentative one. Although the administrator could not
legally bind the Legislature to pay the costs associated with such par-
ticipation, we seriously doubt that the Legislature could, over a long
period of time, continue to withdraw participation after receiving full
details on projects for which letters of intent have been granted. To
permit the Administrator to issue such letters would deny the Legis-
lature an essential review function, particularly with regard to possible
large state financial obligations.
For the above reasons, among others, the committee recommends
against amending the Porter-Cobey Act. Letters of intent should con-
tinue to be issued only upon specific authorization of the Legislature.
The committee recommends further that the Resources Agency, its
constituent departments and the federal agencies continue to work
together (as they have since the enactment of the Federal Water Proj-
ect Recreation Act) to develop more definitive interpretations of the
act and policies to guide the state and local agencies, as well as federal
agencies, in the implementation of the Federal Water Project Recrea-
tion Act and the Port er-C obey Act. In our opinion the Federal Water
Project Recreation Act has raised as many questions as it has answered.
Federal water development in California will not suffer but if past
experience is a guide, will benefit from a careful and thorough study
before changing state policy.
It should be borne in mind that the Legislature already has placed
California in the forefront of the states as the first state to adopt an
official legislative policy of participation with the federal government
as a nonfederal agency. The state cannot, at the present time and with
the limited information available, embark upon a program of blanket
participation in proposed federal projects.
The committee cannot overemphasize the need for balanced recreation
planning in California and balanced expenditures by the state govern-
ment for such purposes. The Federal Water Project Recreation cost to
be assumed by the state should be integrated into overall planning
efforts of the state and cannot be permitted to impair the financing
of the beaches and parks development program or the ongoing state
water project recreation development program.
Expenditures under the Porter-Cobey Act compete with these other
state recreation expenditures. The Legislature must be able at all times
to carefully weigh the advantages and disadvantages of participation
at a federal project against other state recreation expenditures.
The committee strongly recommends continued study by the Re-
sources Agency and this committee of the problems raised by the Fed-
eral Water Project Recreation Act and the Porter-Cobey Act in order
that this important new source of recreation for California can be
properly integrated into overall state recreation planning.
APPENDIX
DRAFT BILL NO. 1
An act to repeal Chapter 5 (commencing with Section 12880)
of Part 6, Division 6 of, and to add Chapter 5 (commencing
with Section 12880) to Part 6, Division 6 of, the Water
Code, relating to water resources.
The people of the State of California do enact as follows:
1 Section 1. Chapter 5 (commencing with Section 12880)
2 of Part 6 of Division 6 of the Water Code is repealed.
3 Sec. 2. Chapter 5 (commencing with Section 12880) is
4 added to Part 6 of Division 6 of said code, to read :
5
6 Chapter 5. State Financial Assistance
7 for Local Projects
8
9 Article 1. Short Title
10
11 12880. This chapter shall be known and may be cited as
12 the Davis-Grunsky Act.
13
14 Article 2. General Provisions
15
16 12881. In furtherance of the development, control and con-
17 servation of the water resources of the state and the State
18 Water Resources Development System it is the policy of the
19 state to provide financial assistance to public agencies for the
20 construction of water projects to meet local requirements in
21 which there is a statewide interest by making grants or loans,
22 or both, and by participating in the construction and opera-
23 tion of water projects, and also to provide financial assistance
24 to public agencies for the preparation of certain feasibility
25 reports on such water projects by making loans, in accordance
26 with this chapter.
27 12881.2. As used in this chapter :
28 (a) "Project" means any construction or improvement by
29 a public agency for the diversion, storage, or distribution of
30 water primarily for domestic, municipal, agricultural, indus-
31 trial, recreation, fish and wildlife enhancement, flood control,
32 or power production purposes.
LEGISLATIVE COUNSEL'S DIGEST
Davis-Grunsky Act.
Repeals and adds Ch. 5 (commencing with Sec. 12880), Pt. 6, Div.
6, Wat.C.
Recodifies Davis-Grunsky Act without making substantive change.
Vote — Majority; Appropriation — No; State Expense — No.
(65)
66 ASSEMBLY INTERIM COMMITTEE ON WATER
1 (b) "Public agency" means any city, county, district or
2 other political subdivision of the state.
3 (c) "Feasibility report" means such report on the feasi-
4 bility of a public agency's proposed project as the department
5 may require the public agency to file with the department in
6 support of an application by the public agency under this
7 chapter for a loan for the construction of the proposed project.
8 12881.4. In the administration of this chapter, the depart-
9 ment and the commission shall give preference to projects
10 involving the development of new basic water supplies.
11
12 Article 3. Procedure
13
14 12882. Applications for loans or grants or financial par-
15 ticipation by the state under this chapter shall be made to the
16 department in such form and with such supporting material
17 as may be prescribed by the department. Supporting material
18 with respect to the ability of a public agency to repay the loan
19 and to the reasonable ability to finance the proposed project
20 from other sources may be supplied by the county assessor and
21 the county engineer.
22 12882.2. Applications for loans for irrigation distribution
23 system projects or municipal distribution system projects
24 which involve extreme hardship which jeopardizes the public
25 health, safety or welfare shall be made in the following
26 manner :
27 The governing body of the public agency shall submit an
28 application to the department describing generally, such ex-
29 treme hardship existing with respect to the water supply,
30 the financial and economic conditions existing in the area, and
31 the proposed project. The statements by the governing body
32 shall be based upon, and the application shall be accompa-
33 nied by :
34 (a) A report by the assessor of the local agency with
35 respect to assessed valuations and tax delinquencies.
36 (b) A report by the engineer of the local agency (or if it
37 has none, by the county surveyor or road commissioner) de-
38 scribing the project and estimating its cost, in general terms.
39 (c) In cases involving a health hazard with respect to the
40 domestic water supply, a report by the local health officer or
41 by the Department of Public Health with respect to such
42 health hazard.
43 (d) Such other information as the department may re-
44 quire from the agency.
45 12882.4. A report on each application shall be prepared by
46 the department and filed with the Legislature. In such report
47 the department shall make findings as to the nature and extent
48 of the statewide interest in the project, the public necessity
49 for the project, the urgency of the need, and the engineering
50 feasibility, economic justification, and financial feasibility
51 of the project ; provided, that in the case of reports on appli-
52 cations for loans for the preparation of proposed feasibility
RECREATION COSTS AT WATER PROJECTS 67
1 reports, in lieu of the above findings, the department shall
2 make findings with respect to the public necessity for and
3 urgency of need of the proposed project and the ability of the
4 applicant to repay the requested loan for the preparation of
5 the proposed feasibility report.
6
7 Article 4. Qualifications Generally
9 12883. A proposed project may be approved for assistance
10 only if it is determined that the project substantially conforms
11 to the California Water Plan, is engineeringly feasible, eco-
12 nomically justified, and, if a loan is proposed, that there is
13 reasonable assurance, commensurate with the need for the
14 proposed project, that the public agency can repay it. The
15 potential future growth and development of the area shall
16 be taken into consideration in the calculation of the benefits
17 for the determination of the economic justification of a pro-
18 posed project. Such factors as the public health, safety, and
19 welfare shall be taken into consideration in determining the
20 need for a proposed project.
21 12883.2. In the case of a grant for recreation or fish and
22 wildlife enhancement, or both, the determination of economic
23 justification of the proposed project may, in the department's
24 discretion, be limited to a determination of the economic
25 justification of the recreation and fish and wildlife enhance-
26 ment functions of the project.
27 12883.4. A loan for the preparation of a proposed feasi-
28 bility report on a proposed project may be approved only if
29 it is determined that there is reasonable assurance that the
30 public agency can repay the loan and only if the agency re-
31 ceives a favorable written reply from the department on a
32 written request for a preliminary determination of eligibility
33 for a loan for the construction of the proposed project filed
34 with the department by the agency under the regulations of
35 the department promulgated pursuant to this chapter.
36
37 Article 5. Grants
38
39 12884. The department is authorized to make state grants
40 to public agencies from moneys available for such purpose in
41 amounts not exceeding four hundred thousand dollars ($400,-
42 000) for any one project for the purposes specified in subdi-
43 visions (a) and (b) of Section 12884.2 and, in addition, in
44 amounts as authorized by subdivision (c) of Section 12884.2,
45 subject to the provisions of this chapter and to the prior ap-
46 proval of the California Water Commission for each grant that
47 the department proposes to make. Grants in excess of four
48 hundred thousand dollars ($400,000) for any one project for
49 the purposes authorized by subdivisions (a) and (b) of Section
50 12884.2 may be made by the department only upon specific
51 authorization of the Legislature and upon such terms and con-
52 ditions as the Legislature may prescribe.
68 ASSEMBLY INTERIM COMMITTEE ON WATER
1 12884.2. Grants in furtherance of a project that involves
2 the development of a new water supply may be made for the
3 following purposes :
4 (a) For the part of the construction cost of the proposed
5 project properly allocated to the enhancement of fish and
6 wildlife ; provided, that a grant for such part shall not exceed
7 fifty percent (50%) of the construction cost.
8 (b) For the part of the construction cost of any dam and
9 reservoir of the proposed project properly allocated to rec-
10 reational functions of statewide interest; provided, that a
11 grant for such part shall not exceed fifty percent (50%) of the
12 construction cost, and provided further, that the total grant
13 under subdivisions (a) and (b) for any one project shall not
14 exceed seventy-five percent (75%) of the construction cost
15 of the project. Such construction costs may include expendi-
16 tures for lands located above the high waterline of reservoirs
17 which are necessary or desirable for public recreation in con-
18 nection with the reservoir.
19 (c) For the construction of initial water supply and sani-
20 tary facilities which are needed for public recreational use of
21 each proposed dam and reservoir of the proposed project. A
22 grant for the purpose specified in this subdivision shall not
23 be subject to the limitation contained in Section 12884 on
24 grants for the purposes specified in subdivisions (a) and (b)
25 and shall not be included in computing the total amount
26 which may be granted to a public agency in connection with
27 a project for such purposes. A grant for the purpose specified
28 in this subdivision shall not exceed one-fourth of the total
29 amount granted to a public agency in connection with a proj-
30 ect for the purposes specified in subdivisions (a) or (b), or
31 both, of this section.
32 Article 6. Loans
33
34 12885. The department is authorized to make state loans to
35 public agencies for the construction of projects, from moneys
36 available for such loans, in amounts not exceeding four million
37 dollars ($4,000,000) for any one project, subject to the provi-
38 sions of this chapter and to the prior approval of the Cali-
39 fornia Water Commission for each loan that the department
40 proposes to make. Loans in excess of four million dollars
41 ($4,000,000) for any one project may be made by the depart-
42 ment only upon specific authorization of the Legislature and
43 upon such terms and conditions as the Legislature may pre-
44 scribe.
45 12885.2. Loans may be made only for projects primarily
46 for domestic, municipal, agricultural, industrial, recreation, or
47 fish and wildlife enhancement purposes. Such loans may be
48 made for all or any part of the construction cost of any such
49 project but in no event shall any such loan be in an amount
50 which is greater than the portion of the construction cost of
51 the project which the department finds to be beyond the rea-
52 sonable ability of the public agency to finance from other
RECREATION COSTS AT WATER PROJECTS 69
1
2
sources. Such loans shall be repayable over a period riot to
exceed 50 years. A period of development of not exceeding 10
3 years may be allowed within such maximum 50-year repay-
4 ment period, during which no payments on the principal of or
5 the interest on such loans shall be required, when in the
6 department's judgment such development period is justified
7 under the circumstances. If the payment of interest is deferred
8 pursuant to this section, interest shall be charged on the
9 interest amounts for which payment is deferred at the same
10 rate as the rate of interest charged on the principal amount of
11 the particular loan. The accrued interest may, at the option
12 of the public agency, be paid in annual installments during the
13 remainder of the loan repayment period at the same rate of
14 interest as is charged on the principal amount of the loan.
15 12885.3. In furtherance of the policy set forth in Section
16 12881.4, no funds shall be loaned for either irrigation distribu-
17 tion system projects or municipal distribution system projects,
18 except in cases which, in the judgment of the department and
19 the commission, involve extreme hardship which jeopardizes
20 the public health, safety or welfare. Distribution facilities
21 which are a necessary and integral part of an overall water
22 development project may be covered by a state loan.
23 12885.6. The department is authorized to make state loans
24 to public agencies for the preparation of feasibility reports on
25 proposed projects, from any moneys available for such loans,
26 in an amount for any one feasibility report on a proposed
27 project not exceeding 2 percent of the estimated cost of the
28 proposed project or fifty thousand dollars ($50,000), which-
29 ever is less, subject to the provisions of this chapter ; provided,
30 that only one such loan may be made to a public agency in
31 relation to any one proposed project. A loan in excess of said
32 amount for any one feasibility report may be made by the
33 department only upon authorization by the Legislature and
34 upon such terms and conditions as the Legislature may pre-
35 scribe.
36 12885.7. Loans may be made for all or any part of the cost
37 of the preparation of proposed feasibility reports on proposed
38 projects, but in no event shall any such loan be in an amount
39 which is greater than the portion of the cost of the prepara-
40 tion of the proposed feasibility report which the department
41 finds to be beyond the reasonable ability of the public agency
42 to finance from other sources. Such loans shall be repayable
43 over a period not to exceed 10 years.
44 12885.8. The department shall require the payment of in-
45 terest on each loan that is made pursuant to this chapter after
46 September 19, 1963, at a rate equal to the average, as deter-
47 mined by the department, of the net interest costs to the state
48 on the sales of general obligation bonds of the state that
49 occurred during the period from January 1, 1962, inclusive,
50 through the calendar year immediately preceding the calendar
51 year in which the application is filed if the application is filed
52 prior to the year 1968 or that occurred during the period of
70 ASSEMBLY INTERIM COMMITTEE ON WATER
1 five calendar years immediately preceding the year in which
2 the application is filed if the application is filed after the year
3 1967 ; provided, that when the applicable average of the net
4 interest costs to the state is not a multiple of one-tenth of 1
5 percent, the interest rate on the loan shall be at the multiple of
6 one-tenth of 1 percent next above the applicable average of the
7 net interest costs.
8
9 Article 7. State Participation in Projects
10
11 12886. If in order to accomplish the objectives of this
12 chapter it is necessary to construct a project that is larger than
13 one which a public agency proposes to construct, the state may
14 participate in planning, designing, constructing, operating and
15 maintaining the project, and in so participating shall finance
16 those costs of the project allocated to the state, on terms agreed
17 upon wth the agency, to the end that the project shall accom-
13 plish the maximum water development objectives at a mini-
19 mum total expenditure.
20 12886.2. In participating in a project under this article,
21 the department may perform all or part of the planning, de-
22 signing, construction, operation or maintenance of the project
23 on terms agreed upon with the agency.
24 12886.4. The department is authorized, following receipt
25 of an application for state participation from a public agency,
26 to participate under this article on behalf of the state in any
27 project that is larger than the one which the public agency
28 proposes to construct and that is primarily for domestic, mu-
29 nicipal, agricultural, industrial, recreational or fish and wild-
30 life enhancement purposes and in so participating shall finance
31 those costs of such project that are allocated to the state, on
32 terms agreed upon with the public agency, subject to the prior
33 approval of the California Water Commission, and to expend
34 for participation in the planning, designing, and construction
35 of any one project an amount not exceeding one million dollars
36 ($1,000,000) from moneys available for such participation, in-
37 eluding but not limited to, the moneys appropriated by the
38 California Water Resources Development Bond Act (Chapter
39 8 (commencing with Section 12930) of Part 6 of Division 6 of
40 this code) for provision for water development facilities for
41 local areas as provided in this Chapter 5. Expenditures by the
42 department in excess of one million dollars ($1,000,000) for
43 the planning, designing, and construction of any one project
44 may be made only upon specific authorization of the Legisla-
45 ture.
46 12886.6. The department is authorized to make loans and
47 grants to public agencies pursuant to the provisions of this
48 chapter for projects in which the department participates
49 under this article.
RECREATION COSTS AT WATER PROJECTS 7]
1 Article 8. Powers of Public Agencies
3 12887. Notwithstanding any provision of law to the con-
4 trary, every public agency empowered by law to construct and
5 operate a project, as defined in Section 12881 .'J, is hereby
6 granted, in addition to and not in derogation or limitation of
7 the powers conferred upon the public agency by any other law,
8 the powers specified in this article.
9 12887.1. A public agency may borrow money from and
10 repay the same with interest to the state in accordance with
11 this chapter on behalf of the entire public agency or of any
12 portion or portions thereof for which the law applicable to the
13 agency authorizes an indebtedness or liability to be incurred,
14 including any improvement district, distribution district, or
15 zone within the public agency, notwithstanding any debt limi-
16 tation or other provision in the law applicable to such agency
17 which might otherwise preclude or limit such borrowing.
18 12887.2. A public agency may enter into a contract with
19 the department, on behalf of the entire public agency, or of
20 any portion or portions thereof referred to in Section 12887.1,
21 for a loan or grant under this chapter or for participation by
22 the state in a local project under Article 7 (commencing with
23 Section 12886) of this chapter and to use the loan or grant
24 contracted for as an additional or alternative means of financ-
25 ing the project proposed by the public agency.
26 12887.3. A public agency may comply with the provisions
27 of any contract entered into with the department under this
28 chapter, including any provision which obligates the public
29 agency, or any specified portion or portions thereof, to meet
30 all commitments, financial or otherwise, undertaken by the
31 public agency in such contract notwithstanding any individual
32 default by its constituents or others in the payment to the
33 public agency of taxes, assessments, tolls, or other charges
34 levied by the public agency.
35 12887.4. A public agency may include recreation and en-
36 hancement of fish and wildlife, or either of them, as functions
37 of a project which the public agency is empowered by law to
38 construct and operate, and may construct and operate the
39 project for such recreation and enhancement of fish and wild-
40 life functions, or either of them, in accordance with the provi-
41 sions of a grant contract entered into with the department,
42 including provisions for public use of the project facilities for
43 fishing and other recreational activities.
44 12887.5. A public agency may construct and operate such
45 onshore recreational facilities, fish and wildlife enhancement
46 facilities or other facilities as the department or the Legislature
47 may require in connection with a grant to the public agency
48 under this chapter, and may construct and operate such fa-
49 cilities in accordance with the provisions of a grant contract
50 entered into with the department, including provisions for pub-
51 lie use of such facilities for fishing and other recreational ac-
52 tivities.
72 ASSEMBLY INTERIM COMMITTEE ON WATER
1 12887.6. A public agency may annually levy or cause to be
2 levied upon all property in the public agency, or in any portion
3 or portions thereof, subject to taxation or assessment by the
4 public agency an ad valorem tax or assessment, based upon
5 the assessed valuation of such property, necessary and sufficient
6 to meet all commitments, financial or otherwise, of the public
7 agency that are set forth in any contract which the agency
8 enters into with the department under this chapter, in addition
9 to any other taxes or assessments which the public agency is
10 authorized to levy or cause to be levied on such property and
11 notwithstanding any provision in the law applicable to such
12 agency which might otherwise preclude or limit such taxing
13 or assessing. "Where the law applicable to such public agency
14 does not set forth a procedure for leving and collecting taxes
15 or assessments on an ad valorem basis, such public agency
16 shall utilize the procedure for levying and collecting taxes for
17 the payment of principal and interest on general obligation
18 bonds of municipal water districts, set forth in the Municipal
19 Water District Law of 1911 (Division 20 (commencing with
20 Section 70000) of this code), as it may now or hereafter be
21 amended, for the purpose of levying and collecting taxes or
22 assessments necessary and sufficient to meet commitments in a
23 contract entered into under this chapter.
24 12887.7. A public agency may make charges for the fur-
25 nishing of services from the project for which the public
26 agency receives financial assistance under this chapter and may
27 pledge and use any or all revenues received from the collec-
28 tion of such charges for the purpose of meeting the commit-
29 ments, financial or otherwise, of the public agency that are set
30 forth in any contract which the public agency enters into with
31 the department under this chapter.
32 12887.8. A public agency is hereby granted the power to
33 bring an action in the superior court of the county in which
34 the office of such agency is situated to determine the validity
35 of any contract made with the department under this chapter
36 and the authority of the public agency to enter into the con-
37 tract, The action shall be had as in the case of the judicial de-
38 termination of the validity of the public agency's bonds, as
39 nearly as the same may be applicable, and with like effect.
40 Where the law applicable to such agency does not set forth a
41 procedure for the judicial determination of the validity of the
42 public agency's bonds, the action shall be had as in the case of
43 the judicial determination of the general obligation bonds of
44 irrigation districts under the Irrigation District Law (Division
45 11 (commencing with Section 20500) of this code), as it may
46 now or hereafter be amended, as nearly as the same may be ap-
47 plicable, and with like effect.
48 12887.9. Whenever a public agency is required to have
49 legal counsel in connection with any of its activities pursuant
50 to this chapter, it may use the services of the district attorney
51 or county counsel of the county in which it is located.
RECREATION COSTS AT WATER PROJECTS 73
1 12888. A public agency may perform all acts and do all
2 things that are necessary or convenient to carry out the powers
3 specified in this article.
4
5 Article 9. Public Agency Election
6
7 12889. Except in the case of a grant to a public agency
8 where the applicable law contains provisions for the election of
9 the members of the governing body of the agency or where a
10 county board of supervisors acts as the governing body of the
11 agency, before a public agency may enter into a contract with
12 the department for a construction loan or a grant under this
13 chapter, the public agency shall hold an election on the propo-
14 sition of whether or not the public agency shall enter into the
15 proposed contract and more than 50 percent of the votes cast
16 at such election must be in favor of such proposition ; provided,
17 that if a higher percentage of favorable votes is required for
18 the issuance of any bonds by the public agency or is required
19 by the Constitution before the public agency may incur an in-
20 debtedness, such higher percentage shall apply in lieu of the
21 percentage set forth in this subdivision.
22 12889.2. The election shall be held in accordance with the
23 following provisions:
24 (a) The procedure for holding an election on the incurring
25 of bonded indebtedness by such public agency shall be utilized
26 for an election on the proposed contract as nearly as the same
27 may be applicable. Where the law applicable to such agency
28 does not contain such bond election procedure, the procedure
29 set forth in the Revenue Bond Law of 1941 (Chapter 6 (com-
30 mencing with Section 54300) Part 1, Division 2, Title 5 of the
31 Government Code), as it may now or hereafter be amended,
32 shall be utilized as nearly as the same may be applicable.
33 (b) No particular form of ballot is required.
34 (c) The notice of the election shall include a statement of
35 the time and place of the election, the purpose of the election,
36 the general purpose of the contract, and the maximum amount
37 of money to be borrowed from the state under the contract.
38 (d) The ballots for the election shall contain a brief state-
39 ment of the general purpose of the contract substantially as
40 stated in the notice of the election, shall state the maximum
41 amount of money to be borrowed from the state under the con-
42 tract, and shall contain the words "Execution of contract —
43 Yes" and "Execution of contract — No."
44 (e) The election shall be held in the entire public agency
45 except where the public agency proposes to contract with the
46 department on behalf of a specified portion, or of specified
47 portions, of the public agency, in which case the election shall
48 be held in such portion or portions of the public agency only.
74 ASSEMBLY INTERIM COMMITTEE ON WATER
1 Article 10. Administrative Provisions
2
3 12890. The department is authorized to make from time to
4 time such rules and regulations as may be necessary to carry
5 out, and as are consistent with, this chapter.
6 12890.2. In making loans or grants pursuant to this chap-
7 ter, the department shall impose terms and conditions that are
8 designed to protect the state's investment and that are nec-
9 essary to carry out the purposes of this chapter.
10 12890.4. The department shall keep full and complete rec-
11 ords and accounts concerning all of its transactions under this
12 chapter and shall render a report on such transactions to the
13 Legislature within 15 days after the commencement of each
14 legislative session.
15 12891. In order to effectuate loans or grants made by the
16 department pursuant to this chapter, the State Controller shall,
17 upon demand of the department, draw warrants made pay-
18 able to such public agencies and in such amounts as are from
19 time to time designated by the department. The State Treas-
20 urer shall pay such warrants from available moneys.
21 12891.2. It shall be the duty of the State Controller to
22 make such audit or audits of the books and records of public
23 agencies receiving loans or grants pursuant to this chapter,
24 as he may deem necessary from time to time, for the purposes
25 of determining that the money received by such public agencies
26 as loans or grants hereunder has been expended for the pur-
27 poses and under the conditions authorized herein. Whenever
28 the State Controller determines that any money paid to such a
29 public agency has been expended by such public agency for
30 purposes not authorized by this chapter, or exceeds the final
31 cost of the project for which a loan or grant was made, or
32 exceeds the final cost of the feasibility report for which a loan
33 was made, the State Controller shall furnish written notice to
34 the department and to the public agency directing the public
35 agency to pay into the State Treasury the amount of such
36 unauthorized expenditures, or the amount in excess of the final
37 authorized cost of the project or the feasibility report. Upon
38 receipt of such notice, such public agency shall, at the time
39 specified therein, pay to the State Treasurer the amount set
40 forth in such notice. Such amount shall, upon order of the
41 State Controller, be deposited in the State Treasury to the
42 credit of the California Water Resources Development Bond
43 Fund to be available for the purposes prescribed in Section
44 12937 of this code.
45 It shall be the duty of such public agency to make the pay-
46 ments to the State Treasurer as provided in this section, and
47 it shall be the duty of the State Controller to enforce such
48 collection on behalf of the state.
49 12892. No member of the California Water Commission
50 shall participate in the action of the commission in considering
51 for approval, or approving, a loan or grant under this chap-
RECREATION COSTS AT WATER PROJECTS 75
1 ter to a public agency of which he is an officer, employee agent
J consultant, accountant, engineer, or legal counsel or in which
S he owns real property.
76 ASSEMBLY INTERIM COMMITTEE ON WATER
DRAFT BILL NO. 2
An act to amend Section 12881.2 of, to amend and renumber
Sections 12885.2 and 12885.3 of, and to add Sections 12882.3,
12885.2, 12885.3, and 12885.4, to the Water Code as proposed
by Assembly Bill No. of the 1967 Regular Session, re-
lating to water resources.
The people of the State of California do enact as follows:
1 Section 1. Section 12881.2 of the Water Code, as pro-
2 posed to be added by Assembly Bill No. , is amended to
3 read :
4 12881.2. As used in this chapter :
5 (a) "Project" means any dam, reservoir, or other construc-
6 tion or improvement by a public agency for the diversion,
7 storage, or distribution of water primarily for domestic, mu-
8 nicipal, agricultural, industrial, recreation, fish and wildlife
9 enhancement, flood control, or power production purposes.
10 (b) "Public agency" means any city, county, district or
11 other political subdivision of the state.
12 (c) "Feasibility report" means such report on the feasi-
13 bility of a public agency's proposed project as the department
14 may require the public agency to file with the department in
15 support of an application by the public agency under this
16 chapter for a loan for the construction of the proposed project.
17 Sec. 2. Section 12882.3 is added to said code, to read:
18 12882.3. An application for a reservoir site loan pursuant
19 to Section 12885.2 shall include :
20 (a) Evidence that the proposed site is zoned as a reservoir
21 site.
22 (b) Geologic data as to the suitability of the site for reser-
23 voir construction.
24 Sec. 3. Section 12885.2 of said code, as proposed to be
25 added by Assembly Bill No. , is amended and renumbered
26 to read :
27 12885.1. 12885.2. Loans may be made only for projects
28 primarily for domestic, municipal, agricultural, industrial,
LEGISLATIVE COUNSEL'S DIGEST
Davis-Grunsky Act.
Amends and adds various sees., and various sees, as proposed by
AB , Wat.C.
Authorizes Department of Water Resources to make loans, up to a
maximum amount of $400,000, with loans in excess thereof subject to
approval of Legislature and California Water Commission, for acquisi-
tion of land in connection with construction of proposed water projects
and prescribes requisite conditions and procedures department shall
follow in administering such loans.
Vote — Majority; Appropriation — Yes; State Expense — Yes.
RECREATION COSTS AT WATER PROJECTS 77
1 recreation, or fish and wildlife enhancement purposes. Such
2 loans may be made for all or any part of the construction cost
3 of any such project but in no event shall any such loan be
4 in an amount which is greater than the portion of the con-
5 struction cost of the project which the department finds to be
6 beyond the reasonable ability of the public agency to finance
7 from other sources. Such loans shall be repayable over a
8 period not to exceed 50 years. A period of development of not
9 exceeding 10 years may be allowed within such maximum 50-
10 year repayment period, during which no payments on the
11 principal of or the interest on such loans shall be required,
12 when in the department's judgment such development period
13 is justified under the circumstances. If the payment of inter
14 is deferred pursuant to this section, interest shall be charged
15 on the interest amounts for which payment is deferred at the
16 same rate as the rate of interest charged on the principal
17 amount of the particular loan. The accrued interest may, at
18 the option of the public agency, be paid in annual install-
19 ments during the remainder of the loan repayment period at
20 the same rate of interest as is charged on the principal amount
21 of the loan.
22 Sec. 4. Section 12885.3 of said code, as proposed to be
23 added by Assembly Bill No. , is amended and renumbered
24 to read :
25 12885.5. 42885.3. In furtherance of the policy set forth
26 in Section 12881.4, no funds shall be loaned for either irriga-
27 tion distribution system projects or municipal distribution
28 system projects, except in cases which, in the judgment of the
29 department and the commission, involve extreme hardship
30 which jeopardizes the public health, safety or welfare. Dis-
31 tribution facilities which are a necessary and integral part
32 of an overall wTater development project may be covered by a
:^3 state loan.
:J4 Sec. 5. Section 12885.2 is added to said code, to read :
35 12885.2. The department is authorized to make state loans
36 to public agencies for the acquisition of interests in lands that
37 are necessary for the construction, operation, or maintenance
38 of proposed projects that would meet water needs of the public
39 agencies. Such loans may be made separate and apart from
40 loans that may be made under this chapter for the construction
41 of proposed projects by public agencies.
42 The making of each loan pursuant to this section shall be
43 subject to the following conditions :
44 (a) The loan may be made for all or any part of the cost
45 of acquiring interests in lands for a proposed project but in
46 no event shall any such loan be in an amount which is greater
47 than the portion of such cost which the department finds to be
48 beyond the reasonable ability of the public agency to finance
49 from other sources.
50 (b) The loan shall not exceed four hundred thousand dol-
51 lars ($400,000) for any one project. A loan in excess of that
52 amount for any one project may be made by the department
78 ASSEMBLY INTERIM COMMITTEE ON WATER
1 only upon specific approval of the Legislature, by act enacted
2 after the receipt of copies of the project report filed pur-
3 suant to Section 12882.4 and upon such additional terms and
4 conditions as the Legislature may prescribe.
5 (c) Each loan is subject to the provisions of Article 9 of
6 this chapter.
7 Sec. 6. Section 12885.3 is added to said code, to read :
8 12885.3. Each loan that is made pursuant to Section
9 12885.2 shall be repayable with interest upon the same terms
10 as are applicable to construction loans that are made pursuant
11 to this chapter, as set forth in Sections 12885.1 and 12885.8,
12 except that each contract which the department enters into
13 for a loan under this article shall provide for the sale of the
14 interests in lands that are acquired with the loan if, in the
15 department's determination, the construction of the proposed
16 project has not commenced within a period of 10 years from
17 the date of the first disbursement of loan funds under the
18 contract or within any extension of said period that the de-
19 partment may allow shall provide that, under that eventuality,
20 such interests in lands shall be offered for sale within six
21 months from the termination of such 10-year period or of
22 any extension thereof, and shall provide that the proceeds of
23 the sale shall be applied toward the repayment of the principal
24 amount of the loan and toward the payment of the accrued
25 interest thereon. Any remaining proceeds, after deducting ad-
26 ministrative costs of the public agency in the purchase and
27 sale of the interests in lands shall be repaid to the state.
28 Sec. 7. Section 12885.4 is added to said code, to read :
29 12885.4. Notwithstanding any provision of law to the con-
30 trarj^, any land acquired with a loan made pursuant to this
31 chapter, which land is located outside the boundaries of the
32 public agency acquiring the land and which was subject to
33 taxation at the time of acquisition thereof, shall remain sub-
34 ject to taxation.
RECREATION COSTS AT WATER PROJECTS 79
DRAFT BILL NO. 3
An act to amend Sections 12885.2 and 12885.8 of the Wafer
Code, as proposed to be added by Assembly Bill No. of
the 1967 Regular Session, relating to water resources.
The people of the State of California do enact as follows:
1 Section I. Section 12885.2 of the Water Code, as pro-
2 posed to be added by Assembly Bill No. ___ of the 1967 Regu-
3 lar Session, is amended to read:
4 12885.2. Loans may be made only for projects primarily
5 for domestic, municipal, agricultural, industrial, recreation, or
6 fish and wildlife enhancement purposes. Such loans may be
7 made for all or any part of the construction cost of any such
8 project but in no event shall any such loan be in an amount
9 which is greater than the portion of the construction cost of
10 the project which the department finds to be beyond the rea-
11 sonable ability of the public agency to finance from other
12 sources. Such loans shall be repayable over a period not to
13 exceed 50 years. A period of development of not exceeding 10
14 years may be allowed within- in addition to such maximum
15 50-year repayment period, during which no payments on the
16 principal of or the interest on such a loan s shall be required,
17 when in the department's judgment such development period
18 is justified under the circumstances. If the payment of interest
19 is deferred pursuant to this section, no interest shall be charged
20 on the interest amounts for which payment is deferred at the
21 same *iate as the m±e el interest charged en the principal
22 amount el tne particular lean- . The accrued interest may, at
23 the option of the public agency, be paid in annual installments
24 during the remainder of the loan repayment period at the
25 same *ate el interest as is charged: en tne principal amount
26 el the lean .
LEGISLATIVE COUNSEL'S DIGEST
Davis-Grunsky Act.
Amends Sees. 12885.2 and 12885.8, as proposed by A.B. __ , Wat.C.
Provides that the 10-year development period during which interest
and principal payments may be deferred shall be in addition to, rather
than included within, the maximum 50-year repayment period appli-
cable to state loans for local water projects. Abolishes the requirement
that interest be charged on interest amounts for which payment is
deferred.
Eliminates the formula upon which the interest rate due on such
loans is computed and specifies in lieu thereof a flat 2\% annual rate
to be applicable to loans made after September 30, 1967.
Vote — Majority; Appropriation — No; State Expense — No.
80
ASSEMBLY INTERIM COMMITTEE ON WATER
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
Sec. 2. Section 12885.8 of the "Water Code, as proposed
to be added by Assembly Bill No. of the 1967 Regular
Session, is amended to read :
12885.8. The department shall require the payment of in-
terest on each loan that is made pursuant to this chapter after
September i9j 1963 30, 1967 , at a rate equal te the average, as
determined fey the department, el the net interest costs te the
state eft the sales el general obligation bonds el the state that
occurred during the period from January 1-j 1962, inclusive,
through the calendar year immediately preceding the calendar
year m which the application: is filed il the application is filed
prior te the year 1968 of that occurred during the period e#
five calendar years immediately preceding the year in which
the application is filed il the application is filed after the year
1967 ; provided? tharfe when the applicable average el the net
interest costs to the state is net a multiple el one tenth el i
percent, the interest rate en the lean shall fee at the multiple el
one tenth el i percent next above the applicable average el the
net interest eeste of 2\ percent per annum .
RECREATION COSTS AT WATER PROJECTS gj
DRAFT BILL NO. 4
An act to amend Sections 12882.4, 12884, and 1288:"). 6 of the
Water Code, as proposed to be added by Assembly Bill
No of the 1967 Regular Session, relating to water re-
sources.
The people of the State of California do enact as follows:
1 Section 1. Section 12882.4 of the Water Code, as proposed
2 to be added by Assembly Bill No. , is amended to read:
3 12882.4. A report on each application shall be prepared
4 by the department €t*t4 fiiedr w4*h . The report, together with
5 the comments of the California Water Commission, shall be
6 filed ivith the Legislature, if it is in session, or if it is not in
7 session, with the Rules Committees of the Assembly and the
8 Senate of the Legislature. In such report the department shall
9 make findings as to the nature and extent of the statewide
10 interest in the project, the public necessity for the project, the
11 urgency of the need, and the engineering feasibility, economic
12 justification, and financial feasibility of the project; provided,
13 that in the case of reports on applications for loans for the
14 preparation of proposed feasibility reports, in lieu of the above
15 findings, the department shall make findings with respect to
16 the public necessity for and urgency of need of the proposed
17 project and the ability of the applicant to repay the requested
18 loan for the preparation of the proposed feasibility report.
19 Sec. 2. Section 12884 of the Water Code, as proposed to be
20 added by Assembly Bill No. , is amended to read :
21 12884. The department is authorized to make state grants
22 to public agencies from moneys available for such purpose
23 *» amounts «e£ exceeding few1 hundred thousand dollars
LEGISLATIVE COUNSEL'S DIGEST
Davis-Grunsky Act.
Amends and adds various sees., Wat.C, as proposed by AB — ,
Wat.C.
Requires that the Department of Water Resources file comments of
the California Water Commission, as well as its report on each project
loan or grant application, with the Legislature.
Specifies that a project loan in excess of $4,000,000, or project grant
in excess of $400,000, is (1) subject to the provisions of the act and the
approval of the California Water Commission; and (2) must be spe-
cifically approved by the Legislature by an act subsequent to its receipt
of copies of the project report.
Specifies that all loans for project feasibility reports are subject to
the provisions of the act and the approval of the California Water
Commission, as well as being subject to specific legislative authorization
when they exceed the lesser of 2 percent of the estimated project cost
or $50,000.
Vote — Majority; Appropriation — No; State Expense — Yes.
82 ASSEMBLY INTERIM COMMITTEE ON WATER
1 ($100,000) £o¥ any1 ene project fe* the purposes specified in
2 subdiviaiona -fa)- and -(%)■ e# Section 12881.2 and7 4a addition,
3 in amounts as authorized by subdivision -{ej- e£ Section 12881.2,
4 subject te the provisions of this chapter and te the prior
5 approval e# the California Water Commission fe* each grant
6 that the department proposes te make . Grants in excess of
7 four hundred thousand dollars ($400,000) for any one project
8 for the purposes authorized by subdivisions (a) and (b) of
9 Section 12884.2 may be made by the department only upon
10 specific authorization approval of the Legislature , by act
11 enacted after the receipt of copies of the project report filed
12 pursuant to Section 12882.4 and upon such additional terms
13 and conditions as the Legislature may prescribe.
14 Sec. 3. Section 12885 of the Water Code, as proposed to be
35 added by Assembly Bill No. , is amended to read:
16 12885. The department is authorized to make state loans
17 to public agencies for the construction of projects 7 from
18 moneys available for such loans 7 m amounts net exceeding
19 fen*? million dollars ($1,000,000) fe* any one project, subject
20 te && provisions e4 this chapter and te the prior approval
21 e# the California Water Commission £e* each loan that the
22 department proposes to make . Loan in excess of four million
23 dollars ($4,000,000) for any one project may be made by the
24 department only upon specific authorization approval of the
25 Legislature , by act enacted after the receipt of copies of the
26 project report filed pursuant to Section 12882.4 and upon such
27 additional terms and conditions as the Legislature may pre-
28 scribe.
29 Sec. 4. Section 12885.6 of the Water Code, as proposed to
30 be added by Assembly Bill No. , is amended to read :
31 12885.6 The department is authorized to make state loans
32 to public agencies for the preparation of feasibility reports on
33 proposed projects, from any moneys available for such loans,
34 in an amount for any one feasibility report on a proposed
35 project not exceeding 2 percent of the estimated cost of the
36 proposed project or fifty thousand dollars ($50,000), which-
37 ever is less 7 sufejeet to the jm^isiens e£ this ehaptcr ; provided,
38 that only one such loan may be made to a public agency in
39 relation to any one proposed project. A loan in excess of said
40 amount for any one feasibility report may be made by the
41 department only upon authorization by the Legislature and
42 upon such additional terms and conditions as the Legislature
43 may prescribe.
44 Sec. 5. Section 12891.4 is added to the Water Code, to
45 read :
4Q 12891.4. All loans or grants made pursuant to this chapter
47 shall be subject to the provisions of this chapter and subject to
48 the approval of the California Water Commission.
49 Sec. 6. It is the intent of the Legislature that the pro-
50 visions of the Davis-Grunsky Act, as amended by this act, pro-
51 viding that loans and grants in amounts in excess of those
52 authorized without specific legislative approval are to be sub-
RECREATION COSTS AT WATER PROJECTS
1 ject to the provisions of the Davis-Grunsky Act and to the ap-
2 proval of the California Water Commission shall be applicable
3 to excess loans and grants heretofore authorized by the Legis-
4 lature, but with respect to which the applications for the loans
5 or grants have not been approved by the Department of Water
6 Resources.
84 ASSEMBLY INTERIM COMMITTEE ON WATER
DRAFT BILL NO. 5
An act to add Section 12893 as proposed by Assembly Bill No.
to the Water Code, relating to water resources.
The people of the State of California do enact as follows:
1 Section 1. Section 12893 is added to the Water Code, as
2 proposed by AB , to read :
3 12893. In the case of a grant under subdivision (b) of
4 Section 12884.2 for the part of the construction cost of a dam
5 and reservoir properly allocated to recreational functions of
6 statewide interest and a grant under subdivision (a) of Sec-
7 tion 12884.2 for the part of the construction cost of the pro-
8 posed project properly allocated to the enhancement of fish
9 and wildlife, the department may provide in the grant con-
10 tract that the public agency shall deposit a portion of the
11 grant into a special account or fund and shall use the money
12 deposited, and its increments, solely for the construction of
13 specified onshore recreation facilities until the construction
14 cost of the facilities is paid. In acting under this section, the
15 department may reserve for the construction of onshore recre-
16 ation facilities only the portions of such grants which, in the
17 department's judgment, will not be needed for the payment
18 of the construction cost of the dam and reservoir, in the case
19 of a grant under subdivision (b) of Section 12884.2, or the
20 construction cost of any project facilities other than the on-
21 shore recreation facilities, in the case of a grant under sub-
22 division (a) of Section 12884.2.
LEGISLATIVE COUNSEL'S DIGEST
Davis-Grunsky Act.
Adds Sec. 12893, Wat.C, as proposed by AB ___, Wat.C.
Specifies that when grants are made for part of construction cost of
a dam or reservoir properly allocated to recreational functions of state-
wide interest or for part of project construction costs properly allo-
cated for fish and wildlife enhancement, the Department of Water
Resources may provide in the grant contract for deposit of that portion
of the grant not needed for payment of dam and reservoir construction
costs or other project facilities, as the case may be, into a special reserve
account to be used solely for the construction of specified onshore rec-
reation facilities until they are paid for.
Vote — Majority ; Appropriation — No ; State Expense — Yes.
RECREATION COSTS AT WATER PBOJECTfi
DRAFT BILL NO. 6
An act to amend Sections 12882 and 12882.4 of the Water
Code, as proposed to be added by Assembly Bill No. . of
the 1967 Regular Session, relating to water resources.
The people of the State of California do enact as follows:
1 Section 1. Section 12882 of the Water Code, as proposed
2 to be added by Assembly Bill No. ___, is amended to read:
3 12882. Applications for loans or grants or financial par-
4 ticipation by the state under this chapter shall be made to the
5 department in such form and with such supporting material
6 as may be prescribed by the department. Supporting material
7 with respect to the ability of a public agency to repay the
8 loan and to the reasonable ability to finance the proposed
9 project from other sources may be supplied by the county
10 assessor a»4 £ke eounty e^ginee*1 .
11 Sec. 2. Section 12882.4 of the Water Code, as proposed to
12 be added by Assembly Bill No. , is amended to read :
13 12882.4. A copy of each application, except applications
14 for loans for the preparation of proposed feasibility reports,
15 shall be transmitted by the department to the Department of
16 Parks and Recreation and to the Department of Fish and
17 Game. A report on each application shall be prepared by the
18 Department of Water Resources and filed with the Legisla-
19 ture , together with the comments of the Department of Parks
20 and Recreation and the Department of Fish and Game. In
21 such report the department shall make findings as to the na-
22 ture and extent of the statewide interest in the project, the
23 public necessity for the project, the urgency of the need, and
24 the engineering feasibility, economic justification, and financial
25 feasibility of the project ; provided, that in the case of reports
26 on applications for loans for the preparation of proposed feasi-
27 bility reports, in lieu of the above findings the department
28 shall make findings with respect to the public necessity for
29 and urgency of need of the proposed project and the ability
LEGISLATIVE COUNSEL'S DIGEST
Davis-Grunsky Act.
Amends Sees. 12882 and 12882.4, Wat.C. as proposed by AB ___,
Wat.C.
Requires Department of Water Resources to transmit a copy of a
loan or grant application to the Department of Parks and Recreation
and to the Department of Fish and Game, and to include in its report
to the Legislature on each such application: (1) the comments, if any,
of either department, and (2) a statement of the project's existing
onshore facilities and other facilities which the department will require
as a condition of the grant or loan.
Vote — Majority; Appropriation — No; State Expense — Yes.
86 ASSEMBLY INTERIM COMMITTEE ON WATER
1 of the applicant to repay the requested loan for the prepara-
2 tion of the proposed feasibility report. The report shall include
3 a statement of the project's existing onshore facilities and
4 any other local facilities to he required by the department as
5 a condition of the grant or loan.
RECREATION COSTS AT WATER PROJECTS B7
DRAFT BILL NO. 7
An act to add Section 12891.3 as proposed by Assembly Bill
No. to the Water Code, relating to water resow
The people of the State of California do enact as follows:
1 Section 1. Section 12891.3 is added to the Water Code,
2 as proposed by AB , to read :
3 12891.3. The Auditor General may make periodic audits of
4 the books and records of public agencies receiving loans and
5 grants pursuant to this chapter for the purposes of determin-
6 ing that the money received by such public agencies as loans
7 or grants has been expended for authorized purposes and
8 under authorized conditions.
LEGISLATIVE COUNSEL'S DIGEST
Davis-Grunsky Act.
Adds Sec. 12891.3, Wat.C., as added by AB , Wat.C.
Authorizes Auditor General to make periodic audits of books and
records of public agencies receiving state loans or grants for local
water projects to insure that such moneys are expended for the pur-
poses and under the conditions authorized.
Vote — Majority; Appropriation — No; State Expense — Yes.
o
printed in California office of state printing
1^1737—100 11-66 1,200
STATE AND LOCAL RESPONSIBILITIES
FOR WATER RESOURCES
a report on
• Groundwater
• Water Boards and Commissions Reorganization
• Water District Organization
by the
ASSEMBLY INTERIM COMMITTEE
ON WATER
CARLEY V. PORTER, Chairman
HALE ASHCRAFT, Vice Chairman
LETTER OF TRANSMITTAL
December 13, 19GG
Honorable Jesse M. Unruh
Speaker of the Assembly
Members of the Assembly
State Capitol
Sacramento, California 95814
Gentlemen :
In accordance with the provisions of House Resolution 710 of the
1965 Regular Session, Assembly Interim Committee on "Water herewith
submits a record of committee activities and its report entitled State
and Local Responsibilities for Water Resources.
Part I includes the study of groundwater, which was conducted by
the Subcommittee on Groundwater.
Part II includes studies of the "Little Hoover Commission" recom-
mendations for reorganization of water boards and commissions (with
the exception of recommendations relating to pollution and water rights,
which are found in the report of this committee entitled New Horizons
in California Water Development, Vol. 26, No. 16).
Part III of this report includes recommendations on studies in the
area of water district organization. This study was conducted by the
Water District Organization Subcommittee. Assemblyman Ashcraft
served as chairman of this subcommittee.
Draft legislation to implement recommendations of this report are
found in the appendix.
Respectfully submitted,
Carley V. Porter
Chairman
Burt M. Henson
Harvey Johnson
Ray E. Johnson
Frank Lanterman *
Charles W. Meyers
Robert T. Monagan
John P. Quimby
Newton R. Russell
John E. Williamson
Edwin L. Z'berg
Hale Ashcraft,
Vice Chairman
Frank P. Belotti
Eugene A. Chappie
John L. E. Collier
William E. Dannemeyer
Pauline L. Davis
(With a few reservations)
Houston I. Flournoy
Charles B. Garrigus
* See comment on page 21.
(3)
TABLE OF CONTENTS
Page
Letter of Transmittal 3
Summary of Recommendations 7
Part I. Groundwater H
Introduction 13
A. The Need for Water Well Standards Legislation __ 14
Water Wells, Groundwater, and Existing Law, a
Brief Statement of the Problem 14
Existing Law 14
1965 Legislation 17
Public Reaction 17
Recommendations 19
B. Cost Sharing on Groundwater Management Studies 21
Background 21
The Problem 22
Recommendations of the Legislative Analyst 22
Recommendations of the Department of Water
Resources 23
Views of Local Water Agencies 23
Events of 1966 Budget Session 23
Conclusion and Recommendations 25
Part II. Water Boards and Commissions Reorganization 27
Introduction 29
A. The California Water Commission 30
Background 31
Summary 34
B. Reclamation Board 34
Background 34
Conclusions 36
Recommendation 37
Part III. Water District Organization 39
Introduction 41
A. Uniform District Election Law 41
B. Recall Elections 42
C. Reclamation Districts 49
D. District Bond Issue Review 51
Appendix — Draft Legislation 53
Table 1 — Special Districts in California —
Governing Body Elections 42
(5)
SUMMARY OF RECOMMENDATIONS
PART I. GROUNDWATER
A. Wafer Well Standards
1. The committee recommends the continuation of well reporting re-
quirements as modified by the Legislature in 1965. In order to provide
information on new wells to counties and to aid in local establishment
and enforcement of well standards, the committee recommends that the
law be amended to provide that the Department of Water Resources,
at the request of any county, shall notify the county of filings of notices
of intention to drill, including a description of the well site and the
proposed date of construction only.
2. The committee recommends that the Regional "Water Quality Con-
trol Boards, after receiving reports from the department, be required
to determine whether or not well standards are required to protect
the quality of underground waters and to delineate the specific geo-
graphic area to be covered by such standards. Responsibility for the
establishment of well standards should rest with county government.
Upon a county's failure to adopt ordinances establishing water well
standards, the committee recommends that the Regional Control Board
in the affected area be authorized to adopt such standards with enforce-
ment as if the standards had been established locally.
3. The committee recommends that provisions relating to water well
standards be transferred to Division 7 of the Water Code (the State
Water Quality Control Law).
8. Cost Sharing of Groundwater Management Studies
The committee recommends that the department continue to develop
the concept of substantial local participation in groundwater basin
management studies and to require maximum local participation
feasible.
(7)
8 ASSEMBLY INTERIM COMMITTEE ON WATER
PART II. WATER BOARDS AND COMMISSIONS
REORGANIZATION
A. California Water Commission
1. The Commission Staff
a. The committee recommends that the Water Commission be
made more effective by providing that the executive secretary
and the staff engineer be employed directly by the commission.
b. The committee recommends that the Water Commission re-
quest the services of the Attorney General whenever it feels that
the proper performance of its duties requires independent legal
counsel.
c. The committee recommends that the maximum compensation
for members of the commission remain the same but that the
maximum for the chairman be increased from $2,000 to $2,500.
2. Commission Responsibility
In order to more fully delineate the responsibility of the com-
mission, the committee recommends that a number of general
areas where the commission now functions and should continue
to function be set forth in the law as required responsibilities of
the commission as follows :
Federal Appropriations : The committee recommends that the
commission be charged with the responsibility of presenting con-
solidated views of the state to the Congress on federal appropria-
tions and that the commission be required to consult with local,
state and federal agencies.
Federal Project Coordination: The committee recommends
that on matters concerning the coordination of planning, con-
struction, and operation of federal water development and flood
control projects in California, the Water Commission should
advise affected state agencies and the Governor and should be
authorized to conduct public hearings and investigations as part
of this process.
Review of Department of Water Resources Planning Pro-
grams: The committee recommends that the department be
required, each year, to provide the commission with a report
summarizing its planning program, including existing and pros-
pective planning projects and the cost of these projects. The
commission should be authorized to conduct public hearings and
make recommendations on the department's planning program
to the department, the Governor and the Legislature.
Review of Feather River Project: The committee recom-
mends that the commission be authorized to make an annual
review of the project and report its findings to the Director of
Water Resources, the Legislature and the Governor including
hearings prior to any authorization by the director of additional
features of the State Water Project.
SUMMARY OF RECOMMENDATIONS 9
8. State Reclamation Board
The committee recommends that abolition of the Reclamation Board
be given further study with particular attention directed to the five
problem areas outlined in the body of the report.
PART III. WATER DISTRICT ORGANIZATION
A. Uniform District Election Law
1. The committee recommends that th^ following district acts be
amended to provide for general district elections pursuant to the
Uniform District Election Law: California Airport Districts (3),
Community Services Districts (125), Library Districts (8), Memorial
Districts (26), Police Protection Districts (6), Montalvo Municipal
Improvement District (1), Embarcadero Municipal Improvement Dis-
trict (1), Estero Municipal Improvement District (1).
2. The committee recommends that the Uniform District Election
Law be broadened to include uniform recall provisions, including
separate provisions for land ownership voting districts.
8. Reclamation Districts
The committee recommends that legislation be enacted bringing elec-
tion provisions of the Reclamation District Law up to date and requir-
ing biennial elections.
C. District Bonds Review
The committee recommends that an appropriate Assembly Commit-
tee make a comprehensive interim study of bond issue review to ascer-
tain the necessity of continuing this practice.
PART I
GROUNDWATER
INTRODUCTION
During the current interim the committee considered several ar
under the general topic of groundwater. For this purpose Chairman
Porter established a Groundwater Subcommittee consisting of the fol-
lowing: Porter, Chairman; Collier, Belotti, Chappie, Mrs. Davis, Gar-
rigus, Henson, Ray Johnson, Meyers, Monagan, Quimby and Russell,
members.
The subcommittee was assigned two major areas:
A. The Need for Water Well Standards Legislation
B. Cost Sharing of Groundwater Basin Management Studies
The subcommittee held the following meetings:
Date
Location
Subject
September 23, 1965
Sacramento
Water Well Standards and
Cost Sharing of Ground-
water Basin Studies
December 7, 1965
San Diego
Cost Sharing of Groundwa-
ter Basin Studies and the
Need for New Ground-
water Legislation
September 28, 1966
Fresno
Water Well Standards
October 19, 1966
Sacramento
Executive Session
With regard to water well standards, at its initial meeting the com-
mittee received testimony from the State Department of Water Re-
sources on the subject of Bulletin 74. It also received testimony from
the State Department of Public Health, the other state agency prin-
cipally involved in water well regulation. The committee also received
testimony from the representatives of the Associated Drilling Con-
tractors. At its meeting in Fresno on September 28, 1966, following
the opportunity of the Department of Water Resources to present its
views on proposed revision of Bulletin 74, the committee received pub-
lic testimony on Bulletin 74 and on the provisions of A.B. 2707, as
originally introduced (which would have implemented the recommen-
dation of Bulletin 74 that state water well standards and enforcement
be established).
With regard to cost sharing of groundwater basin studies by the
department the committee received testimony from the State Depart-
ment of Water Resources at its meetings in Sacramento on September
23, 1965, and in San Diego on December 7, 1965. In addition, the com-
mittee heard considerable testimony from local agencies involved in
groundwater basin studies at its hearing on December 1, 1965.
Draft legislation incorporating the committee's recommendations is
included in the appendix of this report.
The committee wishes to express its appreciation to the committee
staff and the offices of the Legislative Analyst and Legislative Counsel
for their assistance in the preparation of this report.
(13)
14 ASSEMBLY INTERIM COMMITTEE ON WATER
A. THE NEED FOR WATER WELL STANDARDS
LEGISLATION
Water Wells, Groundwater, and Existing Law — a Brief Statement of* Problem
Over 50 percent of the water used in California today is derived
from groundwater supplies. The demands which increasing population
and increasing per capita use are placing on groundwater supplies
and which in the future will continue to place are well documented
and need no elaboration here.1
Regulation of construction of water wells and destruction of aban-
doned wells can be a significant factor in the protection of ground-
water quality. While properly constructed wells do not cause impair-
ment of groundwater, inadequacies in construction or careless abandon-
ment may result in deterioration of the quality of groundwater. Such
deterioration in quality (depending on source and type of deterioration
and surrounding geological conditions) can affect either the water
immediately adjacent to the well in question, the water drawn by a
group of closely adjacent wells or a much larger quantity of ground-
water in underground aquifers.
Contaminants entering the groundwater supply through improperly
constructed wells have been major factors in outbreaks of water-borne
diseases in parts of the United States. However, contaminants entering
improperly constructed wells are not restricted to those carrying dis-
ease producing organisms, but include other sources of degradation
of water quality as well. Inadequately constructed or improperly aban-
doned wells are not believed to have been the sole cause of water quality
degradation where a sizeable portion of a California groundwater basin
has been involved. However, the construction of thousands of addi-
tional wells in California each year, coupled with the fact that many
of them are becoming more closely spaced, and an increase in the
number of wells which can be expected to fall into a state of disrepair
indicates that the potential for impairing the quality of groundwater
continues to grow. The Department of Water Resources has found some
groundwater impairment in some localities where numerous shallow
wells are located.2 Because of the great dependence of California on
its groundwater supply it is imperative that such supplies be protected
and that risks to public health and economic loss not be incurred
because of inadequate water well construction standards or careless
abandonment.
Existing Law
At present there are no statewide standards regulating construction
and abandonment of water wells. Local agencies, however, have gen-
eral authority to adopt and enforce regulations on a local basis and
many cities and counties have adopted water well ordinances of some
type.3
1 See previous report of this committee, Groundwater Problems in California, As-
sembly Interim Committee Reports, Vol. 26, No. 4, December 1962. See also the
report of this committee, New Horizons in California Water Development, As-
sembly Interim Committee Reports, Vol. 26, No. 16.
2 Bulletin No. 74-8, "Water Well Standards in Del Norte County," page 61.
3 For example, see San Luis Obispo County ordinance and Los Angeles County Health
Department regulations.
GROUNDWATER ] 5
Although the state does not have this authority, it does have various
designated responsibilities in the area of protection of groundwater
quality. Division 7 of the California Water Code states that the pri-
mary responsibility for control of water pollution by the state rests
with the nine Kegional Water Quality Control Boards. State water
quality control is divided between the State Water Quality Control
Board, when quality "is of statewide concern," and the regional boards
when quality is primarily "of a regional concern."
In 1949 when the Legislature enacted the State Water Quality (then
Pollution) Act (Dickey Act) it created several separate and distinct
state responsibilities with regard to water pollution as part of a com-
prehensive program.
First, the law established the nine Regional Water Quality (then
Pollution) Control Boards to establish waste discharge requirements
for pollution control. The law also established the State Water Quality
(then Pollution) Control Board.
Second, the Legislature created the State Water Pollution Control
Fund (Water Code 13100 et seq.) with an appropriation of $1 million
to provide loans to municipalities and districts for the construction of
sewage and storm drainage facilities. Supervision of the program was
placed with the State Water Quality Control Board.
Third, concurrent authority in certain areas of water pollution was
granted the State Department of Public Health. At present the State
Board of Public Health may make and enforce regulations for public
domestic wells. It may make and enforce regulations with respect to
use of reclaimed waste waters to recharge water bearing strata which
may be a source of domestic water supply (Health and Safety Code
Section 4458).
The Department of Public Health may also order abatement in cases
of contamination (Health and Safety Code Sections 5412 and 5461).
Section 4458 of the Health and Safety Code relates to groundwater. It
provides that no wells should be used for the purpose of disposal of
sewage into water bearing strata used or suitable for domestic use.
It should be emphasized that the Department of Public Health is
primarily concerned with the maintenance of standards of water for
domestic use, especially with respect to "contamination,"4 as distin-
guished from "pollution."5 The concern, however, of this committee
is that the quality of groundwater be protected and that measures be
taken to prevent any source of pollution or impairment of the quality
of groundwaters as a result of inadequate well construction standards
or careless abandonment.
Thus, the committee believes that action is necessary not only to
prevent the extreme case where public health is endangered, but to
prevent any pollution or degradation of groundwater. In this respect
an improperly constructed or carelessly abandoned well may contribute
* Contamination "means an impairment of the quality of the waters of the state by
sewage or industrial waste which creates an actual hazard to the public health
through poisoning or the spread of disease" (Water Code Section 13005, Health
and Safety Code Section 5400).
e Pollution "means an impairment of the quality of the waters of the state by sewage
or industrial waste to a degree which does not create an actual hazard to the
public health but which does adversely and unreasonably affect such waters foi-
domestic, industrial, agricultural, recreation or other beneficial use ..." (Water
Code Section 13005, Health and Safety Code Section 5410).
16 ASSEMBLY INTERIM COMMITTEE ON WATER
to such deterioration of groundwater supplies regardless of the pur-
pose for which a well was constructed, i.e., domestic or agricultural
supply.
Fourth, Sections 7078 to 7082 of the Water Code were established
requiring well drilling reports and logs on all water wells drilled in
California be submitted to the Regional Water Pollution Control
Boards. As modified by the Legislature at the 1965 session, Sections
7078 to 7082 specify that the report must be filed with the Depart-
ment of Water Resources whenever a well is completed, repaired, or
abandoned. A notice of intent to drill is also required.
Fifth, Section 231 of the Water Code was enacted requiring the
Department of Water Resources to investigate and survey damage of
quality of underground waters as follows :
The department, either independently or in cooperation with
any person or any county, state, federal or other agency, shall
investigate and survey conditions of damage to quality of under-
ground waters, which conditions are or may be caused by improp-
erly constructed, abandoned or defective wells through the inter-
connection of strata or the introduction of surface waters into
underground waters. The department shall report to the appropri-
ate regional water pollution control board its recommendations for
minimum standards of well construction in any particular locality
in which it deems regulation necessary to protection of quality of
underground water, and shall report to the Legislature from time
to time, its recommendations for proper sealing of abandoned
wells.
Although the Department of Water Resources may report to appro-
priate regional Water Quality Control Boards its recommendations for
minimum standards of well construction, there are no provisions for
enforcement of such standards. In accordance with this section the
department has made several investigations and has issued reports on
groundwater supplies and relevant geological data.6 Bulletin 74, " Rec-
ommended Minimum Well Construction and Sealing Standards for
Protection of Ground Water Quality, State of California, ' ' preliminary
edition, released in July 1962, sets forth the department's case for the
establishment of state standards for well construction. Final revision
of this report is now being written.
In addition to the foregoing, the Business and Professions Code re-
quires that any person engaged in the business of drilling, digging,
boring, or otherwise constructing, deepening, repairing, reperforating
6 California State Department of Water Resources, Division of Resources Planning.
"Recommended Water Well Construction and Sealing Standards, Mendocino
County." Bulletin No. 62. November 1958.
"Sea Water Intrusion in California." Bulletin No. 63. November 1958.
"Water Quality and Water Quality Problems, Ventura County." Bulletin 75. February
1959.
"Recommended Minimum Well Construction and Sealing Standards for Protection of
Ground Water Quality, State of California." Bulletin No. 74. Preliminary Ed:-
tion. July 1962.
"Recommended Minimum Water Well Construction and Sealing Standards for the
Protection of Ground Water Quality, Alameda County." Bulletin No. 74-2. Pre-
liminary Edition. December 1962.
"Water Well Standards, Del Norte County." Bulletin No. 74-3. August 1966 .
"Recommended Well Construction and Sealing Standards for Protection of Ground
Water Quality in West Coast Basin, Los Angeles County." Bulletin No. 107. Au-
gust 1962.
GROUNDWATER 17
or abandoning water wells be a licensed contractor (this Licensing
provided in Chapter 9. Division 3 of the Business and Professions
Code). There are several exceptions to this licensing requirement. In-
cluded among these exemptions are a person or his employees who con-
structs, alters or abandons a water well for his own use; representa-
tives of state and federal governments; representatives of local gov-
ernments and political subdivisions of the state; public utilities op-
erating under the jurisdiction of the Public Utilities Commission; the
drilling and operation of oil and gas wells when performed by an
owner or lessee; construction on federally owned sites; and jobs costing
less than $100 (Business and Professions Code Sections 7026 :} and
7040 to 7048).
These exceptions appear reasonable. The committee's study of water
well standards has not included an inquiry into the need for additional
licensing requirements. The committee's concern has primarily been
directed toward the need for regulation of physical standards of well
construction and abandonment.
7 965 Legislation
Chairman Porter introduced AB 2707 at the 1965 session of the
Legislature to implement the recommendation of Bulletin 74 that the
state establish and enforce well standards. As originally introduced,
AB 2707 would have given the Department of Water Resources this
task. Such authority, however, was amended out of the bill and in its
final form, the bill merely revised the reporting procedure for persons
drilling wells. As enacted into law, the bill requires that the log of
drilling operations kept by a well driller be filed initially with the
Department of Water Resources, rather than with the Regional Water
Quality Control Boards. In addition, the driller of any well is re-
quired to provide the department with a notice of intent on a postcard
form prior to commencement of drilling. The advantage of this new
procedure is that the data goes directly to the Department of Water
Resources which is the primary data gathering agency of the state
in the resources field.
Public Reaction
Assembly Bill 2707, in its original form, has been criticized on
several bases. In its study, the committee has not tried to evaluate the
myriad of technical objections to the proposed standards in Bulletin 74,
but shall discuss several areas of disagreement to indicate the general
objections presented to the committee.
1. Exemptions of agricultural drainage wells
There was a general objection by many to the inclusion of agricul-
tural wells under any regulations. For example, in parts of the San
Joaquin Valley it is necessary to pump water for drainage purposes,
i.e., to lower the water table so that agricultural practices may be
carried out. It was argued that to apply the standards of Bulletin 74
to agricultural drainage wells would raise costs prohibitively. Hence,
strict regulations should be attempted only in cases where a threat
of contamination exists.
18 ASSEMBLY INTERIM COMMITTEE ON WATER
In this respect the Department of Water Resources recognized in its
proposed revisions of Bulletin 74 that it is "impractical to provide
standards for every conceivable situation and further that it may be
necessary to deviate from statewide standards or even substitute other
measures which will provide protection equal to that in our recom-
mended standards." 7
The Department of "Water Resources, in its proposed revision of
Bulletin 74 states that "No protective seal should be required for
agricultural wells except when they are adjacent to domestic wells or to
known sources of pollution or contamination or sources of surface
mineral degradation." In addition "With respect to the destruction
of wells our recommendations have been revised to take into account
the varying geological groundwater conditions encountered in the
state. ' ' 8 The general feeling of those testifying at the committee 's
hearing was that particularly with regard to agricultural wells, local
conditions require that any standards be tailored to specific needs,
which vary from area to area.
2. Cost of compliance
A second related complaint was that the cost of compliance with
state standards proposed in Bulletin 74 would be a burden on local
interests. The department's revisions proposed for Bulletin 74 seem
to give more flexibility to the standards in this respect but considerable
concern was expressed over cost factors. The committee has been unable
to precisely estimate the cost implications.
3. Need for local control
Another general category of objection was that in view of varying
conditions, local, rather than state water well standards, were more
desirable. These criticisms resulted in two general suggestions to the
committee.
First, the state should require local agencies to adopt standards
and enforce them 9 on the basis that local agencies can more efficiently
set and enforce standards since local agencies have more detailed knowl-
edge of groundwater conditions and can more effectively enforce stand-
ards.
It was pointed out to the committee that several counties and cities
have enacted and for some time have enforced local water well stand-
ards which appear to be stricter than those proposed by the state. It
should also be noted that the proposed enforcement of AB 2707 (as
introduced) was by the Attorney General. In this regard, local enforce-
ment appears to be considerably more expeditious than utilization of
this state entity.
Second, a number of witnesses before the committee indicated that
if the state were to establish standards (either on the state level or on
a regional level by an entity such as the Regional Water Quality Con-
trol Boards) that enforcement of such standards, in any case, be left
with local entities.
7 Statement to Assembly Interim Committee on Water, September 28, 1966, testimony
of J. R. Teerink, page 4.
8 hoc ait.
9 Statement to Assembly Water Committee by Eldridge Lowry, Senior, water works
engineer, City of Los Angeles, September 28, 1966, page 4.
GROUNDWATER 1!)
Recommendations
The Department of Water Resources has shown that there exisls a
need for technical standards for water well construction and abandon-
ment. This is borne out by the fact that many local agencies have seen
fit to adopt and enforce standards at the local level. In addition, most
states have adopted and enforce some type of technical standards for
construction of water wells.10
The committee recognizes that there are considerable variations in
groundwater conditions throughout the state associated with various
geological factors. In a state with such diverse geologic and hydrologic
conditions as California, it would be most difficult to formulate a
simple set of standards which would be satisfactory for the entire
state. For example, a requirement which may be necessary to protect
an aquifer in one area may impose prohibitive and unnecessary costs
on a person drilling a well in another area. Conversely, requirements
which would be strict enough in one area may not be adequate in
another.
The primary responsibility for regulation of water quality rests with
the State and Regional Water Quality Control Boards. The committee
is not convinced that its investigations have shown that the state should
impose water well standards on localities if local authorities are re-
quired to take adequate precautions where necessary to protect the
quality of groundwater.
The Department of Water Resources has conducted a series of studies
of the need for water well standards in various areas.11 However, there
appears to be inadequate coordination between the Department of
Water Resources and local public agencies with regard to many studies
of this type.12 Specifically, this lack appears between Regional Water
Quality Control Boards, which protect the underground water supply
by establishing waste discharge requirements, and Department of Wa-
ter Resources in making its studies under Water Code Section 231.
It should be noted that the suggested standards in Bulletin 74 have
proved to be valuable aids to local agencies in establishing local regu-
lations. This advisory function will continue to be valuable to local
entities.
Because now there is no provision for requiring local agencies to
enact and enforce water well standards, the committee recommends
that the state require local and regional enforcement of water well
standards in specified areas which have been determined to be in need
of standards, but which have not presently adopted them.
The committee further recommends that the water well standards
program be supervised on a policy level by the Regional Water Quality
Control Boards utilizing technical data and studies of the Department
of Water Resources under Water Code Section 231.
Specifically, the committee recommends that a water well standards
law be enacted which will include the following:
10 Bulletin 74, Op. cit. Appendix D. See also transcript, September 23, 1965.
11 See footnote 6, page 16 for list.
13 See report of this committee, "New Horizons in California Water Development," for
a discussion of this problem with regard to waste water reclamation studies
under Water Code Section 230. Also see Section B of this report with regard to
groundwater basin studies.
20 ASSEMBLY INTERIM COMMITTEE ON WATER
1. Well Reports
The committee recommends that the water well reporting require-
ments, enacted in 1949 and modified by the Legislature by AB 2707
at the 1965 session of the Legislature, be continued. In order to pro-
vide information on new wells to counties and to aid in local estab-
lishment and enforcement of well standards the committee recommends
that the reporting law be amended to provide that the Department of
Water Resources, at the request of any county, shall notify the county
of filings of notices of intention to drill including a description of
the well site and the proposed date of construction only. Similar in-
formation would be made available in the same manner with regard
to the notice of completion filed by the well driller. The committee be-
lieves that the existing provisions of law which stipulate that the ' ' well
logs" be kept confidential, with certain exceptions be continued. That
is, these logs are not to be made available to the general public.
2. Department of Water Resources Studies
The committee recommends that the Department of Water Resources
continue to make investigations, studies, and reports pursuant to Sec-
tion 231 of the Water Code. It is anticipated that departmental reports
made under this section will be similar to those in the past 13 and will
include recommended standards for well construction and maintenance
in the area involved. Testimony to the committee indicated that these
reports have proven to be of assistance to local agencies in formulating
water well standards.
In effect, this recommendation would result in the investigatory and
data gathering functions of the department remaining the same as they
are under existing law.
3. Well Standards
The committee recommends that primary responsibility for determin-
ing whether or not a given area requires minimum water well standards
be given to the Regional Water Quality Control Boards. The committee
recommends that the regional boards, after receiving reports from
the department, be required to make a determination of whether or
not well standards are required to protect the quality of underground
waters and to describe the specific geographic area to be covered
by such standards. The regional board shall make this determination
only after conducting a public hearing on the need to establish stand-
ards for the specific areas.
If the regional board determines that water well standards are re-
quired in a given area the committee believes that the responsibility
for establishing such standards should rest with county governments.
To implement this local establishment and enforcement of water well
standards the committee recommends that the board transmit its find-
ings, together with the department's recommended standards, to each
affected county. After receipt of the finding of the regional board that
standards are necessary, the counties involved would have 120 days to
adopt ordinances establishing water well standards in the area desig-
nated by the regional board. In order to assure adequate local stand-
18 See footnote 6, page 16 for list.
GROUNDWATER 21
ards, such ordinances shall take effect 60 days from the dale of their
adoption by the county unless the regional board determines that the
standards adopted are not adequate to protect the quality of the at'
fected waters and to meet the objectives established by the regional
boards. Any such disapproval could, of course, be appealed to the State
Water Quality Control Board.
The committee is confident that county governments will assume this
responsibility for adopting and enforcing the necessary ordinances to
protect groundwater qualit}^ The committee is also convinced that
there is no need for any state agency to assume this function which is
one that can best be administered and formulated on the local level.
However, to provide for the possibility that a county may not adopt the
necessary ordinances the committee recommends farther that upon
failure to adopt ordinances establishing water well standards the
Regional Water Quality Control Board in the affected area be au-
thorized to adopt such standards. In such a case, the enforcing respon-
sibility of the local agency would be as if the ordinance had been estab-
lished locally *
Testimony to the committee indicated that counties are willing and
able to adopt and enforce the necessary standards to protect the quality
of the underground waters of our state.
4. Technical Provisions
Inasmuch as water well standards are primarily a matter of water
quality the committee recommends further that provisions relating to
water well standards be transferred to Division 7 of the Water Code
(the State Water Quality Control Act).
A draft of a bill proposed to implement the foregoing committee
recommendations is found in the appendix.
B. COST SHARING ON GROUNDWATER
MANAGEMENT STUDIES
Background
During hearings on the 1964 Budget Bill the Senate Finance Com-
mittee considered the need to adopt a state policy on cost sharing or
local participation in groundwater basin management studies which
are undertaken by the Department of Water Resources. The committee
asked for recommendations by the Legislative Analyst and the Depart-
ment of Finance.
Recommendations for cost sharing were prepared and submitted by
the Legislative xlnalyst and the Department of Finance in the 1965
General Session. There was considerable difference in viewpoint con-
tained in the recommendations. Assembly House Resolution 627 was
introduced by Chairman Porter to authorize interim study of the
problem.
A hearing was held by the Groundwater Subcommittee of the As-
sembly Interim Committee on Water on September 23, 1965 at which
time the Department of Water Resources and the Office of the Legis-
lative Analyst restated the recommendations which they had originally
presented to the Legislature in the preceding session. Subsequently on
* Mr. Lanterman accepts this recommendation provided that county ordinances can
be appealed to the regional boards.
22 ASSEMBLY INTERIM COMMITTEE ON WATER
December 7, 1965, further testimony was received by the subcommittee
in San Diego from a substantial number of local water agencies which
wished to present their views.
The Problem
In general, the problem under consideration involves the extent to
which the Department of Water Resources should budget and conduct
its studies of the management of groundwater basins contingent upon
financial or other participation by the local water agencies which overlie
the groundwater basin and possess rights to pump the water or to
manage the groundwater aquifers.
The principal area of concern is in southern California where the
Department of Water Resources has been conducting its "Planned
Utilization of Groundwater Basin Studies." This study consists of a
series of studies starting with the west coastal plain of Los Angeles
and moving inland successively through the San Gabriel Basin, the
Chino-Riverside Basin and into the Bunker Hill Basin in the vicinity
of the City of San Bernardino. Other studies of a somewhat similar
nature have been proposed by the department for the San Joaquin
Valley and the Sacramento River Valley and a small study has been
started in the Livermore Valley area of Alameda County. The Orange
County Water District had already undertaken certain work on its
own initiative.
The planned utilization studies establish the hydrology of the basin,
the geologic formation and transmissability of the aquifers in the
basin, the water requirements, imports and exports of water from the
basin and the basic water transportation facilities serving the basin.
The above forms of information are collected, analyzed and integrated
in the course of the study.
Various assumptions and objectives regarding the desirable opera-
tion, management and economics of the basin's water resources are
then tested using the above data in order to arrive at a management
plan or series of recommended operations which would represent the
optimum use of the water supplies and facilities available in the basin
or identify the facilities needed to achieve such optimization. These
studies utilize digital computer techniques on a large scale to secure
the necessary data handling capacity to consider both surface and
groundwater supplies and requirements conjunctively. The planned
utilization studies by the Department of Water Resources in the Los
Angeles area represent substantial pioneering in the field of water re-
sources management.
Recommendations of the Legislative Analyst
The Legislative Analyst, pursuant to the request originally made by
the Senate Finance Committee, reviewed the increasing cost of the
groundwater studies which the department has been budgeting and
pointed out the tendency for the department, in recent years, to budget
such studies entirely at state expense. Certain studies such as the
planned utilization of groundwater basins obviously are of direct value
to the overlying water users in that the studies permit a more efficient
and economical utilization of their water resources.
GROUNDWATER 23
The analyst also noted that since the water involved is subject to the
vested rights of the users, the department in most cases is studying
means to enhance private property rights. Therefore, it was concluded
that financial participation in the studies by 1 lie p.- if those
water rights was appropriate and justified. A cosl sharing formula of
50 percent state and 50 percent local financial participation was recom-
mended based on the existing practice of cost sharing for watermaster
service.
Recommendations of Deportment of Water Resources
The Department of Water Kesources endorsed the concept of some
cost sharing but did not agree with the 50 percent sharing recom-
mended by the analyst. Instead, the department emphasized the possi-
bility that the groundwater storage capacity involved in many of the
studies could be an important statewide water resource which the state
might wish to utilize in conjunction with future water projects. The
department recommended that the same cost sharing policy be applied
to both surface and groundwater basin studies. The amount of local
participation would be based on the department's evaluation of the
extent of statewide interest in any particular groundwater management
study. The degree of local participation would vary depending on
whether the study fits into the department's schedule and serves a
departmental need for information as well as whether the study is
primarily local or statewide in interest.
The department expressed the belief that any study proposed by a
local agency would have some degree of statewide interest but that the
department should not consider budgeting a cooperative study of this
type unless the degree of statewide interest would warrant at least a
50 percent state contribution. Each project would have to be evaluated
by the department at the time it is budgeted to determine how it met
the above criteria and the extent to which local participation would
be justified. In only one instance, that of the San Joaquin Valley
Groundwater Investigation, was specific cost sharing recommended by
the department.
Views of Local Water Agencies
The local water agencies which testified before the subcommittee in
San Diego expressed, in varying degrees, a substantial interest in the
groundwater basin studies undertaken by the department. The local
agencies stressed their desire to participate in the studies involving
their basins to assure that their interest and water rights were pro-
tected and that the department studies were responsive to the ground-
water management problems the local agencies believed existed.
At the same time, the local agencies pointed out their difficulties in
financing a substantial portion of the high cost of the complex and
technical work which these studies require. Representatives from the
San Joaquin Valley indicated no present interest in such studies except
for the Kern County Water Agency which stated that it plans to under-
take a limited study in cooperation with the federal government and
the Department of Water Resources. The Orange County Water Dis-
trict and the San Bernardino Valley Municipal Water District ex-
pressed a strong desire that the schedule for groundwater basin studies
24 ASSEMBLY INTERIM COMMITTEE ON WATER
in their areas be expedited in order to provide answers to problems
currently confronting the districts.
The testimony tended to indicate a feeling that tke departmental
studies were somewhat remote, unresponsive or unsympathetic to the
existence of local political or economic problems involved in manage-
ment of groundwater basins. In numerous instances, the witnesses
stressed the desire of their agencies to maintain and enhance their
responsibility for such groundwater management and made it clear
that the state and the Department of Water Resources were not wel-
come as management agencies in the area. In general, it appeared to
the committee that the financial assistance of the department and its
technical experience and capabilities in the difficult groundwater basin
management studies were welcomed and desired by the local agencies
but that the local agencies were fearful of losing control of their
groundwater basins.
Events of 7966 Budget Session
During the 1966 Budget Session, the San Bernardino Valley Mu-
nicipal Water District and the Orange County Water District requested
the Legislature to augment the department's budget in order to expe-
dite the studies in their respective areas. In both cases, the local agen-
cies proposed substantial local participation to assist in meeting the
higher rate of expenditure required in fiscal year 1966-67 if the studies
were to be expedited. Through a series of negotiations and counter
proposals the Budget Bill, as finally adopted, included limited augmen-
tations for the studies in both Orange County and the San Bernardino
area with the understanding that the local agencies would also con-
tribute to the study.
Since the adoption of the 1966 Budget Act, the Department of Water
Resources has negotiated agreements with the water agencies in Orange
County, in the Chino-Riverside area and in the San Bernardino area
to provide for local participation in the studies. Each of the three agree-
ments follows a somewhat different pattern depending upon local con-
ditions, the work required and the ability of the local agencies to con-
tribute to the work. In general, the agreements provide for varying
combinations of contributions of funds, manpower and services to the
department by the local agency. The department serves as project
manager and provides the major source of funding for the study.
Wherever possible, personnel from a local agency are assigned to
the department to work with the department on the study in order to
become familiar with the work, to provide an interchange of informa-
tion at a technical level and to assure the technical capacity of the
local agency to carry out the findings and conclusions of the study
when it is completed. In some instances, hydrologic and other data
is being furnished and evaluated by the local agency.
In other cases, office space, computer time and various services are
being contributed. In each instance, however, the department has
adopted the policy of securing sufficient local participation to demon-
strate a genuine local interest in the study and an assurance that suffi-
cient understanding and exchange of viewpoints and information exists
between the department and the local agency to warrant undertaking
the work. In particular, there is cooperation in the selection of the
GROUNDWATER 25
basin management alternatives evaluated in the study. This increj
the probability that the technical problems identified by the dep
ment will be evaluated along with the economic, managerial and politi-
cal problems, which are of major concern to the local agency if the
results of the study are to be implemented.
Conclusion and Recommendations
The committee concludes that the Legislature's exploration of the
extent to which local agencies should participate in groundwater basin
management studies has been beneficial to all concerned in developing
understanding of the problems involved. The local agencies more fully
appreciate the high cost to the state and the need for local financial
participation in the studies. The department and the Legislature have
seen the fact demonstrated that where local agencies are genuinely
interested in having studies undertaken, these agencies are both willing
and able to find methods within their resources to participate actively
in the study. Evidence to date is that such participation is of major
advantage to all concerned and is an essential ingredient of a success-
ful study.
The committee has not been able to identify any specific requirements
for local participation in a groundwater management study because
of the differing financial and technical abilities of the local agencies
to provide technical assistance or to share the cost. In addition, the
nature of the problem varies substantially from basin to basin and
this may determine the type of participation a local agency can justify.
It is apparent, however, that participation sufficient to require allo-
cation of a substantial portion of the resources of the local agencies
should be required by the department and the Legislature for each
groundwater basin study if assurances of local interest in, and support
for the implementation of the study findings are to be secured. An
arbitrary requirement for a given percentage contribution by a local
agency does not appear to be feasible as a general guide until more
information can be developed.
The committee recommends that the department continue to develop
the concept of substantial local participation in groundwater^ basin
management studies and to require the maximum local participation
feasible.
PART II
WATER BOARDS AND COMMISSIONS
REORGANIZATION
INTRODUCTION
In April 1965, the Commission on California State Governmenl
Organization and Economy, commonly known as the " Little Hoover
Commission," issued a report on "The Use of Boards and Commissions
in the Resources Agency." The report dealt with the 41 boards and
commissions in the Resources Agency and recommended a number of
major changes in the organization of these boards and commissions.
A number of the agencies involved are those traditionally under the
jurisdiction of the Assembly Water Committee, and during the 1965
session, the committee considered five bills implementing the report,
only one (AB 2504, Marks) of which was enacted. The bill, in fact,
was the only Little Hoover Commission recommendation adopted at
the 1965 session. It transferred responsibility for "state filings" from
the California Water Commission to the State Water Rights Board.
In its report to the Legislature, the Little Hoover Commission not
only made specific recommendations with regard to modifying exist-
ing boards and commissions, but it also presented a rather comprehen-
sive series of recommendations on the basic concepts and criteria which
should guide the organization and operation of plural bodies in the
administrative branch of government.
The commission's recommendations with regard to specific boards
and commissions follow these basic premises of organization developed
by the commission. As an example of type of guidelines the commis-
sion has recommended, it was suggested that the number of members
of commissions not exceed seven. It also recommended the type of or-
ganizational status for the various boards and commissions.1
The following boards and commissions discussed in the Little Hoover
Commission Report were studied by this committee : California Water
Commission, Reclamation Board, and State and Regional Water Quality
Control Boards. This committee's complete recommendations with re-
gard to the State Water Rights Board and the State and Regional
Water Quality Control Boards and partial recommendations as to the
California Water Commission are presented in the report entitled
"New Horizons in California Water Development," Assembly Interim
Committee Reports, Vol. 26, No. 16. Additional recommendations re-
garding the California Water Commission are included in Part I of
the committee report entitled "Recreation Costs at Water Projects,"
Assembly Interim Committee Reports, Vol. 26, No. 15.
This report includes partial recommendations as to the California
Water Commission and the committee's complete recommendations on
the Reclamation Board. This study was assigned by Chairman Porter
to the full committee and meetings were held as follows :
October 26-27, 1965 Sacramento Executive session
October 19, 1966 Sacramento Little Hoover Commission
recommendations
December 13, 1966 San Diego Executive session
1 See the Little Hoover Commission Report, pages 12-16 for a discussion of the subject.
(29)
30 ASSEMBLY INTERIM COMMITTEE ON WATER
The committee wishes to thank the committee staff and the Offices
of the Legislative Counsel and the Legislative Analyst for their as-
sistance.
A. THE CALIFORNIA WATER COMMISSION
The Little Hoover Commission recommends that the California Water
Commission be retained but with significant changes in its responsi-
bilities and composition. The Little Hoover Commission noted the role
of the Water Commission in California resources development, and
indicated, "The California Water Commission in its policy advisory
role is the broadest based of the many plural bodies in some way in-
volved in the state's water programs."
The Little Hoover Commission recommended that the California
Water Commission 1) be assigned the entire functions and duties of
the State Water Quality Control Board,2 and 2) assume certain flood
control responsibilities which would exist after implementing the rec-
ommendations with regard to the reclamation board. (See Section B
of this report.)
The Hoover Commission also recommended that the Water Commis-
sion be relieved of other duties, including those relating to release of
state filings (legislation implementing this was enacted at the 1965
session) and approval of condemnation declarations of public necessity
made by the Director of Water Resources.
In addition to the specific problems raised by the Hoover Commis-
sion, there are other significant policy implications in any study of the
California Water Commission. Created in 1956 as part of the compro-
mise legislation establishing the Department of Water Resources, the
role of the commission, and particularly its relationship to the Director
of Water Resources, has never been the subject of a comprehensive
re-examination. In recent years the commission (or representatives of
the commission) have been given expanded responsibilities in state
water planning (such as participation in the comprehensive San Fran-
cisco Bay Pollution Study and membership on the California Advisory
Committee on Western States Water Planning) without an overall
evalution of its functions.
The commission's responsibilities under the Davis-Grunsky Act re-
cently have been the subject of discussion by the commission itself.
This matter is considered and recommendations included in the report
of the Davis-Grunsky subcommittee.3
The close statutory relationship of the commission to the department,
the commission's lack of independent staff, and the widely accepted
view that the commission has essential water policy advisory responsi-
bilities, indicated that a broad study of the commission, not limited
merely to the matters raised by the Little Hoover Commission, was
necessary.
2 A discussion and committee recommendation on this one part of the Little Hoover
Commission recommendation is included in this committee's report, "New Hori-
zons in California Water Development," and is not discussed in this report.
3 See report, "Recreation Costs at Water Projects/' Part I.
WATER BOARDS AND COMMISSIONS REORGANIZATION 31
Background
The California Water Commission was created in 1956 concurrently
with the establishment of the Department of Water Resources. The
commission succeeded to the duties and powers of the old State Water
Resources Board. The Water Commission as finally constituted, repre-
sented a compromise between conflicting views on the type of organiza-
tion the new Department of Water Resources should take. There was
considerable debate over whether the department should be headed by
a board or a single executive.
The Legislature resolved the conflict by establishing the Department
of Water Resources with a director as its head with the California
Water Commission primarily an advisory body. However, as noted
above, the commission was given certain statutory duties such as ap-
proval of Department of Water Resources regulations, and later upon
enactment of the Davis-Grunsky Act was given the responsibility of
approving loans and grants. In this respect the commission must act
affirmatively before Department of Water Resources actions become
effective. Secondly, however, the commission serves as a sounding board
where the public can present views on proposed water developments
in the state and other matters under the jurisdiction of the department.
In practice, the Director of Water Resources reports monthly to the
commission and generally brings most matters of major policy impor-
tance to the commission for discussion.
Since 1961, when the commission was granted authority to utilize
subcommittees which could hold hearings throughout the state, the
commission has expanded the scope of areas of policy it considers. The
full commission meets approximately once a month.
Over the years, the commission has received widespread public sup-
port. It has been limited somewhat, however, in exercising fully inde-
pendent judgment on some matters because of its close ties to the
department. There appears to be general support for broadening the
commission's policy functions and assuring its independence of judg-
ment.
In reviewing the functions of the commission, the committee believes
that its present concept as an advisory body and not as a "board of
directors" for the Department of Water Resources is the most appro-
priate role for the commission. The committee believes, however, that
if the commission is to provide a more meaningful review of the poli-
cies and activities of the Department of Water Resources the Water
Code should be amended in a number of specific instances.
1. Staff
The staff of the Water Commission consists of a full-time executive
secretary and a full-time engineer. Under the existing law both of
these employees are not appointed by the commission but are assigned
to the commission by the Director of Water Resources. In this manner,
the commission's staff is responsible not to the commission, but to the
director and the Department of Water Resources which, of course, is
the department which the commission is charged with advising and
whose policies it must review.
32 ASSEMBLY INTERIM COMMITTEE ON WATER
The committee believes that the Water Commission can be made more
effective by providing that the executive secretary and the staff engi-
neer be employed directly by the California Water Commission. The
limited clerical assistance necessary for the commission should also be
appointed directly by the commission rather than drawn from the staff
of the Department of Water Resources. The existing law provides that
additional technical assistance for the commission can be provided by
the department and this should be maintained so that in the event the
commission requires additional staff for specific projects, it can be
made available from the department.
In addition to providing staff assistance the department also provides
legal services to the commission. Although the commission does not
require extensive legal services it is placed in a difficult position when
the need arises to develop an independent review of departmental pro-
grams as it must utilize the department's own legal staff for legal
portions of such review. The committee notes that under the existing
law (see Gov. Code Sec. 11157) the commission is free to utilize the
Attorney General for legal services if it so desires. The committee rec-
ommends that the commission request the services of the Attorney
General whenever it feels that the proper performance of its duties
requires independent legal counsel.
The chairman and members of the California Water Commission are
compensated on the basis of $50 per day when on commission business
up to a maximum of $2,000 per year per member. In reviewing the
functions of the commission, the committee has found that the chair-
man of the commission spends considerable additional time in appear-
ances before congressional committees and in representing the commis-
sion throughout the state at functions not connected with the commis-
sion 's regular work. As a result, the commission chairman 's time on the
job often exceeds the maximum compensation permitted. Other state
boards, such as the State Water Rights Board provide additional com-
pensation for the chairman. Therefore, the committee recommends that
the maximum compensation for members of the commission remain the
same but that the maximum for the chairman be increased from $2,000
to $2,500.
2. Commission Responsibilities
Existing provisions of the Water Code are rather general in their
enumeration of the areas within the purview of the commission. Section
161 of the Water Code provides: "The California Water Commission
shall confer with, advise, and make recommendations to the director
with respect to any matters and subjects under his jurisdiction."
(Emphasis added.) Section 162 of the code provides that "it is the
intention of the Legislature that in the making of all major depart-
mental determinations, policies and procedures, such as departmental
recommendations to the Legislature, the Director and the California
Water Commission shall be in agreement whenever possible." This
code section goes on to describe the procedure for resolving differences
between the director and the commission. The law provides, however,
that in case of ultimate disagreement the views of the director shall
prevail. The committee has found no instance of a specific disagree-
ment under this section of the law.
WATER BOARDS AND COMMISSIONS REORGANIZATION 83
In practice, the areas of concern of the Water Commission are lim-
ited by those matters which the director brings before the commission.
The commission has been somewhat reluctant to voluntarily enter into
various problem areas in the absence of direct statutory instruction.
In order to more fully delineate the responsibilities of the commis-
sion, the committee recommends that a number of general areas wh
the commission now functions and should continue to function should
be set forth in the law.
Federal Appropriations. At the present time the commission serves
as a clearinghouse and central coordinating body in representing Cali-
fornia before congressional committees on federal water project appro-
priations for California. Working closely with local representatives and
local organizations in actively developing and promoting flood control
and water projects in California, the commission annually presents a
consolidated statement in behalf of California requests for congres-
sional appropriations.
The committee believes that this function of the commission is one
of its most valuable functions and the commission's performance in
this regard has received broad public approval. The committee recom-
mends that the commission specifically be charged with the responsi-
bility of presenting consolidated views of the state to the Congress. In
performing this function, the committee recommends that the commis-
sion be required to consult with local, state and federal agencies. The
commission also should be authorized to represent, upon request, the
views of any local or state agency before the Congress.
Federal Project Coordination. This committee and others have ex-
pressed their repeated concern over the need for more adequate cooper-
ation and coordination between the federal and state governments in
the development of water projects in California. The commission has
taken the lead in working toward better coordination of these efforts.
The committee believes that this function of the commission also
should be made a statutory one. The committee recommends that on
matters concerning the coordination of planning, construction and op-
eration of federal water development and flood control projects in
California, the Water Commission should be required to advise affected
state agencies and the Governor and should be authorized to conduct
public hearings and investigations as part of this process.
Review of Department of Water Resources Planning Programs. In
other reports, this committee has, on several occasions, expressed the
belief that Department of Water Resources planning programs and
investigations frequently are conducted with inadequate coordination
with local agencies and other interested parties. The committee believes
that in reviewing "all major departmental determinations, policies and
procedures" (Water Code Sec. 162) the commission should specifically
be charged with reviewing the department's planning program. There-
fore, the committee recommends that the department be required, on
January 1st of each year, to provide the^ commission with a report
summarizing its planning program, including existing and prospective
planning projects and the costs of these projects. The commission should
be authorized to conduct public hearings and make recommendations
on the department's planning program to the department, the Gover-
nor and the Legislature, in order that full public response to these
2— L-1761
34 ASSEMBLY INTERIM COMMITTEE ON WATER
vitally important departmental programs and maximum local utiliza-
tion of the fruits of these efforts can be obtained.
Review of Feather River Project. A final area in which the Cali-
fornia Water Commission has been active in recent years is evaluation
of the Feather River Project. Under existing law the Water Commis-
sion is not given a specific directive to review the Feather River Proj-
ect. However, the commission has appointed a subcommittee which is
assigned the project. The subcommittee makes annual inspection trips
of the project and has issued periodic reports on its progress. The
committee believes commission reviews of the project are helpful and
desirable even though the project is carefully scrutinized, particularly
by the state's water service contractors. The committee recommends
that the commission be authorized to make an annual review of the
project and report its findings to the Director of Water Resources, the
Legislature and the Governor.
Hearing on Authorization of New Features of the State Water Proj-
ect. Various provisions of the Burns-Porter Act authorize the Director
of Water Resources by administrative authorization to add new proj-
ects or features to the State Water Project and to authorize additions
to the Water Resources Development System. Since these authorizations
can be of great importance to the state and its water service contrac-
tors and the normal hearing processes of the Legislature are not in-
volved, an administrative hearing is desirable before authorization.
The Burns-Porter Act need not be amended to require such a hearing
nor is it necessary to restrict the authority of the Director of Water
Resources. The committee recommends adding a new section 12944.4
to the Water Code providing that the Director of Water Resources
notify the commission of any pending authorization and that the com-
mission be required to hold a hearing and submit its advice and recom-
mendations to the director on any authorization to add projects or
features to the State Water Project or the Water Resources Develop-
ment System.
Summary
The committee believes that the California Water Commission is one
of the outstanding commissions in state government. It has provided
a conscientious, reliable and sympathetic forum for the public and has
proved to be a workable and effective means of providing policy guid-
ance to the Department of Water Resources.
However, consistent with the general framework of its advisory func-
tion, its responsibility should be more clearly set forth in the law. A
draft bill incorporating the committee's recommendations on the Cali-
fornia Water Commission (except with regard to water quality and
the Davis-Grunsky Act) is included in the appendix to this report.
B. RECLAMATION BOARD
Background
The Commission on California State Government Organization and
Economy recommended abolishing the Reclamation Board, reassigning
WATER BOARDS AND COMMISSIONS REORGANIZATION 35
its administrative and engineering functions to the Department of
Water Resources and reestablishing the board for an interim period of
approximately three years to advise the Resources Agency on a state-
wide flood control policy and plan.
The Reclamation Board is presently a state agency which consists of
seven members with administrative responsibility. The board itself has
a dual role. Its principal role is the acquisition of lands in the name
of the State of California which are required for the levee and channel
flood control projects of the U. S. Corps of Engineers within the Cen-
tral Valley covering approximately 30 million acres of land or 38 per-
cent of the state. The board 's staff consists of approximately 90 persons
and its budget averages approximately $5 million per year for this
function. The above function, which is generally known as furnishing
lands, easements and rights-of-way for federal flood control projects,
is undertaken by local agencies of government such as flood control
districts, counties or municipalities and by the Department of Water
Resources in the remaining 62 percent of the state. The board also
carries out a variety of functions under various working relationships
with the Department of Water Resources. In general, the Department
of Water Resources actually executes many of the responsibilities which
are legally assigned to the Reclamation Board.
In its second role, the board is also the governing board for the
Sacramento and San Joaquin Drainage District which covers 1,726,553
acres of land or approximately 1J percent of the area of the state
extending along the Sacramento and San Joaquin Rivers from the City
of Oroville south to approximately the Madera-Fresno County line.
The Little Hoover Commission commented particularly on several
basic problems of organization which the Reclamation Board poses.
Included among these are the confusion which arises from having the
Reclamation Board carry out the same responsibility to participate in
federal flood control projects which the Department of Water Re-
sources and local agencies execute elsewhere in the state. The com-
mission noted that the lack of a clear relationship with the Corps of
Engineers, the Department of Water Resources and local districts does
not permit a clear identification of the state's position on important
policy questions. It also pointed out that a fully coordinated planning
function for all aspects of water resources is difficult as long as the
flood control function in the Central Valley is assigned to a substan-
tially autonomous state body. Further, this body is undertaking right-
of-way and engineering work which is identical to that being done by
larger and more versatile staffs located elsewhere in state government.
Finally, the commission noted that the board itself is a part-time citizen
board involved in administrative matters and that the Water Code
permits members of the board to vote on and to benefit personally from
programs and policies which they administer.1
In general, the committee concurs with the recommendations of the
commission that the Reclamation Board should be abolished as a sep-
arate state agency. The hearing conducted by the committee, however,
indicated that not all of the functions presently performed by the
Reclamation Board should be assigned to the Department of Water
Resources since some of them are more properly the functions of local
1 See Section 8575.
36 ASSEMBLY INTERIM COMMITTEE ON WATER
government than state government. Therefore, as a general guide, the
committee believes that the statewide responsibilities for planning and
for the administration of state participation in federal flood control
projects should be transferred to the Department of Water Resources
in order to provide a consistent pattern throughout the state. However,
a variety of assessing, policing and other functions which appear to be
more appropriate for a local agency of government should not be as-
signed to the Department of Water Resources but instead should re-
main with the board reconstituted as a local agency. The responsibility
to formulate a statewide flood control program and policy should be
jointly assigned to the Department of Water Resources and the Cali-
fornia Water Commission.
Conclusions
The committee can not draw unqualified conclusions on the above
guides because of several complex matters which it believes require
considerable further study as follows:
1. The Reclamation Board is a state agency but it is also the
governing board of the Sacramento and San Joaquin Drainage
District whose functions and duties are uncertain but appear to
be primarily those of a local agency. If the board is to be recon-
stituted as a local agency, the major differences in powers and
geographical jurisdiction of the board in its two roles need to be
resolved in order that the appropriate jurisdiction both legally
and geographically can be established. The confusion and uncer-
tainties involved in the dual role of the Reclamation Board should
be resolved only after detailed study.
2. The Water Code contains numerous sections authorizing
many functions and providing many legal powers, some of which
the Reclamation Board no longer uses while others are substan-
tially broader than are required. A detailed evaluation of these
powers and deletion of obsolete or inappropriate authority from
the code is needed.
3. The Reclamation Board was the state agent involved in
Adams v. California which held the state responsible, under in-
verse condemnation, for $6.3 million in damages as a result of the
1955 floods at Yuba City. The California Law Revision Commis-
sion is presently studying in detail the legal problems of inverse
condemnation and the major financial liability the present law
creates for the state. It may be found, as a result of this study,
that some of the sweeping declarations contained in the Water
Code with respect to the Reclamation Board, and even its exist-
ence as a state agency rather than as a local agency, have con-
tributed unnecessarily to the liability of the state under inverse
condemnation.
4. The Reclamation Board, under authority recently granted by
the Legislature, can acquire lands in fee for recreation purposes
where it might otherwise acquire a lesser title to the same lands
for flood control purposes. The relationship of the flood control
and recreation aspects of land acquisition along the Sacramento
River and in the delta needs to be clarified. This may be possible
WATER BOARDS AND COMMISSIONS REORGANIZATION 37
later based upon planning activities now underway elsewhere in
the Kesources Agency.
5. The Department of Water Resources has recommended thai
the Reclamation Board serve as the agent to secure repayment for
the reimbursable costs of the San Joaquin Valley master drain.
If this function, which is primarily a function of local govern-
ment, is assigned by the Legislature to the board it should sub-
stantially influence the decision on the area to be included in the
local agency, the method of selecting board members, the assess-
ment powers needed, and finally whether a local agency should be
established in the San Joaquin Valley separately from the Sacra-
mento Valley.
Recommendation
The committee recommends that abolition of the Reclamation Board
be given further study with particular attention directed to the five
problem areas outlined above.
PART III
WATER DISTRICT ORGANIZATION
WATER DISTRICT ORGANIZATION
introduction
For several years the committee has been conducting a continuing
study of water district organization.1 During the current interim this
subject was assigned to a subcommittee consisting of the following:
Ashcraft, Chairman; Flournoy, Garrigus, Harvey Johnson, Lante'r-
man, Meyers, Monagan, Porter, Quimby, Russell, and Z'berg, members.
The subcommittee spent the major portion of its efforts on a con-
tinuation of its study of uniform election procedures. Early in its
studies the committee determined that the most advantageous method
of achieving general uniformity in and modernization of the various
water district enabling acts would be to select certain subject areas
and develop detailed legislation in one field at a time. The first subject
area selected by the committee was that of district elections.
A. Uniform District Election Law
Following the recommendations of this committee to the 1965 Session
of the Legislature, Assembly Bill 1892, the Uniform District Election
Law, was enacted and, in its original form, was made applicable to
four general district acts and five special district acts, for a total of
about 450 individual districts.
Following enactment of the Uniform District Election Law in 1965,
the committee undertook the objective of adding additional nonwater
districts to the coverage of its provisions. Although such other districts
are not traditionally under the jurisdiction of this committee, it was
believed desirable to extend the single election procedure to as many
public districts in California as possible, in order to attain maximum
effectiveness.
When Governor Brown placed the subject of Uniform District Elec-
tion Law on the call for the 1966 First Extraordinary Session, Assem-
blyman Porter introduced Assembly Bills 60, 61, 62, 63, and 64. This
package of bills which was prepared by the committee, added a signifi-
cant number of additional districts to the coverage of the Uniform
District Election Law. It also made a series of technical changes and
corrections in the 1965 legislation. As a result of the legislation enacted
in 1966, 69 percent of the districts now having elected governing bodies
are subject to the provisions of the Uniform District Election Law.
A summary of provisions of the law relating to elections or appoint-
ment of elections is shown in Table 1.
1. Additional Districts
Since enactment of the 1966 legislation the committee has continued
its studies and development of legislation to bring the remaining 424
1 For previous reports on this subject see Assembly Interim Committee Reports, Vol.
26, No. 6, Subcommittee Reports, and Reports on Referred Bills, December 1962 ;
Vol. 26, No. 5, Study of Water District Laws, November 1962 ; Vol. 26, No. 9,
Study of Water District Laws, (1963, Revision) January 1964; Vol. 26, No. 14,
Water District Organization, January 1965.
(41)
42 ASSEMBLY INTERIM COMMITTEE ON WATER
districts with unconsolidated elections under the provisions of the
Uniform District Election Law. The committee has excluded from this
study most districts in which elections already consolidated with either
the primary or general election.
The committee recommends that the following district acts he
amended to provide for district elections pursuant to the Uniform Dis-
trict Election Law: California airport districts (3), community services
districts (125), library districts (8), memorial districts (26), police
protection districts (6), Montalo Municipal Improvement District (1),
Guadalupe Valley Municipal Improvement District (1), Bethel Island
Municipal Improvement District (1), Embarcadero Municipal Improve-
ment District (1), Estero Municipal Improvement District (1).
Draft legislation incorporating the committee's recommendation is
found in the appendix of this report.
8. Recall Elections
In continuing the committee's study of District Elections, its in-
vestigation revealed that provisions for recall elections were not uni-
form among district acts and in some cases these provisions were totally
unworkable. For example, under the California Water Storage District
Act, although directors are elected by a vote of landowners on a basis
Table 1
SUMMARY
SPECIAL DISTRICTS IN CALIFORNIA
Governing Body Elections
I. APPOINTED OR EX OFFICIO
General law 1,092
Special law 51
Total 1,143 districts
II. UNIFORM DISTRICT ELECTION LAW
General law 1,333
Special law 10
Total 1,343 districts
or 69 percent of total districts having elections
III. CONSOLIDATED ELECTIONS
General law 172
Special law 9
Total 181 districts
or 8 percent of total districts having elections
IV. UNCONSOLIDATED ELECTIONS
General law 407
Special law 17
Total 424 districts
or 23 percent of total districts having elections
WATER DISTRICT ORGANIZATION
SPECIAL DISTRICTS IN CALIFORNIA
Governing Body Elections
I. EX OFFICIO OR APPOINTED BOARDS
A. General Law Districts
43
District
1 . Air pollution control districts
2. Public cemetery districts
3. Drainage District Act of 1885
4. Drainage District Improvement Act of 1919
5. County fire protection districts
6. Flood Control and Flood Water Conservation Dis
trict Act
7. Garbage disposal districts
8. Garbage and refuse disposal districts
9. Harbor improvement districts
10. Port districts
11. River port districts
12. Joint Highway District Act
13. Protection District Act of 1895
14. Union high school district public libraries
15. Highway Lighting District Act
16. Mosquito abatement districts
17. Pest abatement districts
18. Vehicle Parking District Law of 1943
19. Citrous Pest District Control Act
20. Police protection districts — unincorporated territory.
21. County sanitation districts
22. Separation of Grade District Act
23. Municipal Sewer Districts, Act of 1911
24. Sewer Maintenance District Act
25. Storm Drain Maintenance District Act
26. Storm Drain Maintenance District Act of 1939
27. Metropolitan Water District Act
28. County Waterworks District Law
Type of
governing body
Ex officio
Appointed or
ex officio
Appointed
Ex officio
Ex officio1
Appointed
Ex officio
Appointed
Ex officio
Appointed
Appointed
Appointed
Ex officio
Ex officio
Ex officio
Appointed
Appointed
Appointed
Appointed
Ex officio
Ex officio
Appointed
Ex officio
Ex officio
Ex officio
Ex officio
Appointed
Ex officio or
appointed
Number of
districts
6
256
6
2
10
2
1
4
1
13
1
4
404
50
9
1
7
3
136
1
2
41
29
1
1
96
1 May have appointed or elected commissioners to manage affairs of district. If commissioners are elected, date of
election is same day as state general election.
44 ASSEMBLY INTERIM COMMITTEE ON WATER
B. Special Law Districts
District
Type of
governing
body
1. Alameda County Flood Control and Water Conservation District
2. Alpine County Water Agency
3. Contra Costa County Flood Control and Water Conservation District.
4. Contra Costa County Storm Drainage District
5. Contra Costa County Water Agency
6. Del Norte County Flood Control District
7. El Dorado County Water Agency
8. Fresno Metropolitan Flood Control Act
9. Humboldt County Flood Control District
10. Lake County Flood Control and Water Conservation District
11. Lassen-Modoc County Flood Control and Water Conservation District
12. Los Angeles County Flood Control District
13. Marin County Flood Control and Water Conservation District
14. Mariposa County Water Agency
15. Mendocino County Flood Control and Water Conservation District.
16. Monterey County Flood Control and Water Conservation District. _.
17. Napa County Flood Control and Water Conservation District
18. Nevada County Water Agency
19. Orange County Flood Control District
20. Placer County Water Agency
21. Plumas County Flood Control and Water Conservation District
22. Riverside County Flood Control and Water Conservation District
23. Sacramento County Water Agency
24. San Bernardino County Flood Control District
25. San Diego County Flood Control District
26. San Joaquin County Flood Control and Water Conservation District.
27
28
29
30
31
32
33
34
35
36
37.
38,
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
San Luis Obispo County Flood Control and Water Conservation
District
San Mateo County Flood Control District
Santa Barbara County Flood Control and Water Conservation District.
Santa Barbara County Water Agency
Santa Clara- Alameda-San Benito Water Authority
Santa Clara County Flood Control and Water Conservation District..
Santa Cruz County Flood Control and Water Conservation District..
Shasta County Water Agency
Sierra County Flood Control and Water Conservation District
Siskiyou County Flood Control and Water Conservation District
Solano County Flood Control and Water Conservation District
Sonoma County Flood Control and Water Conservation District
Sutter County Water Agency
Tehama County Flood Control and Water Conservation District
Vallejo Sanitation and Flood Control District
Ventura County Flood Control District
Yolo County Flood Control and Water Conservation District
Yuba-Bear River Basin Authority
Yuba County Water Agency
Lake Cuyamaca Recreation and Park District Act
Mount San Jacinto Winter Park Authority Act
Fairfield-Suisun Sewer District Act
San Francisco Bay Area Rapid Transit District Act
Bay Area Air Pollution Control Law
San Diego Unified Port District Act
Ex officio
Ex officio
Ex officio or
appointed
Ex officio
Ex officio
Ex officio
Ex officio
Appointed
Ex officio
Ex officio or
appointed
Ex officio
Ex officio
Ex officio
Ex officio
Ex officio
Ex officio
Ex officio
Ex officio
Ex officio
Ex officio
Ex officio
Ex officio
Ex officio
Ex officio
Ex officio
Ex officio or
appointed
Ex officio
Ex officio
Ex officio
Ex officio
Appointed2
Ex officio
Ex officio
Ex officio
Ex officio
Ex officio
Ex officio
Ex officio
Ex officio
Appointed
Appointed
Ex officio
Appointed
Appointed
Ex officio
Appointed
Appointed
Ex officio
Appointed
Appointed
Appointed
2 If prescribed protest is filed to appointment of member which nominates another person a special election is required
to be called by board of supervisors to elect member of governing body.
WATER DISTRICT ORGANIZATION
II. UNIFORM DISTRICT ELECTION LAW
45
(First Tuesday after the First Monday in November of odd num-
bered years. Effective January 1, 1967.)
A. General Law Districts
District
Number
of districts
1. Drainage District Act of 1903
2. Fire Protection District Law of 1961 3
3. Local Fire District Law
4. Fire protection districts in one or more counties
5. Protection District Act of 1880
6. Levee districts (Act of 1905)
7. Protection District Act of 1907
8. Resort Improvement District Law4
9. Sanitary District Act of 1923
10. Sanitary District Law of 1891
11. Soil conservation districts
12. Storm Water District Act of 1909
13. The Public Utility District Act
14. California Water District Law
15. Water Conservation Act of 1931
16. County water districts
17. Irrigation districts
16
470
7
7
5
3
135
1
162
6
67
126
10
205
113
3 May have elected, appointed, or ex officio governing body.
* Ex officio governing body unless board of supervisors authorizes an elected governing body.
B. Special Law Districts
District
1. Brisbane County Water District
2. Costa Mesa County Water District (merger) 5
3. Crestline-Lake Arrowhead Water Agency5
4. Donner Summit Public Utility District
5. Kings River Conservation District5
6. Mojave Water Agency
7. Olivehurst Public Utility District
8. Orange County Water District
9. San Benito County Water Conservation and Flood Control District
10. Solvang Municipal Improvement District
5 First governing body was appointed.
46
ASSEMBLY INTERIM COMMITTEE ON WATER
I. CONSOLIDATED ELECTIONS
A. General Law Districts
District
Number
of districts
1. Small Craft Harbor District Law
2. Library districts6
3. Recreation and park districts7
4. Regional park districts
5. Transit District Law
6. Municipal Utility District Act
7. Municipal Water District Act of 1911
8. Water Replenishment District Act
Primary
General
General
General
General
General
Primary
Primary
1
1
103
1
6
6
53
1
6 First governing body is appointed.
7 May have elected, appointed, or ex officio governing body.
B. Special Law Districts
District
Date
1 . Amador County Water Agency
2. American River Flood Control District 8__
3. Antelope Valley-East Kern Water Agency
4. Desert Water Agency8
5. Kern County Water Agency
6. Lower San Joaquin Levee District8
7. San Gorgonio Pass Water Agency
8. Sutter County Levee District No. 1
9. Upper Santa Clara Valley Water Agency-
Primary
General
Primary
Primary
General
Primary
Primary
General
Primary
8 First governing body was appointed.
WATER DISTRICT ORGANIZATION
IV. OTHER UNCONSOLIDATED DATES
A. General Law Districts
47
Number of
District
Date
districts
1.
California airport district
Fourth Tuesday in March, every second
year after formation
3
2.
Bridge and highway district.
Tuesday nearest first Monday after first
Tuesday in March, every fourth year
after formation
1
3.
Community services district.
Same as general law cities or direct
primary
125
4
Harbor districts.
First Tuesday after first Monday in No-
vember of even-numbered years
7
5.
The Local Hospital9 District
Third Tuesday in November in each even
63
Law
year, or consolidated with state general
election
6.
Library districts in unincor-
porated towns and villages
First Tuesday in June annually
8
7
Memorial districts
Fourth Tuesday in March of third March
26
following formation election and fourth
Tuesday in March of every second
year thereafter
8.
Police protection districts-
unincorporated towns
First Tuesday in April of each year__ _ _
6
9.
Reclamation districts. _.
Tuesday designated by board of super-
visors or Tuesday nearest any other
day designated by board of supervisors
every second or fourth year as provided
in districts bylaws
154
10.
Water Conservation Act of
First Tuesday in February of odd-num-
5
1927
bered years
11.
California Water Storage
First Tuesday in February of odd-num-
9
District Law
bered years
9 First governing body is appointed.
48 ASSEMBLY INTERIM COMMITTEE ON WATER
B. Special Law Districts
District
Date
1. Avenal Community Services Dis-
trict
2. City of Marysville Levee District. .
3. Hunters Point Reclamation District.
4. Montalvo Municipal Improvement
District
5. Palo Verde Irrigation District
6. Reclamation District No. 317
7. Reclamation Districts No. 10, 70,
800, 830, 832, 833, 900, 999,
1001, 2020, 2031
8. Reclamation District10; No. 1500__.
9. Reclamation District No. 1600
10. Reclamation District No. 1660
11. Sacramento River West Side Levee
District
12. Swamp Land District No. 150
13. Union Island Reclamation Districts
Nos. 1 and 2
14. Guadalupe Valley Municipal Im-
provement District Act
15. Bethel Island Municipal Improve-
ment District Act
16. Embarcadero Municipal Improve-
ment Act
17. Estero Municipal Improvement
District Act
Same as general law cities or direct primary
Same as city election
Tuesday designated by board of supervisors, or
Tuesday nearest any other day designated
by board of supervisors, every fourth year
following formation
Second Tuesday in September of odd-numbered
years
Third Tuesday of September of each year
Tuesday nearest second Wednesday of April of
each year
Tuesday designated by board of supervisors or
Tuesday nearest any other day designated by
board of supervisors every second or fourth
year as provided in districts bylaws
Third Tuesday in October each odd-numbered
year
Third Tuesday in October each even-numbered
year
Third Tuesday in October every other odd-
numbered year
Tuesday nearest last Monday of October of
every other odd-numbered year
Tuesday designated by board of supervisors or
Tuesday nearest any other day designated by
board of supervisors every second or fourth
year as provided in districts bylaws
Tuesday designated by board of supervisors or
Tuesday nearest any other day designated by
board of supervisors every second or fourth
year as provided in districts bylaws
Fourth Tuesday in March every other year after
formation
Fourth Tuesday in March every other year after
formation
Fourth Tuesday in March every other year after
formation
Fourth Tuesday in March every other year after
formation
10 If election is not held at time specified, it may be held on Tuesday designated by board of supervisors, or Tuesday
nearest any other day designated by board of supervisors.
SOURCE: Legislative Counsel.
WATER DISTRICT ORGANIZATION 49
of one vote for each dollar of assessed evaluation, recall provisions were
added to the California Water Storage District Act by copying directly
those provisions of the Irrigation District Act, a resident voter districl
act. As a result, directors in California water storage districts may be
recalled by a simple majority vote of the persons voting. This provision
is totally inconsistent with the method of election of these directors.
Recall should be on the same basis as original election.
This example indicates the type of problem the committee has found
in the law when land ownership districts and resident voter districts
are given identical treatment when, in fact, such districts are basically
different. For this reason, a principal feature of the Uniform District
Election Law is the establishment of separate election provisions for
each type of district.
Many district acts provide recall provisions pursuant to the law
regarding recall of city offices or the recall of county offices, other have
no recall provisions at all. In order to provide uniform procedures for
recall, the committee recommends that the Uniform District Election
Law oe modified to include uniform recall provisions, including sepa-
rate provisions for land ownership voting districts. Draft legislation in-
corporating this recommendation is found in the appendix of this
report.
C. Reclamation Districts
Reclamation Districts were the first general act districts provided for
by the Legislature in 1966.2 A reclamation district may be formed by
the owners of swamp and overnood, salt marsh, tidelands, or other
lands subject to flood or overflow who desire to reclaim the land. A
district may also be formed for maintenance, protection or repair of,
or completion of reclamation works in progress.3
The Water Code provides for a Board of Trustees of 3, 5, or 7 mem-
bers to be elected to govern the district. The trustees serve until their
successors are elected and qualified. Voting is generally on the basis
of land ownership only with each landowner or representative entitled
to one vote for each doUar of land value owned, as determined from the
last equalized tax roll in the county. Taxation is also on the basis of
land only.4
Section 50730 of the Water Code provides that there shall be an
election in each district every two to four years. However, if the board
does not call an election as required by Section 50730, Section 50731
provides that only upon petition of 20 percent of the landowners (who
own 20 percent of the value of the land) shall the county board of
supervisors set an election date.
The act includes the usual cancellation provisions when there are
insufficient candidates.
The Water Code also provides that upon the formation of districts
only, with consensus of all landowners, a district was to be organized to
operate without a Board or without the establishment of bylaws.
2 study of Water District Laws, (1963 Revision), Assembly Interim Committee Re-
ports, Vol. 26, No. 9, January 1964.
'Howlfve^^^ of 1966 (SB 90) the voting basis is one vote for
each $1 of owned value of land and improvements when the district chooses to
assess on the basis of land and improvements rather than land only.
50 ASSEMBLY INTERIM COMMITTEE ON WATER
In an attempt to evaluate the election procedures of reclamation dis-
tricts, the committee sent questionnaires to each of the 118 reclamation
districts still in operation. Of the 57 respondents,5 39 of the districts
have held no district elections in the past 10 years.
One respondent states, ' ' the best information we have is that the last
special election was held in 1937 ... In the last few years appointments
were made by the county board of supervisors." Another district
stated, "No records were available, no elections have been held for
thirty years." One district held no elections since 1915 while another
held elections "only when needed." However, in the latter case, ap-
parently none were needed since no elections were ever held. There were
numerous districts in which elections were never^ held, the trustees
having been appointed since formation of the district.
The chart below gives a breakdown of the date of election or appoint-
ment of the trustees of the various responding districts. Even though
many of the appointments were made during the last ten years, it ap-
pears that, on the whole, turnover of trustees is rather low. There does
not seem to be much opposition to incumbents, and regularly scheduled
elections are the exception rather than the rule.
Although few districts hold regular elections, there is no reason for
the committee to conclude that reclamation districts have not been
competently governed. However, the present procedure places the bur-
den of initiating an election upon the voters instead of upon the
leadership of the district. It is extremely unusual that 20 percent of the
voters should be required to submit a petition to call an election. This
is contrary to provisions governing all other elected water districts.6
Date in which trustees of responding districts were first elected or
appointed to office.
Date Number of trustees
1916-1920 4
1921-1925 0
1926-1930 1
1931-1935 5
1936-1940 12
1941-1945 12
1946-1950 22
1951-1955 28
1956-1960 41
1961-1965 33
1966-1970 7
Because of these provisions there is a low rate of turnover of trustees,
many appointments of directors, and few elections. It also appears that
the practice of not holding regularly scheduled elections renders
difficult any opposition to a district's operation and minimizes the dis-
cussion of issues which might well be of concern to the people of the
district.
Reclamation districts are not now subject to the provisions of the
Uniform District Election Law. The committee believes that it is not
appropriate to extend the Uniform District Election Law to cover
5 Including five districts reporting inactive status.
6 Similar provisions in the Irrigation District Act were repealed by legislation spon-
sored by this Committee in 1966.
WATER DISTRICT ORGANIZATION f> 1
reclamation districts since many reclamation districts are not active in
the sense that they have completed their major reclamation works. As
a result, some districts have as their primary purpose the maintenance
of existing structures or payment of bonds which financed the major
reclamation structures of the district.
The committee does believe that the trustees of reclamation districts,
however, should be responsive to the voters.
The committee believes that it is important that district voters have
an opportunity to discuss issues regularly and that the burden of
calling elections should be on the district. Regular elections should be
called without the necessity of requiring the public to force an election
by petition.
In districts in which no opposition files or there is only one candidate,
of course, elections need not be held and this cancellation procedure is
provided for in the Reclamation District Act as a result of 1963
amendments.
The committee recommends that legislation be enacted bringing the
Reclamation District Law up to date and requiring biennial elections.
D. District Bond Issue Review
Over the years the practice of submitting all Water District bond
issues to bond counsel for review has evolved. Although this practice is
not required by law, it has become a precondition to the offering of
bonds for sale and is an accepted prerequisite for guaranteeing the
"soundness" of such bonds.
The initial effect of the fees charged by bond counsel is to increase
costs to the water district of selling the bonds. The ultimate impact of
these fees is borne by the water users through prices paid for water.
During the interim, members of the committee expressed concern
over the implications of this practice. However, the committee was
unable to investigate this problem at this time. Therefore, the commit-
tee recommends that the Assembly make a comprehensive study of the
subject to ascertain the necessity of continuing this practice. A copy of
a proposed house resolution is found in the appendix.
APPENDIX
DRAFT LEGISLATION
PROPOSED WATER WELL STANDARDS LEGISLATION
An act to add Chapter 6 (commencing with Section 13200) to Division
7 of, and to repeal Chapter 7 (commencing with Section 7076) of
Division 4 of, the Water Code, relating to water wells.
The people of the State of California do enact as follows:
Section 1. Chapter 7 (commencing with Section 7076) of Division
4 of the Water Code is repealed.
Sec. 2. Chapter 6 (commencing with Section 13200) is added to
Division 7 of the Water Code, to read:
Chapter 6. Water Wells
Article 1. Declaration of Policy
13200. The Legislature finds that the greater portion of the water
used in this state is obtained from underground sources and that such
waters are subject to impairment in quality and purity, causing detri-
ment to the health, safety and welfare of the people of the state. The
Legislature therefore declares that the people of the state have a pri-
mary interest in the location, construction, maintenance, abandonment
and destruction of water wells, which activities directly affect the qual-
ity and purity of underground waters.
Article 2. Reports
13250. Every person who hereafter intends to dig, bore, or drill a
water well, or who intends to deepen or reperforate any such well,
shall file with the department a notice of intent to engage in such
construction or repair prior to commencing such construction or repair ;
provided, that when such construction or repair must be accomplished
immediately in order to prevent damage to persons or property due to
the loss of an existing water supply, such notice shall be filed with the
department as soon as possible thereafter, but in any event not more
than five days after commencement of such construction or repair.
The report shall be made on forms furnished by the department and
shall contain such information as the department may require, includ-
ing, but not limited to: (a) description of the well site sufficiently
exact to permit location and identification of the well; (b) proposed
date of construction of well; (c) the use for which the water well is
intended; (d) the work to be done and a description of type of con-
struction; and (e) in event of late filing, the reasons therefor.
13251. Every person who hereafter digs, bores or drills a water
well, or who deepens or reperforates any such well, shall file with the
department a report of completion of such well within 30 days after
its construction or repair has been completed.
(55)
56 ASSEMBLY INTERIM COMMITTEE ON WATER
The report shall be made on forms furnished by the department and
shall contain such information as the department may require, includ-
ing, but not limited to: (a) description of the well site sufficiently
exact to permit location and identification of the well; (b) detailed log
of the well; (c) description of type of construction; (d) details of per-
foration; and (e) methods used for sealing off surface or contaminated
waters.
13252. Reports made pursuant to Section 13251 shall not be made
available for inspection by the public but shall be made available to
governmental agencies for use in making studies ; provided, that any
report shall be made available to any person who obtains a written
authorization from the owner of the water well.
On the request of any county, the department shall notify the county
of the filing of a report pursuant to Section 13250, including only the
name of the person filing, a description of the well site, and the pro-
posed date of construction and shall notify the county of the filing of
a report pursuant to Section 13251, including only the name of the
person filing, a description of the well site, and the date of completion.
13253. Every person who hereafter converts, for use as a water
well, any oil or gas well originally constructed under the jurisdiction
of the Department of Conservation pursuant to the provisions of Ar-
ticle 4 (commencing with Section 3200), Chapter 1, Division 3 of the
Public Resources Code, shall comply with all provisions of this chapter.
13254. Failure to comply with any provision of this chapter, or
willful and deliberate falsification of any report required by this
chapter, is a misdemeanor.
Before commencing prosecution against any person, other than for
willful and deliberate falsification of any report required by this chap-
ter, the person shall be given reasonable opportunity to comply with
the provisions of this chapter.
13255. Nothing in this chapter shall affect the powers and duties
of the State Department of Public Health with respect to water and
water systems pursuant to Chapter 7 (commencing with Section 4010)
of Division 5 of the Health and Safety Code, nor the requirement of
compliance with said chapter.
Article 3. Quality Control
13300. The department, after such studies and investigations pur-
suant to Section 231 as it finds necessary, on determining that water
well construction and maintenance standards are needed in an area
to protect the quality of water used or which may be used for any
beneficial use, shall so report to the appropriate regional water quality
control board. The report shall contain such recommended standards
for water well construction and maintenance as, in the department's
opinion, are necessary to protect the quality of any affected water.
13301. The regional board shall hold a public hearing on the need
to establish such standards for the area involved and to determine the
objectives to be attained by such standards.
13302. If the regional board finds that standards of water well
construction and maintenance are needed in any area to protect the
quality of water used, or which may be used, for any beneficial use,
APPENDIX 57
it shall determine the area to be involved and so report to each affected
county in the area, including in such report the objectives determined
by the board as proper and necessary objectives tor such standards.
The report shall also contain any standards which have been recom-
mended by the department.
13303. Each such affected county shall, within 120 days of receipl
of the report, adopt an ordinance establishing standards of water well
construction and maintenance for the area designated by the regional
board. A copy of such ordinance shall be sent to the regional board
on its adoption.
13304. Such county standards shall take effect 60 days from the
date of their adoption by the county unless the regional board, on its
own motion, or on the request of any affected person, holds a public
hearing on the matter and determines that the county standards are
not adequate to protect the quality of the affected waters. If the board
makes such a determination it shall so report to the affected county
and also recommend the standards, or modification of the county stand-
ards, which it determines are necessary.
13305. If a county fails to adopt an ordinance establishing water
well construction and maintenance standards within 120 days of receipt
of the regional board's report of its determination that such standards
are necessary pursuant to Section 13302, or fails within 90 days to
adopt or modify such standards in the manner determined as neces-
sary by the regional board pursuant to Section 13304, the regional
board may adopt standards for water well construction and mainte-
nance for the area. Such regional board standards shall be enforced
in the same manner and shall have the same force and effect as if
adopted as a county ordinance.
13306. Any action, report, determination, or standard taken or
adopted by a regional board pursuant to this article may be reviewed
by the state board on its own motion, and shall be reviewed by the
state board on the request of any affected person or county, in the
same manner as other action or inaction of the regional board is re-
viewed pursuant to Section 13025. The state board has the same powers
as to the review of action or inaction of a regional board under this
article as it has as to other action or inaction of a regional board under
Section 13025, including being vested with all the powers granted a
regional board to initially determine the need in an area for water
well construction and maintenance standards if it finds that appro-
priate action has not been taken by a regional board.
PROPOSED CALIFORNIA WATER COMMISSION
LEGISLATION
An act to amend Sections 150, 157, 159, 162, and 12602 of, to amend
and renumber Section 154.5 of, to add Sections 163, 12604.3, 12634.3,
12944.3, and 12944.4 to, and to repeal Section 163 of, the Water
Code, relating to the California Water Commission.
The people of the State of California do enact as follows:
Section 1. Section 150 of the "Water Code is amended to read :
150. ■The State Wateg Resources Board m continued in existence
within There is in the department Department of Water Resources as
the California Water Commission - bnt the commission shall have only
the powers and duties provided in this article .
Sec. 2. Section 154.5 of the Water Code is amended and renum-
bered to read :
151.5. 163.5. The department shall furnish to the California Water
Commission, at its request, such technical and: clerical assistants assist-
ance as a*e is required to the extent funds are made available therefor.
Sec. 3. Section 157 of the Water Code is amended to read:
157. Each member of the California Water Commission shall re-
ceive fifty dollars ($50) for each day during which he is engaged in
the performance of his official duties, but his total compensation shall
not exceed in any one fiscal year the sum of two thousand dollars
($2,000) ; except the chairman of the commission may receive compen-
sation of not to exceed two thousand five hundred dollars ($2,500) for
performance of such duties . In addition to his compensation each mem-
ber shall be reimbursed for his necessary traveling and other expenses
incurred in the performance of his official duties.
Sec. 4. Section 159 of the Water Code is amended to read :
159. Special meetings may be called at any time by the chairman
or by the executive secretary at the request of any four members, upon
notice specifying the matters to be acted upon at such meeting, but
no other matters shall be acted upon at special meetings which were not
so noticed, unless all members are present and consent thereto.
Sec. 5. Section 162 of the Water Code is amended to read :
162. It is the intention of the Legislature that in the making of all
major departmental determinations, policies and procedures, such as
departmental recommendations to the Legislature, the director and the
California Water Commission shall be in agreement whenever possible ;
but for the purpose of fixing responsibility to the Governor and to the
Legislature, in the event of disagreement between the director and the
commission upon such matters, the views of the director shall prevail ,
except in those cases where discretionary powers have been granted to
the commission by statute . In such situations the event of disagree-
ment pursuant to this section, a written report upon such disagreement
(58)
APPENDIX 59
shall be made immediately to the Governor and to the President pro
Tempore of the Senate and the Speaker of the Assembly by the com-
mission and by the director.
Sec. 6. Section 163 of the Water Code is repealed.
4££r *he department may employ, and shall do so fce the extent
funds a-ee made available, s^en- technical and clerical assistants fe* the
California Water Commission as may be necessary fe? the proper 4+m-
ehfw=ge e£ ite duties and may purchase e* *ent £e* the commission any
necessary supplies, instruments? tools, equipment, and conveniences.
Sec. 7. Section 163 is added to the Water Code, to read :
163. The commission may employ an executive secretary, exempt
from civil service, under Section 4(a) (5) of Article XXIV of the
Constitution, and a staff engineer. The commission may also employ
such clerical assistants as may be necessary for the proper discharge
of its duties and may purchase or rent necessary supplies, instruments,
tools, equipment and conveniences.
Sec. 8. Section 12602 of the Water Code is amended to read :
12602. The department, or a representative authorized by the de-
partment to do so, may call, conduct or attend conferences or hearings,
official or unofficial, within or without this State state , or otherwise
participate in such conferences or hearings, with interested persons,
agencies or officers, of this or any other state, or with the Congress of
the United States, congressional committees, or officials of the federal
government, concerning water projects, plans, or problems. However,
where the appropriations committees of the Congress are hearing re-
quests for appropriations for flood control projects being planned or
constructed in California under the jurisdiction of the United States
Army Corps of Engineers, or reclamation projects being planned or
constructed in California by the Bureau of Reclamation, United States
Department of the Interior, the California Water Commission shall
present its views. Prior to making such presentation, the commission
shall consult with interested local, state, and federal agencies, and may
on request represent the views of any county, city, state, agency, or
public district regarding such appropriations. Nothing in this section
shall be deemed or construed to modify, limit, or take away from any
other of the powers and duties vested in the department pursuant to
this article.
Sec. 9. Section 12604.3 is added to the Water Code, to read:
12604.3. In matters concerning the coordination of planning, con-
struction, and operation of federal water development and flood control
projects in the State of California with state and local projects, the
California Water Commission shall advise the department, and the
Governor, and to this end may confer with the appropriate executive
agencies of the United States.
Sec. 10. Section 12634.3 is added to the Water Code, to read :
12634.3. The department shall submit, prior to January 1st of each
year, a report to the California Water Commission summarizing its
activities, including existing and prospective planning projects, the
need for such projects, and the estimated costs thereof. The commission
may conduct public hearings on such reports and may make recom-
mendations thereon to the department, the Governor, and the Legis-
lature.
60 ASSEMBLY INTERIM COMMITTEE ON WATER
Sec. 11. Section 12944.3 is added to the Water Code, to read :
12944.3. The California Water Commission shall conduct an annual
review of the progress of construction and operation of the State Water
Resources Development System, and shall make a report on its findings
to the department, the Governor, and the Legislature, together with
whatever recommendations it deems appropriate.
Sec. 12. Section 12944.4 is added to the Water Code, to read :
12944.4. The California Water Commission shall hold public hear-
ings on all additional facilities proposed to be added to the State Water
Resources Development System by the department pursuant to this
chapter and the department shall not authorize the construction of
any such facility unless such hearing has been held and the commis-
sion has transmitted its recommendations thereon to the department,
the Governor, and the Legislature.
PROPOSED
District Bond Approval Legislation
HOUSE RESOLUTION
Relative to an interim study of the necessity of submitting water dis-
trict bond issues to bond counsel for their approval prior to public sale
of the bonds.
WHEREAS, It has come to the attention of the Members of the
Assembly that all bond issues of the various water districts in Cali-
fornia are submitted to bond counsel for approval prior to being offered
to the public for sale ; and
WHEREAS, The practice of submitting bond issues to bond counsel
for approval prior to public sale thereof, although not required by law,
has evolved, over the years, into an accepted prerequisite in guarantee-
ing the soundness of such bonds and thereby ensuring their sale; and
WHEREAS, The legal fees charged by bond counsel incident to
approving such bond issues have increased the costs of the water dis-
tricts concerned and, ultimately, their water users ; now, therefore, be it
Resolved by the Assembly of the State of California, That the As-
sembly Committee on Rules is hereby directed to assign to an appro-
priate interim committee for study the subject of the necessity of sub-
mitting water district bond issues to bond counsel for approval prior
to public sale thereof, and to direct such interim committee to report
its findings and recommendations thereon to the Assembly not later
than the fifth legislative day of the 1968 Regular Session of the Legis-
lature.
printed in California office of state printing
1^1761—100 12-66 1M
ASSEMBLY INTERIM COMMITTEE REPORT
1965-1967
VOLUME 27 NUMBER 4
FINAL REPORT OF THE
ASSEMBLY INTERIM COMMITTEE ON
CONSTITUTIONAL AMENDMENTS
House Resolution No. 710(d)
CONSTITUTIONAL REVISION
IN CALIFORNIA
MEMBERS OF THE COMMITTEE
EDWARD E. ELLIOTT, Chairman
JACK R. FENTON, Vice Chairman
ROBERT E. BADHAM NICHOLAS C. PETRIS
JOHN L. E. COLLIER ALFRED H. SONG
CHARLES J. CONRAD GEORGE A. WILLSON
MILTON MARKS GEORGE N. ZENOVICH
JAMES R. MILLS
FRANCES MORTON, Secretary
PUBLISHED BY THE
ASSEMBLY
OF THE STATE OF CALIFORNIA
HON. JESSE M. UNRUH HON. CARLOS BEE
Speaker Speaker pro Tempore
HON. GEORGE N. ZENOVICH HON. ROBERT MONAGAN
Majority Floor Leader Minority Floor Leader
JAMES D. DRISCOLL
Chief Clerk
CONSTITUTIONAL REVISION IN CALIFORNIA
A Report of the Assembly Interim Committee
on Constitutional Amendments
1965-1966
ACKNOWLEDGMENT
The committee expresses its thanks to Mr. Terry Baum, Principal
Deputy, Office of the Legislative Counsel, Mr. Edward F. Nowak,
Deputy, Office of the Legislative Counsel Mr. Sid McCausland, Research
Analyst, Assembly Legislative Reference Service, Mrs. Marjorie Loheit,
Assembly Secretary, and Mr. Timothy Lemucchi, who served as Con-
sultant for the Committee from October 1, 1965 to April 15, 1966, for
their assistance in conducting meetings and preparing material for the
work of the Committee.
(2)
TABLE OF CONTENTS
Vagi
Letter of Transmittal 5
Tribute to California Constitution Revision Commission 7
Findings 8
Recommendations 9
Meetings 10
Witnesses 11
Chapter 1 :
Development of the California Constitution 13
Chapter 2 :
Efforts for Constitutional Revision Prior to 1962 15
Chapter 3 :
Creation of the California Constitution Revision Commission- 17
Chapter 4:
Operation of Commission ■ 21
Chapter 5 :
First Report of the California Constitution Revision Commission 25
Chapter 6 :
Action by Legislature on Constitutional Revision and Legislative
Reform Program 27
Chapter 7 :
oo
Proposition 1-a
Chapter 8 :
Tasks Ahead for the Constitution Revision Commission^. . 43
Chapter 9 :
Constitutional Revision in Other States and the Renaissance of
State Government
Appendices
Complete
Report of Legislative Reference Service on Study of American
Complete Text of Bills 51
States
Summary of Constitutional Revision in the United States _ -102
(3)
LETTER OF TRANSMITTAL
Assembly Chamber, State Capitol
Sacramento, January 2, 1U(>7
Honorable Jesse M. Unruh, Speaker of the Assembly
and Members of the Assembly
Assembly Chamber
Sacramento, California
Dear Mr. Speaker and Members :
Your Interim Committee on Constitutional Amendments, established
by House Resolution No. 710(d), 1965 Regular Session, submits here-
with the first of two final reports of its activities. This report is on the
subject of constitutional revision in California.
The report contains the committee's findings and recommendations
on the subjects referred to it for interim study by the Assembly Rules
Committee.
Respectfully submitted,
Edward E. Elliott
Chairman
Members:
Jack R. Fenton, Vice Chairman
Robert E. Badham Nicholas C. Petris
John L. E. Collier Alfred H. Song
Charles J. Conrad George A. Willson
Milton Marks George N. Zenovich
James R. Mills
(5)
2— L-1781
TRIBUTE TO CALIFORNIA CONSTITUTION
REVISION COMMISSION
The Assembly Interim Committee on Constitutional Amendments
wishes to pay tribute to the California Constitution Revision Com-
mission for the splendid public service it is rendering. It is sincerely
impressed with the skill, dedication, and constructive interest in better
government in California with which it has functioned. The historic
achievement of the first phase of the revision of California's Consti-
tution through its approval by the voters on November 8, 1966, by an
overwhelming majority, is a lasting monument to its good work.
(T)
FINDINGS
The Assembly Interim Committee on Constitutional Amendments has
devoted considerable time to studies of the work, recommendations,
and procedures of the California Constitution Revision Commis-
sion and the present efforts to achieve a complete revision of California 's
Constitution. The need for such revision has been and is abundantly
clear to the committee. The technique developed through the Cali-
fornia Constitution Revision Commission is an efficient and effective
way of achieving it. The progress made with the approval of the first
phase at the polls on November 8, 1966, bodes well for the completion
of this important project within the reasonably near future. The com-
mittee is also fully cognizant that the vastness, complexity, and great
importance of this project require that the Legislature give vigilant
attention to, and make a constant and constructive study of the work,
procedures, and recommendations of the Constitution Revision Com-
mission.
(8)
RECOMMENDATIONS
1. That the Legislature working with the California Constitution Re-
vision Commission establish as its timetable for the constitutional
revision project the presentation of the second phase at the general
election of 1968 and the third and final phase at the general election
of 1970.
2. That the Legislature use all reasonable restraint in placing any
proposed constitutional amendments on the ballot until the constitu-
tional revision project has been completed.
(9)
List of meetings on the subject of constitutional revision and the review
of the work of the California Constitution Revision Commission held during
1965-66.
December 2-3, 1965 — Sacramento
Subject : Review work of Constitution Revision Commission
January 13, 1966 — Montebello
Subject : Article XXIV — The State Civil Service System
The Initiative
January 14, 1966 — Pico Rivera
Subject : Review of Article XXIV — The State Civil Service System
The Initiative
February 23, 1966 — Sacramento
Subject: Report of Constitution Revision Commission on Articles V
and VI
August 22, 1966 — San Francisco
Subject : Second phase of constitutional revision
September 1, 1966 — Sacramento
Subject : Second phase of revision of State Constitution
September 27, 1966 — Los Angeles
Subject : Second phase of constitutional revision
November 28, 1966 — Sacramento
Subject : Executive Session
(10)
LIST OF WITNESSES
December 2, 1965
Mr. Gregory L. Bounds, Attorney, Constitution Revision Commission
Mr. Richard L. Patsey, Special Counsel, California Constitution Revi-
sion Commission
December 3, 1965
Mr. Gregory L. Bounds, Attorney, Constitution Revision Commission
Mr. James Driscoll, Chief Clerk, Assembly, California Legislature
Mr. Richard L. Patsey, Special Counsel, Constitution Revision Com-
mission
January 13, 1966
Mr. George Feinberg, Chief of the Representation Division, Califor-
nia State Employees ' Association
Mr. John F. Fisher, Executive Officer, State Personnel Board
Mr. Timothy Lemucchi, Consultant, Constitutional Amendments
Committee
Mr. Richard L. Patsey, Special Counsel, Constitution Revision Com-
mission
January 14, 1966
Mr. John F. Fisher, Executive Officer, State Personnel Board
Mr. L. H. Halcomb, Jr., Deputy Officer, Little Hoover Commission
Mr. Richard L. Patsey, Special Counsel, Constitution Revision Com-
mission
Honorable Leo J. Ryan, Assemblyman 27th District
Mr. Richard E. Sherwood, Member, Commission on California State
Government, Organization and Economy
February 23, 1966
Mr. John A. FitzRandolph, Attorney, Constitution Revision Commis-
sion
Mr. Barry Keene, Attorney, Constitution Revision Commission
Mr. Richard L. Patsey, Special Counsel, Constitution Revision Com-
mission
August 22, 1966
Mr. Terry Baum, Principal Deputy, Legislative Counsel's Office
Mr. Gregory Bounds, Attorney, Constitution Revision Commission
September 1, 1966
Mr. Charles A. Barrett, Assistant Attorney General, State of Cali-
fornia
Mr. Gregory L. Bounds, Staff Attorney, Constitution Revision Com-
mission
Mr. Barry Keene, Staff Attorney, Constitution Revision Commission
(11)
12 ASSEMBLY INTERIM COMMITTEE
Mr. Sid McCausland, Research Analyst, Assembly Legislative Refer-
ence Service
Mr. Carl E. Weidman, Representative, California Land Title Ass'n
September 27, 1966
Dr. Alonzo L. Baker, Professor, La Sierra College, Riverside
Mr. Benjamin Hite, Registrar of Voters, Los Angeles County
Mr. Sid McCausland, Research Analyst, Assembly Legislative Ref-
erence Service
Mr. Richard L. Patsey, Special Counsel, Constitution Revision Com-
mission
CHAPTER 1
DEVELOPMENT OF THE CALIFORNIA CONSTITUTION
It was after California had become a territory of the United States
in 1848 as a result of the Treaty of Guadalupe Hidalgo with Mexico
and during the drama and excitement of the gold rush days of 1849 that
a group of distinguished citizens met in Monterey to draft California's
first Constitution. In 1850 President Millard Fillmore signed an act
passed by Congress admitting California to the Union as the 31st state
and ratifying the Constitution adopted in 1849.
The first California Constitutional Convention benefited from the
universally recognized excellence of the work of our founding fathers
in writing the U.S. Constitution and the experiences of other states,
particularly New York and Iowa. It was nevertheless obvious from its
inception that this fundamental law written for a state of about 92,000
inhabitants contained numerous inadequacies. Comprehensive amend-
ments were required. The Legislature proposed constitutional conven-
tions in 1859, 1860, and 1873, but each proposal was rejected by the
voters. Finally, in 1878 public approval of a second constitutional con-
vention was granted.
In 1879 a second constitutional convention was convoked. A new
Constitution was written and adopted by the people. This was during
a time of social turmoil and the resulting document was excessive in
length and reflective in its intricate detail of a distrust of state govern-
ment. It also contained provisions discriminatory toward oriental
Americans which were not repealed until 1950 and 1954, although
most of Article XIX had long since been invalidated by the courts.
Many important provisions of the Constitution had to be added by
amendments. These included the initiative and referendum and the
provisions for an executive budget, the district court of appeal, munic-
ipal courts, absentee voting, and the civil service system.
Both the 1849 and 1879 documents followed fundamental American
concepts of democratic government. Thus, there have been provided
checks and balances; the separation of powers between legislative, ex-
ecutive, and judicial branches of government; a system of freely
elected representatives of the people at the State Capitol; the irre-
vocable guarantee of certain rights and freedoms; and the enuncia-
tion of the concept of the rule of law in a free society. Despite this,
the manner in which both documents were put together left a great
deal to be desired. Much material was included which was essentially
of a statutory rather than a constitutional nature. Inordinate length
and clumsy phrasing made public comprehension difficult. Serious omis-
sions soon became apparent.
The Legislature endeavored to remedy deficiencies by presenting
amendments to the people, and private groups relied upon the initia-
tive to change the basic law of the state. From 1879 through 1964
the California Constitution was amended 343 times. Its length had in-
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14 ASSEMBLY INTERIM COMMITTEE
creased from 16,000 words to 75,000 words. By 1965 it had become the
second longest in the United States and the third longest in the world,
being exceeded in verbosity only by the constitutions of the State of
Louisiana and the nation of India. It had acquired a unique collection
of archaic provisions and become a cumbersome document difficult to
fathom.
Professors Winston Crouch and Dean McHenry noted in 1949 in
their book California Government: "An extensive constitution, like
that of California, departs from the sound rule that constitutions should
contain only important principles and structural outlines. The excess
beyond this basic material is mainly statutory in nature, and should
be handled through ordinary acts of the Legislature. If the state is to
keep abreast of changing times, the detailed matter must be amended
frequently. This places a burden of huge proportions upon the voters.
The electorate has been called upon to vote on an average of twenty
constitutional amendments at each general election in the last two dec-
ades. In times of crisis, legislators find themselves lacking the power to
act swif tly because of statutory matters in the Constitution. ' '
Except for the elimination of some obsolete language primarily
through the action of a joint committee of the Legislature created in
1947, the State Constitution was still, in 1965, pretty much what was
described by these educators in 1949.
The need for a thorough overhauling of the state's fundamental law
had become apparent a few years after the adoption of the 1879 docu-
ment. It became more urgent as the years progressed.
CHAPTER 1
EFFORTS FOR CONSTITUTION REVISION
PRIOR TO 1962
The California Constitution provides in Article XVIII, Section 2 :
"Whenever two-thirds of the members elected to each branch of
the Legislature shall deem it necessary to revise this Constitution,
they shall recommend to the electors to vote at the next general
election for or against a Convention for that purpose, and if a
majority of the electors voting at such election on the proposition
for a Convention shall vote in favor thereof, the Legislature shall,
at its next session, provide by law for calling the same. The Con-
vention shall consist of a number of delegates not to exceed that of
both branches of the Legislature, who shall be chosen in. the same
manner, and have the same qualifications, as members of the Legis-
lature. The delegates so elected shall meet within three months
after their election at such place as the Legislature may direct. At
a special election to be provided for by law, the Constitution that
may be agreed upon by such Convention shall be submitted to the
people for their ratification or rejection, in such manner as the
Convention may determine. The returns of such election shall, in
such manner as the Convention shall direct, be certified to the
Executive of the State, who shall call to his assistance the Con-
troller, Treasurer, and Secretary of State, and compare the returns
so certified to him; and it shall be the duty of the Executive to
declare, by his proclamation, such Constitution, as may have been
ratified by a majority of all the votes cast at such special election,
to be the Constitution of the State of Calif ornia. ' '
Over the years, efforts were made to use this section to revise Cali-
fornia's Constitution or to draft a completely new Constitution. They
have all been unsuccessful. The issue of convoking a constitutional con-
vention was placed before the people by the Legislature on five separate
occasions between 1897 and 1934. On the first four occasions, the voters
rejected the proposal for a constitutional convention. In 1934 a resolu-
tion submitted to the people was approved. The 1935 Legislature and
subsequent Legislatures failed to enact the necessary enabling legisla-
tion.
In 1929, another method of revising California's antiquated and cum-
bersome basic law was proposed. This was through the creation of
a commission by the Legislature to make studies and recommendations
to be screened by the Legislature, and if approved, submitted to a
constitutional convention to be called by a vote of the people. When the
work of the first commission created by law was stymied by inability
to effectuate the calling of a constitutional convention, it was proposed
that the Constitution be amended in order to permit the Legislature
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16 ASSEMBLY INTERIM COMMITTEE
to submit a revision of the fundamental law to the people. In 1961,
a proposed constitutional amendment empowering the Legislature to
submit a revision of the Constitution to the people was adopted and
placed on the ballot as Proposition 7. It was approved by the people
by a vote of more than 2 to 1.
CHAPTER 3
CREATION OF THE CALIFORNIA CONSTITUTION
REVISION COMMISSION
Having devised a new technique for constitutional revision, the
Legislature in 1963 proceeded to establish the machinery for its uti-
lization. Early in the 1963 session of the Legislature Assembly Con-
current Resolution No. 7 created what ultimately became known
officially as the California Constitution Revision Commission. The
resolution read :
"Resolved by the Assembly of the State of California, the Senate
thereof concurring, That notwithstanding the provisions of As-
sembly Concurrent Resolution No. 77 of 1963, the Joint Committee
on Legislative Organization is authorized to appoint a Consti-
tutional Revision Commission to provide the Joint Committee
and the Legislature with facts and recommendations relating to
the revision of the Constitution of the State of California. The
commission shall consist of not less than 25, and not more than 50
citizens, excluding legislative members, and all of the nonlegisla-
tive members shall be appointed by the Joint Committee on Legis-
lative Organization. The members of the Joint Committee on
Legislative Organization shall be ex officio members of the com-
mission. The commission shall, in addition, include three other
Members of the Senate appointed by the Committee on Rules
thereof, and three other Members of the Assembly, appointed by
the Speaker thereof. Not more than two of such other Members of
the Senate and not more than two of such other Members of the
Assembly shall be of the same party. Vacancies in the commission
shall be filled by the respective appointing powers. The commis-
sion membership shall be broadly representative of the various
political, economic and social groupings within the State.
"The commission shall select its own chairman, who may ap-
point an executive committee and such other committees as the
commission shall determine. The commission shall assist and advise
the Joint Committee on Legislative Organization in its delibera-
tions as to revision of the California Constitution and shall report
its findings and recommendations to the Joint Committee on Legis-
lative Organization from time to time. The members of the com-
mission shall serve without compensation but each member shall
be allowed actual expenses incurred in the discharge of his duties,
including travel expenses.
"The Joint Committee on Legislative Organization shall provide
the commission with the necessary staff, equipment and supplies to
carry on its work. All expenses of the commission including the
expenses of its members both legislative and nonlegislative shall
be paid from the money allocated to the Joint Committee on Legis-
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18 ASSEMBLY INTERIM COMMITTEE
lative Organization from the Senate and Assembly Contingent
Funds.
"The existence of the commission shall terminate 90 days
after the termination of the 1965 Regular Session of the Legis-
lature. ' '
The adoption of this resolution was followed by the passage of reso-
lutions in subsequent sessions of the Legislature continuing the work
of this commission and providing the necessary funds. These included :
ACR No. 77 (Filed with Secretary of State July 1, 1963)__$45,000
ACR No. 56 (Filed with Secretary of State May 15, 1964) __ 55,000
ACR No. 144 (Filed with Secretary of State July 1, 1965)__175,000
SCR No. 6 (Filed with Secretary of State May 16, 1966)__137,500
(estimate)
These resolutions empowered the Joint Committee on Legislative Or-
ganization, a committee for the coordination of housekeeping activities
of the California Legislature, then chaired by Assemblyman James R.
Mills, to appoint the members of the Constitution Revision Commission.
The members of the joint committee serve as ex officio members. The
first cochairmen were James C. Sheppard and Dr. Robert Gordon
Sproul, President Emeritus of the University of California. Later, the
joint committee was fortunate in recruiting, first as cochairman and
later as chairman of this vast project, Superior Court Judge Bruce W.
Sumner of Orange County, a former Member of the Legislature. The
69-member commission consists of a broad spectrum of distinguished
California citizens interested in this problem. It includes legal ex-
perts, educators, businessmen, labor leaders, civic leaders, local govern-
ment representatives, legislators, and others. Those serving on the com-
mission under the leadership of Judge Sumner, as of November 8, 1966,
include the following :
Totton J. Anderson, Professor of Political Science, USC
Robert S. Ash, Exec. Secy.-Treas., Central Labor Council, Alameda
County
John D. Babbage, Attorney at Law, Riverside
Judge Joseph G. Babich, Superior Court, Sacramento
Joseph A. Ball, Attorney at Law, Long Beach
Harry Bardt, Bank of America, Los Angeles
Jack A. Beaver, General Manager, San Bernardino Valley Municipal
Water District
Robert C. Brown, Executive Vice President, California Taxpayers
Association, Sacramento
John A. Busterud, Attorney at Law, San Francisco
James S. Cantlen, Retired Regional VP, Pacific Tel. & Tel.
Richard Carpenter, Executive Director & General Counsel, League
of California Cities, Berkeley
Arthur F. Corey, State Exec. Secy., California Teachers Ass'n
James F. Crafts, Insurance Executive, San Francisco
Arthur J. Dolan, Jr., Stock Executive, San Francisco
Burnham Enersen, Attorney at Law, San Francisco
Bryant Essick, President, Essick Manufacturing Company, Los An-
geles
CONSTITUTIONAL AMENDMENTS 19
Hon. Phil Gibson, Retired Chief Justice, California Superior Court
Albin J. Gruhn, President, California Labor Federation, San Fran-
cisco
Mrs. Ruth Church Gupta, Attorney at Law, San Francisco
Mrs. Lauffer T. Hayes, League of Women Voters
Hon. James L. Holmes, Real Estate & Ins. Exec, Santa Barbara
Bernard L. Hyink, Vice President, Academic Affairs, California
State College, Fullerton
P. N. Hyndman, Business Executive, San Diego
Mrs. William Irvine, Associate Director, Upward Bound, Stanford
University
Grandvel A. Jackson, Community Organization Representative, Hu-
man Rights Commission, San Francisco
Ralph N. Kleps, Director, Administrative Office of the Courts, San
Francisco
Mrs. Ernest Lilienthal, San Francisco Board of Education
William R. MacDougall, General Counsel and Manager, County Su-
pervisors Assn. of California, Sacramento
Paul Mason, Attorney at Law, Sacramento
Adrian McCalman, President, Artists Managers Guild, Hollywood
William McKenna, Attorney at Law, Los Angeles
Einar 0. Mohn, International Director, Western Conference of Team-
sters, Burlingame
Franklin D. Murphy, Chancellor, University of California, Los An-
geles
Mrs. Joel Y. Nemschoff, Executive Director, Volunteer Bureau of
San Francisco
Frank C. Newman, Professor of Law, Boalt Hall, Berkeley
Mrs. Walter Oliver, Instructor in Political Science, Long Beach City
College
Donald H. Pflueger, Assistant Professor of Political Science, Cali-
fornia State Polytechnic College, Pomona
Thomas L. Pitts, Exec. Sec'y-Treas., California Labor Federation
George W. Rochester, Attorney at Law, La Habra
Herman Selvin, Attorney at Law, Los Angeles
Mrs. Earl Shoesmith, California Federation of Women's Clubs, Sac-
ramento
Cornelius Siemens, President, Humboldt State College, Areata
Sol Silverman, Attorney at Law, San Francisco
Mrs. Lawrence Spear, City Councilwoman, Claremont
Robert G. Sproul, President Emeritus, Berkeley
Hon. Bruce Sumner, Judge of Superior Court, Santa Ana
Richard L. Taw, Physician, Los Angeles
Milton M. Teague, President, California State Chamber of Commerce
Norman Topping, President, University of Southern California, Los
Angeles
John A. Vieg, Professor of Government, Pomona College, Claremont
Norman Woodbury, Councilman and Exec. Dir., California Munic-
ipal Utilities Districts Ass 'n
Mrs. Robert Zurbach, League of Women Voters
20
ASSEMBLY INTERIM COMMITTEE
Senate :
Assembly,
LEGISLATIVE MEMBERS OF THE COMMISSION
Senator James A. Cobey
Senator Richard J. Dolwig
Senator Fred S. Farr
Assemblyman Edward E. Elliott
Assemblyman Don Mulford
Assemblyman Winfield A. Shoemaker
Senate :
EX OFFICIO LEGISLATIVE MEMBERS OF THE COMMISSION
Senator Hugh M. Burns, President pro Tempore
Senator J. Eugene McAteer
Senator John F. McCarthy
Senator Virgil 0 'Sullivan
Senator Joseph A. Rattigan
Senator Vernon L. Sturgeon
Senator Stephen P. Teale
Assembly,
Assemblyman
Assemblyman
Assemblyman
Assemblyman
Assemblyman
Assemblyman
Assemblyman
Assemblyman
Jesse M. Unruh, Speaker
Carl Britschgi
Lou Cusanovich
Joe Gonsalves
James R. Mills
Leo J. Ryan
Philip L. Soto
Robert Stevens
CHAPTER 4
OPERATION OF COMMISSION
The California Constitution Revision Commission has, in addition to
its membership, a staff and offices both in Sacramento and San Fran-
cisco. On the staff are four attorneys, a public information officer, and a
secretary. With the assistance of this staff it spent over two years
studying, debating, and drafting the first phase of the constitutional
revision project.
In statements before the Assembly Interim Committee on Constitu-
tional Amendments Richard L. Patsey, special counsel, Gregory L.
Bounds, attorney, and Barry D. Keene, attorney, explained the method
of operation followed by the commission. At a meeting of the Constitu-
tional Amendments Committee held in Sacramento on December 2 and
3, 1965, Special Counsel Patsey outlined the manner in which the
commission functions in some detail :
"As a rule, the full commission meets monthly for two- and
three-day sessions. Committees of the commission often meet be-
tween those times. The commission had organized its study of the
Constitution on an article-by-article basis, but before an article is
considered by the commission, background study is undertaken by
the commission staff or by a specially retained consultant under
staff supervision. The background study analyzes the article in
question, relevant sections of other articles in the Constitution and
other provisions which might be considered of a sufficient constitu-
tional character to be added to the article under study. The back-
ground study attempts to present, for each provision in the article,
the alternative methods of treatment. Constitutions and laws of
other states, relevant textural material and proposals from knowl-
edgeable sources of the public and private sector are included in
the study. When the study is completed, the article is considered
by a committee of from 10 to 30 members. The committee, after
studying the article and related material in detail, submits its rec-
ommendations to the full commission. After further study, debate
and solicitation of outside opinion, the revised article is approved
in substance by the commission and forwarded to the drafting
committee. It is the task of the drafting committee to rephrase the
article in more modern, concise language and, if necessary, orga-
nize it in a more logical framework. As with other committees, the
recommendations of the drafting committee are forwarded to the
full commission where extensive discussion takes place before the
article is finally approved. In summary the articles considered by
the commission are exhaustively studied. Each section of every arti-
cle is analyzed by the commission staff or a specially retained con-
sultant, and prepared from a variety of source material, including
the relevant provisions in other state constitutions, scrutinized by
(21)
3— L-1781
22 ASSEMBLY INTERIM COMMITTEE
outside experts and studied on many occasions by various commit-
tees and commissions of the commission as a whole. That is what
has gone into the three articles which we are going to present, in
some detail, to you in the next two days. Just briefly, pages 24 to
27 of the material we have prepared contain a list of the members
of our commission, as well as those former members who have
resigned for one reason or another. And I think you will find on
the whole that our membership represents a responsible group
and an adequate cross section of various posts of leadership in
California. ' '
In a hearing held in Sacramento on September 1, 1966, Barry Keene
further elucidated on the operation of the commission :
Chairman Elliott has done so complete a job on the history
of revision in California, including the work of the present com-
mission, that I find just one point to add to that first package
phase and it relates to the question of informing the public of
Proposition 1-a, the work of the commission, and the problems with
the present Constitution. I am sure this committee, which has so
effectively and extensively studied all the complexities of Proposi-
tion 1-a, recognizes the importance of having the public make an
enlightened decision this November. We may have been a little
slow in our public relations, and I think the reason was that what
we want to do is enlighten the public. We want them to make an en-
lightened decision. We don't want to propagandize, and I think
the line is not always a very clear one. So we don't want to go too
far. But we have appointed a committee that deals specifically with
public information and we have hired a public information coordi-
nator. The duties of this group include informing the public, con-
tinuing to inform the public, of commission meetings so that inter-
ested parties may attend; reporting on commission meetings after
they have taken place so that the news media are well aware of the
progress of the Constitution Revision Commission; following the
commission 's endorsement of Proposition 1-a ; supplying the pub-
lic, interested committees, and civic organizations with technical
data needed for a clear understanding of the revision proposals.
We have tried to gear the language of the new Constitution to an
eighth grader. Unfortunately, in many instances, the matter is just
too technical for many eighth graders and many adults to absorb.
That is why we are trying to compensate for this by supplying
other technical data as needed. The commission has indicated a
willingness to provide speakers on occasions where there are large
groups who are interested in constitutional revision. The public in-
formation coordinator issued press releases concerning completed
background studies. These background studies are kind of basic
matter. They are things that people who are interested in particu-
lar articles want right off the bat. They want the studies and they
want to know what the commission is proposing, what kind of re-
search the staff has done ; they want to introduce comments of
their own, and we certainly welcome all of these. And so the public
information committee, the public information coordinator, gener-
CONSTITUTIONAL AMENDMENTS 23
ally want to maintain a high level of public awareness, of the revi-
sion and its importance to the state and we hope that we will be
able to do more than we have done in the past in the way of pub-
lic information. ' '
In 1966, Commission Chairman Sumner outlined the functioning of
the commission as follows :
''Organizationally, the commission has a chairman and an executive
committee of nine members who suggest commission activities and
policy. We have a full-time staff that now includes four attorneys, a
public information coordinator, and two secretaries, along with secre-
tarial assistance from the Legislature. The staff provides the commission
with necessary background studies, staff drafts, and recommendations.
The commission usually meets monthly for a two- or three-day ses-
sion. The membership is divided into committees that deal with the
specific articles currently under study. In addition to the committees
on articles, there is a drafting committee and a public information
committee.
"An article is studied in the following fashion. The commission
determines which article will be considered. A background study is
then commenced. It acquaints the commission with the purpose and
effect of the article's provisions and identifies problem areas that have
arisen. In some cases the background study is contracted out to an
acknowledged expert. Armed with the contents of the study, the com-
mission committee assigned to the particular article studies it and
makes recommendations. The recommendations are submitted to the
commission which adopts or rejects them. The commission action is
then submitted to the drafting committee, chaired by Professor Frank
Newman of the Law School of the University of California at Berkeley,
and the article is put in final form. The drafting committee includes
Ralph Kleps, former Legislative Counsel and presently Administrative
Director of the Courts of the State of California; Paul Mason, na-
tionally recognized authority on parliamentary procedure and former
Director of the Department of Motor Vehicles of California; Herman
Selvin, a prominent attorney and former member of the Board of
Governors of the State Bar; Margaret Hayes, past president of the
League of Women Voters of the State of California; and the com-
mission chairman. The drafting committee's report is submitted to the
commission and upon adoption is transmitted to the Legislature."
Between its formation and the submission of its report, the commis-
sion held meetings at the following times and places :
1964
February 20, 21 — State Capitol, Sacramento
April 7, 8 — State Capitol, Sacramento
June 4, 5 — San Francisco
July 30, 31 — Los Angeles
September 17, 18 — San Francisco
November 5, 6, 7 — State Capitol, Sacramento
December 10, 11 — San Francisco
24 ASSEMBLY INTERIM COMMITTEE
1965
February 4, 5, 6 — State Capitol, Sacramento
March 4, 5, 6 — State Capitol, Sacramento
April 1, 2 — Sacramento
May 6, 7 — San Francisco
June 3, 4 — Los Angeles
July 28, 29 — Los Angeles
October 14, 15 — San Francisco
November 18, 19 — San Diego
December 16 — San Francisco
1966
January 6, 7 — Los Angeles
February 21 — State Capitol, Sacramento
May 2 — Los Angeles
July 14, 15 — San Francisco
September 15, 16 — Los Angeles
October 20, 21 — Coronado
December 1, 2 — San Francisco
Final actions of the commission are, of course, presented to the Legis-
lature in a report. The Legislature then considers them through a bill
introduced by a Member of the Legislature. If approved, this goes on
the ballot at the next general election for ratification.
CHAPTER 5
FIRST REPORT OF THE CALIFORNIA CONSTITUTION
REVISION COMMISSION
In an historic action on February 15, 1966, the California Constitu-
tion Revision Commission submitted its first report to the Governor of
California and the Legislature. The comprehensive report was 212
pages long and was widely distributed to interested parties and the
public, 30,000 copies being printed.
The recommendations of the commission embodied about one-third
of the State Constitution as a first-phase revision project. It covered
the core of the Constitution dealing with the legislative, executive, and
judicial branches of government. It covered Articles III, IV, V, VI,
VII, VIII, and XXIV.
The report of the commission stated :
"The background study attempts to present, for each provision
in the article, the alternative methods of treating it. The consti-
tution and laws of other states, relevant textual material, and
proposals from knowledgeable sources in the public and private
sectors are included in the study.
"When the study is completed the article is considered by a
committee of from 10 to 30 members. The committee, after studying
the article and related material in detail, submits its recommenda-
tions to the whole Commission. After further study, debate, and
solicitation of outside opinion, the revised article is approved in
substance by the Commission and forwarded to the Drafting
Committee.
" It is the task of the Drafting Committee to rephrase the article
in more modern, concise language and if necessary to organize it
in a more logical framework. As with other committees, the recom-
mendations of the Drafting Committee are forwarded to the full
Commission where extensive discussion takes place before the arti-
cle is finally approved.
"In summary, the articles included in this proposed revision
have been exhaustively studied. Each section was: (1) analyzed
by the Commission staff or a specially retained consultant; (2)
compared with a variety of source materials including the relevant
provisions in other state constitutions; (3) scrutinized by outside
experts; and (4) studied on many occasions by various committees
of the Commission and by the Commission as a whole. ' '
The first of a long series of hurdles for first-phase constitutional
revision was the matter of getting Governor Brown to place this subject
under special call, at that time required during an even numbered
year under the state's outmoded Constitution. After considerable dis-
cussion, the Governor issued a proclamation permitting the Legisla-
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26 ASSEMBLY INTERIM COMMITTEE
ture to consider this subject matter at its first extraordinary session
then in progress.
The recommendations of the commission were introduced in the
Legislature as Assembly Constitutional Amendment No. 13 (First
Extraordinary Session of 1966). The main author was Assemblyman
James R. Mills, Chairman of the Joint Committee on Legislative Organ-
ization. It had 71 coauthors.
CHAPTER 6
ACTION BY LEGISLATURE ON CONSTITUTIONAL
REVISION AND LEGISLATIVE REFORM PROGRAM
In 1965, the Assembly Committee on Constitutional Amendments
began reviewing the work of the commission to prepare the Legislature
for its consideration, to assist in keeping the public informed, and
enable interested parties to express themselves upon it. A number of
interim hearings were held in 1965 and early in 1966 upon this sub-
ject.
In March of 1966, shortly after the Constitution Revision Commis-
sion had submitted its recommendations to the Governor and the Legis-
lature, the Assembly Interim Committee on Constitutional Amendments
issued a Special Report on Constitutional Revision. The report stated :
' ' As part of its interim assignment, the Assembly Committee on
Constitutional Amendments has been reviewing the work of the
California Constitution Revision Commission. The Committee has
held hearings in Sacramento (3 days) ; Los Angeles (1 day) ;
Montebello (1 day) ; and Pico Rivera (1 day) reviewing proposed
Articles III, IV, V, VI, VII, VIII, and XXIV, the entire first
package of proposals submitted to the Legislature to date.
"The Committee has kept well informed on the deliberations
and decisions of the Revision Commission. Two members of the
Committee also serve as members of the Commission and those
members of the Committee who have been able to do so were en-
couraged to and did attend the sessions of the Revision Commis-
sion. The members of the Committee were notified of all sessions of
the Commission and received the proposed revisions in the various
stages of their progress toward the completed report.
' ' The Committee wishes to thank the Chairman of the Constitu-
tion Revision Commission, the Honorable Bruce W. Sumner, the
members of the Commission and the staff of the Commission for
their cooperation in keeping the Constitutional Amendments Com-
mittee informed of the progress of constitution revision. Their dedi-
cation to their work was well evidenced to this Committee by the
many long hours they have spent preparing reports and giving
testimony before the Committee. It is hoped that their efforts will
be rewarded by increased legislative enlightenment in the field
of constitution revision.
"California has the third longest Constitution in the world,
exceeded only by that of the State of Louisiana and India. It has
not been revised since 1879, although since that time it has been
amended over 300 times, its size increasing from 16,000 to over
75,000 words. California's Constitution has ceased to be a docu-
ment embodying only the fundamental law on which the State
Government should be directed. In the words of Phil S. Gibson,
(27)
28 ASSEMBLY INTERIM COMMITTEE
former Chief Justice of the California Supreme Court, it is
"... cumbersome, unelastic and outmoded ... It is not only-
much too long, but it is almost everything a Constitution ought
not to be."
"For the past two years the California Constitution Revision
Commission has been diligently at work studying the Constitution
and preparing a proposed revision of it. Thousands of working
hours and over $150,000 in state funds have been expended thus
far on this project. The distinguished citizen members of the
Commission, among whose members are lawyers, professors, labor
leaders, business executives, civic leaders, educators, judges, doc-
tors, legislators, university presidents, have sacrificed their val-
uable time and talent to aid in the revision of California's out-
moded Constitution.
"In February 1966, the Commission submitted its recommenda-
tions to the Governor and the Legislature — the result of two years
of intensive investigation, study and debate. This report reflects
a valuable expenditure of time, money and talent that can ill
afford to be wasted by the Legislature.
"The Revision Commission has worked for the last two years
toward the goal of having the people consider their proposals at
the 1966 General Election. In 1967 the Legislature may contain
more than 30 new members. It was the 1965-66 Legislature that
was the Revision Commission 's parent body during the formulation
of many of the Commission's proposals. It is important then that
this Legislature — a Legislature which is sympathetic with the
original purposes of the Revision Commission — act upon the pro-
posals of the Commission.
"It is with this background, then, that the Committee on
Constitutional Amendments, having reviewed the work of the
Constitution Revision Commission, sets forth its findings and
recommendations to the Legislature.
"This report is based on the interim assignment of the Com-
mittee on Constitutional Amendments, reviewing the work of the
California Constitution Revision Commission. While the Committee
does make numerous recommendations to the Legislature these
recommendations are only tentative and thorough public hearings
and public discussion should be conducted on the proposals of the
Constitution Revision Commission. Approval of this report by
Members of the Committee does not preclude their later disagree-
ment or non support of individual items proposed by the Revision
Commission."
Along with a number of recommendations generally accepting the
work of the commission with some slight modifications the committee
made the following general recommendations :
GENERAL RECOMMENDATIONS
1. That the proposed revision of the State Constitution be presented
to the voters at the next genera] election in a single omnibus
measure.
CONSTITUTIONAL AMENDMENTS 29
2. That the Legislature enact statutes effective upon the ratification
by the electorate of the constitutional revision, placing into statu-
tory law provisions of the Constitution which the commission
recommended should be in the statutes rather than in the funda-
mental law. That in dealing with this problem the Legislature
adopt the principle that where the commission intended no change
in its recommendation but merely a removal of language from
the Constitution which is of a statutory character, the Legisla-
ture make no substantive change at this time, but retain these
provisions intact, reserving substantive changes for future con-
sideration.
3. That the Legislature enact a conflict of interest statute effective
upon ratification by the electorate of the constitution revision.
4. That the Legislature enact a statute effective upon ratification by
the electorate of the constitution revision, providing for a modi-
fication of mileage and other allowances and a ceiling on adjust-
ments in legislative pensions resulting from an increase in legis-
lative pay.
5. That the Legislature enact a statute effective upon ratification by
the electorate of the constitution revision, providing for a com-
pensation commensurate with full time legislative service and the
dignity of the lawmaking body of the State, such compensation
to become effective at the beginning of the next terms of office
for Members of the Legislature (January 2, 1967).
The Assembly Committee on Constitutional Amendments, to which
AC A 13 (1st Ex.) was referred, held lengthy hearings upon it on
April 12 and April 13, 1966. A number of amendments, relatively
minor in nature, were adopted and it was referred to the Assembly
floor where it was passed by a vote of 67 to 1 on July 7, 1966.
The consideration of the commission's proposed first phase constitu-
tional revision necessitated companion legislation on the part of the
Legislature. Some bills were largely of a technical nature. These in-
cluded (1) an act creating a Governor's disability commission; (2)
an election procedures bill; and (3) an act which would upon the ap-
proval of the first phase of constitutional revision place the matter
of a nonfundamental nature deleted from the Constitution in the
statutes. These bills were introduced jointly by Assemblyman James
R. Mills and Assemblyman Edward E. Elliott, Chairman of the Assem-
bly Committee on Constitutional Amendments.
A more serious matter was the necessity for legislation providing
an adjustment of compensation for legislators commensurate with
mandatory full-time service provided in the commission's recommenda-
tions, limitation of fringe benefits, and a code of ethics and conflict of
interest law, effective upon the ratification of ACA 13 by the electorate.
This first phase constitutional revision and legislative reform pro-
gram embodied in ACA 13 (1st Ex.), AB 173 (1st Ex.), and the
three other technical bills were approved by the Assembly after exten-
sive public hearings by the Constitutional Amendments Committee
and other committees.
In order to work out differences between the Senate and Assembly
an ad hoc informal negotiating committee was appointed by President
30 ASSEMBLY INTERIM COMMITTEE
Pro Tempore Hugh M. Burns of the Senate, and Assembly Speaker
Jesse M. Unruh, one of the main architects of the first phase consti-
tutional revision and legislative reform program. This committee met
under the chairmanship of Senator Luther E. Gibson, another one
of the principal architects of this project. Serving on the committee
were : Senate President Pro Tempore, Hugh M. Burns, Senators Rich-
ard J. Dolwig, Robert J. Lagomarsino, ' * J " Eugene McAteer, and John
F. McCarthy; and Assemblymen Edward E. Elliott, Frank Lanter-
man, James R. Mills, Robert Monagan, Bob Moretti, Don Mulford, and
Jerome Waldie. The committee first met on May 18, 1966. After many
lengthy sessions, it reached unanimous agreement on June 28, 1966.
The ad hoc committee worked in close consultation with the chairman
and staff of the commission and the Legislative Counsel's Office, the
legal advisers to the Legislature. The unanimous agreement of the
committee included a tough conflict of interest law and legislative
reform measure in addition to approving AC A 13 (1st Ex.) with
substantive minor changes.
The final resolution of the two-house differences on AB 173 required
a formal free conference, which successfully worked out the remaining
problems. With the settlement of these final difficulties, ACA 13 was
approved along with AB 173, which in due course was signed by
Governor Brown.
The first phase constitutional revision has covered Articles III, IV,
V, VI, VII, and VIII, dealing with the core of constitutional re-
vision, the separation of powers and the legislative, executive, and
judicial branches of government. Twenty articles of the state's lengthy
fundamental law remain to be revised. The first-phase revision would
remove a vast amount of excess wording, deleting 16,000 words out of
22,000 in the portions encompassed. It makes the following changes :
Article III (Separation of Powers)
The language is updated and shortened by approximately 50 per-
cent.
Article IV (Legislative)
Budget sessions of the Legislature (previously held every other year)
are eliminated and regular sessions are held annually. There is no lim-
itation as to the length of a regular session of the Legislature.
The Legislature is empowered to fix its own salaries by statute,
subject to a two-thirds vote of each house, the Governor's veto, and
the initiative and referendum.
Any pay adjustment for legislators passed in one session does not
take effect until the regular session commencing after the next general
election.
After 1966, salary increases for members of the Legislature of more
than 5 percent multiplied by the ensuing calendar years cannot be
passed.
The Senate and the Assembly are mandated to pass legislative con-
flict of interest statutes.
In the case of the statutory initiative, the present requirement that
the petition be signed by 8 percent of the votes cast for all candidates
CONSTITUTIONAL AMENDMENTS 31
for Governor at the last preceding gubernatorial election is reduced to
5 percent. The existing requirement of 8 percent for initiative consti-
tutional amendments is retained. The proposed change will encourage
persons wishing to sponsor initiative measures to use a statutory initi-
ative rather than a constitutional amendment.
The "indirect initiative" — a petition to the Legislature rather than
to the people — is abolished.
Article V (Executive)
Article V (Executive Department), Article VII (Pardoning Power)
and Article VIII (Militia) are combined.
The Legislature is given authority to grant extensive powers to the
Governor for reorganization of the executive branch.
The long line of succession to the office of Governor after the Lieuten-
ant Governor is cut out and a provision is added that other successors
be designated by statute. The specified line of succession to the office
of Lieutenant Governor is also deleted.
Provision is made in the Constitution for determining disability
of the Governor and the existence of a vacancy in that office. These
powers are now delegated to the State Supreme Court.
Standing to raise questions regarding the Governor's ability to per-
form his duties of office is restricted to a special body provided by law.
A provision allowing the Governor and Controller to authorize spe-
cial funds for the Attorney General is deleted.
The commission determined that the Attorney General's salary —
like that of other elected state officers — should be fixed directly by the
Legislature and not by a constitutional provision.
Article VI (Judicial)
The department system of the Supreme Court — already made
obsolete by district courts of appeal — is deleted.
The existing Constitution requires at least one superior court judge
in each county. The proposed article permits the Legislature with the
concurrence of the boards of supervisors involved, to provide that one
or more judges may be selected to serve more than one county.
The existing Constitution required five years of admission to the
practice of law in this state to be eligible for a judgeship in any court
of record. This is raised to 10 years for superior courts and above.
The existing Constitution specifies that the name of unopposed in-
cumbent judges of the superior court in counties of 700,000 popula-
tion or more not appear on the election ballot. The proposed language
allows the Legislature to extend the system to any trial court in the
state.
Rules regarding the discipline of judges and absence of judges from
the state are revised.
Superior and municipal court judges seeking a nonjudicial public
office must take a leave of absence without pay.
Membership of trial court judges on the Judicial Council was in-
creased.
32 ASSEMBLY INTERIM COMMITTEE
Article XXII (Temporary Provisions)
The two-thirds vote requirement for a legislative salary adjustment
was removed for 1966 leaving only a majority vote.
A provision was added to ACA 13 which makes the content and
language of Assembly Constitutional Amendment No. 90 (reconvening
of the Legislature to consider matters pocket-vetoed by the Governor)
conform to the commission 's style.
It should be noted that the legislative pay increase proposals and
the conflict of interest bill were not actually a part of ACA 13, al-
though the language in effect brought them into being is by ratifying
AB 173.
This entire constitutional revision and legislative reform program
went before the California voters on November 8th as Proposition 1-a.
CHAPTER 7
PROPOSITION 1-a
Just as the constitutional revision and legislative reform program
had received extensive bipartisan support in the Legislature, so Prop-
osition 1-a was a measure that was generally supported by Democrats,
Republicans, and independents. It was titled on the ballot in the fol-
lowing manner :
CONSTITUTIONAL REVISION. Legislative Constitutional
Amendment. Repeals, amends, and revises various provisions of
Constitution relating to separation of powers, and to the legislative,
executive, and judicial departments; provides for annual general
legislative sessions ; provides compensation of members of Legisla-
ture shall be prescribed by statute passed by two-thirds vote, and
limits rate of annual future adjustments; Legislature must enact
laws prohibiting members from engaging in conflicting activities.
Signatures necessary on petition for initiative statute reduced
from 8% to 5% ; eliminates initiatives to Legislature. Legislature
shall provide for succession to the office of Governor in event of
disability or vacancy.
The arguments in the ballot pamphlet, mailed by the Secretary of
State to all registered voters, gave both the affirmative and negative
arguments as follows :
Argument in Favor of Proposition No. 1-a:
We support the proposed revision of the State Constitution and urge
all Californians to vote YES on Proposition 1-a :
Edmund G. "Pat" Brown
Governor of the State of California
Ronald Reagan
Richard J. Donovan, Judge
Municipal Court
San Diego Judicial District
(Former Member of the Assembly,
77th District)
One of our most crucial needs in these times is effective government —
based on a modern Constitution.
Yet, concerning the California Constitution, former State Supreme
Court Justice Phil S. Gibson stated the Constitution is "cumbersome,
unelastic, and outmoded ... It is not only much too long, but it is
almost everything a Constitution ought not to be."
California's Constitution is hardly modern. It is the third longest
Constitution in the world and has been amended over 300 times since
1879. In short, it is a mess.
In 1962, by more than a 2 to 1 vote, the people mandated moderniza-
tion of the Constitution. As a result, a blue-ribbon Constitution
(33)
34 ASSEMBLY INTERIM COMMITTEE
Revision Commission of 69 leading Californians was appointed to
recommend a revised Constitution. These prominent citizens from all
walks of life worked without pay for three years and spent thousands
of hours at their task.
The result is Proposition 1-a. It is the first phase of the commission's
work. It covers approximately one-third of the existing Constitution,
and reduces that one-third from 22,000 to 6,000 words.
The reforms in Proposition 1-a have been labeled by party leaders
and non-partisan groups alike as essential to the effective operation of
government.
Proposition 1-a puts the Constitution into modern, concise and easily
understandable language.
The changes in the legislative, executive and judicial articles would
include machinery, with adequate safeguards, to remove a Governor
from office if he is proven unable to carry on his duties ; judges would
be under stronger disciplinary procedures and the practice of running
for political office while still a judge would be curtailed ; and the Legis-
lature would meet annually to consider all problems confronting
California.
In keeping with increased time demands on the Legislature, Proposi-
tion 1-a removes salary provisions frozen in the Constitution and ratines
a new compensation plan with careful controls and strict regulations
regarding the outside activities and income of legislators.
The fundamental weapons available to California's citizens to combat
abuses by their governmental officials — the initiative, the referendum
and the recall — have been carefully preserved.
State government today faces new challenges and new responsibilities
not dreamed of in 1879. This new Constitution helps to meet those
challenges by making government itself more flexible and able to do
the job which our citizens have a right to expect.
If states are to survive and prosper in our system, they need the tools
of effective government — Proposition 1-a is a giant step toward that
goal. California can lead the way. Vote YES on 1-a.
Luther E. Gibson
State Senator, Solano County
Bruce W. Sumner
Chairman, California Constitution
Revision Commission
Judge, Superior Court,
Orange County
Thomas L. Pitts
(Exec. Sec'y, Calif. Labor Fed.
AFL-CIO) Member Calif.
Constitution Revision Commission
Argument Against Proposition No. 1-a:
As the only person who cast a negative vote in the Assembly on the
Constitutional Revision program under California law I am designated
to submit the negative argument on Proposition 1-a. At the time the
vote was taken in the Assembly, I was not opposed to this proposition
in its entirety ; rather, I found fault with a few of its provisions which
CONSTITUTIONAL AMENDMENTS 35
placed unrealistic restrictions on the legislature. It would be unfair
to those persons who are vigorously opposed to this program for broad
and fundamental philosophical beliefs if I were to submit an argument
which would express, as is the case, only minor reservations about this
program of reform. Because of these considerations, I have delegated
my responsibility for the negative argument to Senator John G. Schmitz
(R-Orange County) whose statement follows:
"This Constitutional Amendment, if passed, would mark a sig-
nificant departure from our traditional system of citizen legislators
to fully paid, full-time legislators.
"The passing of laws in a free country ought not to be a full-
time profession for anyone. When it becomes so, the country per-
mitting it will not long remain truly free.
"We certainly need legal professionals in our courts, at the bar
and on the bench. We certainly need police professionals to enforce
the law and protect the innocent. We may or may not need pro-
fessional bureaucrats in other branches of government. But we do
not need professional legislators.
"The men who founded our American system of government
assigned the law-making responsibility to elected legislatures
which were much closer to the people than either the executive or
the judiciary. The executive and the judiciary were in the hands
of professionals. The legislature was the people's check on the
appetite of government professionals for more and ever more
power and money.
"PRESCRIBING LAWS WHICH OTHER PEOPLE ARE
TO BE FORCED TO OBEY CAN NEVER BE A PRIMARY
OCCUPATION FOR ANY MAN WHO LOVES LIBERTY.' '
Leo J. Ryan
Assemblyman, San Mateo County
The organized opposition to Proposition 1-a was nominal. Among
those opposing it were some taxpayers organizations, some weekly
newspapers, and a small number of Members of the Legislature who
did not approve of it.
In support of Proposition 1-a were both candidates for governor, the
mayors of the two largest cities of the state, the influential Los Angeles
Times, TV and radio stations, and an overwhelming number of organ-
izations, newspapers, and prominent citizens. These included :
Agricultural Council of California California Association for Curriculum
Alameda County Democratic Central Development Supervision
Committee California Association of School
Alameda County Taxpayers Association Administrators
Associated General Contractors of California Association of Secondary
America, Inc. School Administrators
Baptist Ministers — Conference of California Association of Public School
Southern California Business Officials
Bay Cities Metal Trade Council California Congress of Parents and
Boards of Supervisors : Teachers
Orange County California Democratic Council Board of
Riverside County Directors
San Bernardino County California Elementary School
San Diego County Administrators Assn.
Ventura County California Federation of Women's Clubs
36
ASSEMBLY INTERIM COMMITTEE
California Hospital Association
California Labor Federation (AFL-CIO)
California Manufacturers Association
California Medical Association
California Optometric Association
California State Chamber of Commerce
California Retailers Association
California State Employees Association
California School Boards Association
California State Restaurant Association
California Taxpayers Association
California Teachers Association
California Trucking Association
Canners League of California
Cannery Workers and Warehousemen's
Union, Local 875
Chambers of Commerce :
Alhambra
Apple Valley
Arcadia
Artesia
Baldwin Park
Beverly Hills
Burbank
Capitola
Chula Vista
Conejo Valley
Covina
El Monte-South El Monte
Fresno
Fullerton
Greater Pittsburg
Granada Hills
La Habra Area
La Mirada
Long Beach
Los Angeles
Los Angeles (Junior)
Montebello
National City
Oakland
Orauge County
Pacific Palisades
Palm Springs
Pasadena
Pinole
San Diego
San Francisco
Santa Monica
Seal Beach
South Bay District
West Covina
Citizens Political Advisory Council
(San Francisco)
City Councils :
Albany
Azusa
Beverly Hills
Cypress City
Dairy Valley
El Monte
Gardena
Hawthorne
Hermosa Beach
Los Angeles
Manteca
Milpitas
Monrovia
Newport Beach
Richmond
San Dimas
San Fernando
Santa Monica
South El Monte
Temple City
Thousand Oaks
West Covina
Civic League of Improvement Clubs
and Associations (San Francisco)
Commonwealth Club of California
Conference of California Judges
County Supervisors Association of
California
Democratic State Central Committee
Downtown Association of
San Francisco
Home Builders Association of
Los Angeles, Orange and Ventura
Counties
Judges, Marshals and Constables
Association of California
Laguna Beach Democratic Club
Lassen County Democratic Central
Committee
League of California Cities
League of Women Voters of California
Los Angeles County Restaurant
Association
Los Angeles Realty Board of Directors
Northern California Ready Mixed
Concrete and Materials Association
Republican State Central Committee
Rock, Sand and Gravel Producers of
Northern California
San Bernardino County Taxpayers
Association
San Diego County Municipal Court
Judges Association
San Diego Democratic Central
Committee
San Diego Superior Court Judges
San Fernando Valley State College
(Advisory Board)
Santa Clara County Conference of
Municipal and Justice Court Judges
Southern California Political Science
Association
Southern California Restaurant
Association
State Judicial Council
Sutter County Democratic Central
Committee
Torrance Education Association
(Representative Council)
Town. Hall, Los Angeles
Tulare County's Superior Court Judges
(Ginsburg, Ballantyne, Locke)
Visalia Municipal Court Judge
(Noel McDermott)
Western Conference of Teamsters
CONSTITUTIONAL AMENDMENTS
37
NEWSPAPER ENDORSEMENTS, YES ON PROPOSITION 1-a
ALAMEDA Times-Star
ALHAMBRA Post Advocate
ANAHEIM Citizens Neios
ANDERSON Valley News
ANTIOCH Ledger
ARCADIA Tribune
ARTESIA Advocate
ATWATER Signal
AZUSA Herald
BAKERSFIELD Californian
BEVERLY HILLS Courier
BORREGO SPRINGS Borrego Sun
BURLINGAME Advance-Star
BURBANK Review
CALIPATRIA Herald
CAMARILLO Daily Neivs
CARMICHAEL Courier
CHICO Enterprise-Record
CHI NO Champion
CHULA VISTA Star-News
CLOVERDALE Reveille
CLOVIS News & The Pinedale Local
COLUSA Sun Herald
CONCORD Transcript
CORCORAN Journal
CORONA Independent
CORNING Observer
CRESCENT CITY Del Norte Triplicate
CULVER CITY Evening Star News
DUARTE Duarte-Bradbury Journal
EL CAJON Inland Empire Daily
Californian
ENCINO Encinean
EUREKA Humboldt Times Humboldt
Standard
FAIRFIELD-SUISUN Republican
FERNDALE Enterprise
FULLERTON News-Tribune
GARBERVILLE Redwood Record
GILROY Dispatch
GLENDALE News Press
GLENDORA Press
GOLETA Gazette Citizen
HANFORD Sentinel
HAY WARD Daily Review
HEMET Neivs
HIGHLAND Messenger
LIOLLISTER Advisor
IMPERIAL BEACH Star News
KING CITY Restler and News
LAGUNA BEACH South Coast News
LANCASTER Antelope Valley
Ledger-Gazette
LINCOLN News Messenger
LIVERMORE Herald-News
LODI News Sentinel
LOMPOC Record
LONG BEACH Independent and
Press Telegram
LOS ANGELES Central News
LOS ANGELES Eastside Sun
LOS ANGELES Enterprise
LOS ANGELES Herald Examiner
LOS ANGELES Mexican- American
Sun
LOS ANGELES Sentinel
LOS ANGELES Senior American
LOS ANGELES Southwest News
LOS ANGELES Times
LOS ANGELES Wyvernwood
Chronicle
LOS GATOS Times Observer
MADERA Tribune
MARTINEZ Contra Costa Neivs
Gazette
MONROVIA Journal
MONROVIA News Post
MONTEREY Park Progress
MONTEREY Peninsula Herald
NAPA County Record
NAPA Register
NATIONAL CITY Star News
NEVADA CITY Nevada County
Nugget
NEWHALL-SAUGUS Sun
NEWPORT BEACH-COSTA MESA
Orange Coast Daily Pilot
NOVATO Advance
OAKLAND East Bay Labor Journal
OAKLAND Neighborhood Journal
OAKLAND Observer
OAKLAND Tribune
OCEANSIDE Blade Tribune
ONTARIO-UPLAND Daily Report
ORANGE News
PALMDALE Antelope Valley Press
PALM SPRINGS Desert Sun
PALO ALTO Times
PASADENA Independent-Star-News
PETALUMA Argus Courier
POMONA Progress-Bulletin
PORTERVILLE Recorder
RAMONA Sentinel
RED BLUFF Daily News
REDLANDS Facts
REDWOOD CITY Tribune
REDDING Record Searchlight
RICHMOND Independent
RIVERSIDE Enterprise
ROSEVILLE Press Tribune
SACRAMENTO Bee
SACRAMENTO Union
SALINAS Californian
SAN BERNARDINO Sun Free Press
and Muscoy Neivs
SAN BERNARDINO Telegram
SAN BRUNO Herald
SAN DIEGO Business
SAN DIEGO Evening Tribune
SAN DIEGO Union
SAN DIEGO Independent
SAN FERNANDO Sun
SAN FRANCISCO Chronicle
SAN FRANCISCO Daily Comm. News
SAN FRANCISCO Examiner
SAN GABRIEL Valley Tribune
4— L-1781
38
ASSEMBLY INTERIM COMMITTEE
SAN LEANDRO Morning News
SAN LUIS OBISPO Telegram-Tribune
SAN MATEO Times and News Letter
SAN PEDRO News Pilot
SAN RAFAEL Daily Independent
Journal
SAN JOSE News-Mercury
SAN JOSE Spartan Daily
SANTA BARBARA News-Press
SANTA CRUZ Molile Home News
SANTA CRUZ Sentinel
SANTA PAULA Chronicle
SANTA ROSA Press Democrat
SEASIDE News-Sentinel
SELMA Enterprise
SHERMAN OAKS Times
SOLEDAD Bee
SOLVANG Santa Ynez Valley News
SOUTH SAN FRANCISCO Enterprise
SOUTH SAN FRANCISCO The Post
STOCKTON Record
STUDIO CITY Graphics
SUNNYVALE Standard
TAHOE Daily Tribune
TARZANA Times
TEMPLE CITY Times
TERRA BELLA Neivs
THOUSAND OAKS Neivs Chronicle
TOLUCA LAKE Tolucan
TORRANCE South Bay Daily Breeze
TUSTIN Citizens News
TWENTY-NINE PALMS Desert Trail
YACAVILLE Reporter
VALLEJO Times-Herald
VAN NUYS Valley News and Green
Sheet
VENTURA Star Free Press
WALNUT CREEK Contra Costa
Times
WHITTIER News
WOODLAND Democrat
WATSONVILLE Register-Pjaronian
YORBA LINDA Star
YREKA Daily Neics
YUCAIPA News-Mirror
PROMINENT INDIVIDUALS ENDORSING PROPOSITION 1-a
Mrs. John O. Ahern, San Francisco
Executive Vice President
California League of Women Voters
Alton. E. Allen, Laguna Beach
Orange County Supervisor
Hugh Allen, Redding
Vice President
California Labor Federation,
AFL-CIO
Chris Amado, San Francisco
Vice President
California Labor Federation,
AFL-CIO
A. E. Arnold, Santa Ana
Realtor
Al R. Arps, San. Fernando
Mayor
Peter R. Arrigoni, Fairfax
Mayor
DeGraff Austin, San Diego
San Diego County Supervisor
David L. Baker, Garden Grove
Orange County Supervisor
Mrs. Jeannette Banoczi, Anaheim
Radio Station Owner
Mrs. John James Barbour, La Mesa
Vice President at Large, California
Federation, of Women's Clubs
Dr. Harold H. Baxter, Oakhurst
President
Oakhurst Chamber of Commerce
Louis Belotti, Mount Shasta
Hotel Executive
Mark Berke, San Francisco
President
California Hospital Association
Anthony J. Bogdanowicz,
Los Angeles
Vice President
California Labor Federation,
AFL-CIO
Robert H. Bollum, San Diego
Title Insurance
Henry A. Boney, National City
San Diego County Supervisor
R. K. Boyd, Angwin
Professor of Business Administration
Thomas Bradley, Los Angeles
City Councilman
Richard R. Brown, El Cajon
Vice Mayor
Mrs. Bill Bryant, El Segundo
Junior President, California
Federation of Women's Clubs
Lionel Cade, Compton
City Councilman
M. R. Callahan, Long Beach
Vice President
California Labor Federation,
AFL-CIO
James Carroll, Santa Ana
Business Executive
John A. Cinquemani, Los Angeles
Vice President
California Labor Federation,
AFL-CIO
Fred P. Clatworthy, Santa Ana
Business Executive
Horace O. Coil, Riverside
David S. Collins, Anaheim
Realtor
CONSTITUTIONAL AMENDMENTS
39
G. J. Conway, Huntington Park
Vice President at Large
California Labor Federation,
AFL-CIO
Robert Cozens, Escondido
San Diego County Supervisor
Mrs. C. E. Crittenden, Long Beach
Vice President
League of Women Voters
Superior Judge James E.
Cunningham, San Bernardino
President
Conference of California Judges
John L. Dales, Los Angeles
Vice President
California Labor Federation,
AFL-CIO
O. Doyle Dannenberg, O. D.
Escondido — President
California Optometric Association
Burgess Dempster, Santa Ana
Engineering
Robert C. Dent, San Diego,
San Diego County Supervisor
Joseph Desmond, Fresno
President, California State
Restaurant Association
J. J. Devine, Los Angeles
President
California Trucking Association
Manuel Dias, San Francisco
General Vice President
California Labor Federation,
AFL-CIO
Alberto C. Diaz, Los Angeles
Editor-Publisher, Belvedere
Citizen and East Side Journal
Douglas A. Dollarhide, Compton
City Councilman
Warren M. Dorn, Los Angeles
Supervisor, Los Angeles County
Arthur F. Dougherty, San Francisco
Vice President
California Labor Federation,
AFL-CIO
William G. Dowd, San Mateo
Vice President
California Labor Federation,
AFL-CIO
Mrs. Ward Duffy, San Francisco
Dr. Von T. Ellsworth, Berkeley
California Tax Service
Gilbert E. Essell, San Clemente
W. J. Estelle, Jr., Susanville
Chairman, Lassen County
Democratic Central Committee
C. M. Featherly, Santa Ana
Orange County Supervisor
William H. Fellows, Los Angeles
President
California Manufacturers Association
Wilbur Fillippini, Santa Barbara
Vice President
California Labor Federation,
AFL-CIO
Harry Finks, San Francisco
Vice President
California Labor Federation,
AFL-CIO
Alex Fiore, Thousand Oaks
Vice Mayor
Fred D. Fletcher, San Francisco
Vice President at Large
California Labor Federation,
AFL-CIO
Edward J. Foley, King City
Walter Frome, Santa Ana
Business Executive
William Fugue, Los Angeles
Business Executive
Frank A. Gibson, San Diego
San Diego County Supervisor
Senator Luther E. Gibson, Vallejo
Publisher, Vallejo Morning Times
Herald & Evening News Chronicle
Mrs. Sidney Goldhammer
San Diego — Director
California League of Women Voters
Bill Greene, Los Angeles
C. A. Green, Stockton
Vice President
California Labor Federation,
AFL-CIO
Frank A. Grunenfelder, Santa Ana
Supt. of Orange County Schools
Robert Guggenheim, Newport Beach
Business Executive
Richard W. Hackler, San Francisco
Vice President at Large
California Labor Federation,
AFL-CIO
Gertrude J. Haist, La Mirada
Secretary
La Mirada Chamber of Commerce
Robert F. Hale, San Diego
Operations Manager
San Diego Chamber of Commerce
Thomas E. Hall, Commerce
Business Executive
Benjamin E. Handy, Los Angeles
President
Los Angeles Urban League
Catherine Hanrahan
San Luis Obispo
President, California Teachers' Assn.
Harry Hansen, Eureka
Vice President
California Labor Federation,
AFL-CIO
Mrs. J. B. Harloe, Fullerton
Vice President
California League of Women Voters
Mrs. Norman Hinerfeld, Los Angeles
Director
California League of Women Voters
William H. Hirstein, Orange
Orange County Supervisor
Don Hobbs, Newport Beach
Manager, Orange County Airport
40
ASSEMBLY INTERIM COMMITTEE
Mrs. Floyd Hornibrook, Stockton
Vice President at Large, California
Federation of Women's Clubs
Harvey Howard, Los Angeles
Chairman, "Get Out the Vote"
Robert J. Hudecek, Los Angeles
President, Southern California
Restaurant Association
Richard D. Hus, Thousand Oaks
City Councilman
Hon. Luther N. Hussey, San Diego
President, San Diego County
Municipal Court Judges Association
Ted Ince, Oakland
President
East Bay Restaurant Association
Paul L. Jones, Oakland
Vice President
California Labor Federation,
AFL-CIO
J. C. Jury, Granada Hills
Manager, Granada Hills
Chamber of Commerce
Mrs. Kenneth Kaplan, San Mateo
Director
California League of Women Voters
Mrs. Donald S. Keeney, Merced
Director
California League of Women Voters
Norman Kestner, Concord
City Councilman
James C. Killingsworth
Newport Beach
Publisher
Mrs. Stephen Kline, Los Altos
Vice President
California League of Women Voters
K. C. Klinger, Yorba Linda
Executive Assistant
Board of Supervisors, Orange County
T. F. Knight, Jr., Los Angeles
Executive Vice President
California Manufacturers Association
David Koester, Santa Cruz
City Manager
Leonard I. Kopeikin, Santa Barbara
City Councilman
Henry L. Lacayo, Los Angeles
Vice President at Large
California Labor Federation,
AFL-CIO
H. D. Lackey, Bakersfield
Vice President
California Labor Federation,
AFL-CIO
Kenneth D. Larson, La Mirada
Vice President
California Labor Federation,
AFL-CIO
Stanley Lathen, Vallejo
Vice President
California Labor Federation,
AFL-CIO
Thomas E. Laubacher, Oxnard
County Supervisor
Frank C. Layton, Capitola
General Manager
Capitola Chamber of Commerce
Walter Lindecker, Bakersfield
President, Independent
Insurance Agents of America
Gilbert W. Lindsay, Los Angeles
City Councilman
Charles E. Lloyd, Los Angeles
Chairman
California Community Organizations
Leroy E. Littlejohn, Sacramento
President
California State Employees
Daniel N. Longaker, Oakland
Chairman, Alameda County
Democratic Central Committee
John Lowery, Los Angeles
President, Southern Council of
Conservation Clubs
Franklin Lowney, La Puente
Manager, La Puente-Industry
Chamber of Commerce
Bernice Hubbard May, Berkeley
City Councilman
William J. McCann, Santa Fe Springs
City Councilman
John F. McCarthy, San Rafael
California State Senate
Minority Leader
G. A. McCulloch, Los Angeles
Vice President
California Labor Federation,
AFL-CIO
John P. McFarland, San Francisco
Attorney
Superior Judge Charles J. McGoldrick,
Santa Rosa
Immediate Past President
Conference of California Judges
Ray S. Mendoza, Los Angeles
Vice President
California Labor Federation,
AFL-CIO
Victor Michel, Placentia
Mayor
Billy Mills, Los Angeles
City Councilman and Chairman of
Democratic State Committee
Robert T. Monagan, Stockton
California State Assembly
Minority Leader
John C. Montgomery, Camarillo
County Supervisor, Ventura County
Harold W. Moore, Yuba City
Secretary-Treasurer, Sutter County
Democratic Central Committee
Mrs. Adolph Moskovitz, Sacramento
Director
California League of Women Voters
Mrs. E. P. Motley, Davis
Vice President,
California League of Women Voters
CONSTITUTIONAL AMENDMENTS
41
Bernice Nield, Gridley
Secretary
Gridley Chamber of Commerce
P. J. O'Donovan, Los Angeles
Exec. V. P., Home Builders Assn. of
Los Angeles, Orange and Ventura Cos.
Thomas J. O'Keefe, San Clemente
City Councilman
E. P. O'Malley, Los Angeles
Vice President at Large
California Labor Federation,
AFL-CIO
William K. Opdyke, La Mirada
Executive Director
Chamber of Commerce
H. G. Osborne, Santa Ana
Director, Flood Control District
Max J. Osslo, San Diego
Vice President
California Labor Federation,
AFL-CIO
Victor Palmieri, Thousand Oaks
Trustee, California State Colleges
James E. Pardee, Susanville
County Counsel, Lassen County
Clayton H. Parker, Santa Ana
Chief Assistant County Counsel
Orange County
Lindsley Parsons, Newport Beach
City Councilman
Robert C. Paxton, Los Angeles
Business Executive
Lawrence Peters, Seal Beach
President, Seal Beach
Chamber of Commerce
Paul A. Peterson, San Diego
Chairman, San Diego County
Democratic Central Committee
William J. Phillips, Fullerton
Orange County Supervisor
John F. Porter, Tustin,
Business Executive
Jerome Posner, Los Angeles
Vice President at Large
California Labor Federation,
AFL-CIO
Nancy Rademaker, Modesto
Secretary-Treasurer
California League of Women Voters
Howard Reed, Martinez
Vice President
California Labor Federation,
AFL-CIO
Enos C. Reid, Riverside
Dick Richards, Newport Beach
Business Executive
Dan Bidder, Long Beach
Co-publisher, Long Beach
Independent Press Telegram
Harry S. Rinker, Newport Beach
Business Executive
Thomas A. Rotell, San Francisco
Executive Secretary
Bay Cities Metal Trades Council
Norman B. Scharer, Santa Barbara
President, California Association of
School Administrators
Don N. Schneider, Fullerton
Business Executive
Mrs. Gar Schneider, Pomona
Director
California League of Women Voters
Joseph H. Seymour, Los Angeles
Vice President
California Labor Federation,
AFL-CIO
Garvin F. Shallenberger
Santa Ana, Attorney
Leslie Shaw, Los Angeles
Postmaster
Samuel C. Sheats, Altadena
Attorney
Edward T. Shedlock, Los Angeles
Vice President at Large
California Labor Federation,
AFL-CIO
Robert Shelton, Los Angeles
Business Executive
Cornelius H. Siemens, Areata
President, Humboldt State College
Dr. Wayne A. Simpson, Ventura
President, California Association of
Secondary School Administrators
Jim Slemons, Santa Ana
Business Executive
Thomas A. Small, San Mateo
Vice President
California Labor Federation,
AFL-CIO
Charles J. Smith, Los Angeles
Vice President at Large
California Labor Federation,
AFL-CIO
DeWitt E. Smith, Vista
City Councilman
Donald H. Smith, Del Rey Oaks
City Attorney
Jack Smith, Tulare
Manager
Tulare Chamber of Commerce
James L. Smith, Riverside
Vice President
California Labor Federation,
AFL-CIO
James M. Smith, Los Alamitos
City Administrator
Mrs. George F. Spitzer, Berkeley
Director
California League of Women Voters
Mrs. David Steinberg, Palo Alto
Director
California League of Women Voters
WTilliam Stookey, Dairy Valley
Construction Executive
Mrs. Leon H. Stutzman, Monterey
Director
League of Women Voters
Thomas Thompson, Anaheim
Radio Station Owner
42 ASSEMBLY INTERIM COMMITTEE
Morris Weisberger, San Francisco Herbert Wilson, Los Angeles
Vice President Vice President at Large
California Labor Federation, California Labor Federation,
AFL-CIO AFL-CIO
-n „,.„. A . • Mrs. Edward D. Wylie, Glendale
Burr Williams, Anaheim yice President California
Business Executive Federation of Women's Clubs
Ted C. Wills, Fresno Walter J. Zable, San Diego
City Councilman, Mayor Pro Tempore Business Executive
Under the leadership of Assembly Speaker Jesse M. Unruh, and with
the effective cooperation of Senate President pro Tempore Hugh M.
Burns, an impressive campaign was conducted. The two candidates for
governor served as honorary chairmen of the committee and serving as
co-chairmen were Superior Court Judge Bruce W. Sumner, Thomas L.
Pitts, Secretary-Treasurer, California Labor Federation, AFL-CIO,
and Milton M. Teague, Past President, California Chamber of Com-
merce.
Proposition 1-a was approved by the voters on November 8, 1966, by
a landslide vote of 4,129,558 for and 1,475,680 against.
This first phase constitutional revision and legislative reform pro-
gram represents a consummation of many years of effort to streamline
and modernize the Constitution and institute essential reforms for im-
proved state government in California. The California Constitution Re-
vision Commission had achieved its initial goal. It turned to the task of
completing the job.
CHAPTER 8
TASKS AHEAD FOR THE CONSTITUTION
REVISION COMMISSION
It is illustrative of the efficient and dedicated work of the California
Constitution Revision Commission that it moved ahead with the work
of its second phase of constitutional revision even before the first phase
had been approved by the electorate. Even before the Legislature took
its final action on the first constitutional revision and legislative re-
form program on July 7, 1966, the commission was already at work on
the second phase.
The second phase involves Articles IX, X, XI, XII, XVII and XVIII,
as well as some tremendously difficult problems. Altogether there remain
20 articles to be considered out of 26.
Mr. Richard L. Patsey, special counsel for the commission, com-
mented in testifying before the Assembly Constitutional Amendments
Committee at a hearing in Los Angeles on September 27, 1966 :
"Now, as for the second phase, the Constitution Revision Com-
mission has now under study Article X, relating to state institu-
tions and public buildings; Article XVII, relating to land and
homestead exemptions ; and Article XVIII, relating to legislatively
proposed constitutional amendments. We anticipate that these
studies will be completed shortly and later this fall, the commis-
sion will be undertaking three very lengthy and complex articles,
Article IX, relating to education; Article XI, relating to local
government, and Article XII, relating to corporations. These
studies will take a good deal of time. The staff, however, is pre-
paring new background studies for future articles that will be
sent out to interested groups and individuals on the outside so
we can receive their comments before the commission begins to
study them. For example, a background study has been prepared
and sent out to interested people on Article II, the article relating
to suffrage ; and on Article XXI, relating to our state boundaries.
Background studies are now being prepared by the staff on Ar-
ticle I, Bill of Rights; Article XIV and XV, relating to water
rights and harbor frontages; Article XXIII, relating to recall;
Article XXVII, relating to old age security and security for the
blind; and Article XXXIV, relating to public housing projects.
So, as you can see, Mr. Chairman and members, the commission
has not at all stopped its work, even though Proposition 1-a is on
the ballot. It is continuing on. It hopes to have the opportunity
to continue its task and to complete its task; that is, to revise
or recommend a revision for the entire Constitution.
"It seems to us on the commission that the state government
has a modern and effective role to play in our governmental struc-
ture and that state government can only play this modern and ef-
(43)
44 ASSEMBLY INTERIM COMMITTEE
fective role if it is based on a modern and effective Constitution;
and that, I think, is why, basically, we consider this project so
important. Again, we are indebted for your support. We thank
you for your continuing efforts and interest in constitutional re-
vision and we hope that we can continue this project.
". . . It would seem to me difficult to complete all of our rec-
ommendations by the next legislative session in January of 1967,
and I doubt whether it could be completed in January 1968. But
we will have another logical portion of the Constitution we hope to
submit to you at that time. If we are phasing our programs, it
would seem to me that there would probably be a third phase. As
to the length of time that it will take the commission, there have
been estimates made by our Chairman, Judge Sumner, of four
years. ... It is also realistic to say that it might take longer but
it is very difficult to say at this point. ' '
Dr. Alonzo L. Baker, Professor of Political Science at La Sierra
College, in his appearance before the Assembly Interim Committee at
Los Angeles on September 27, 1966, expressed his approval of the first
phase constitutional revision and the work of the Constitution Revision
Commission and the hope that the complete revision would be achieved
in a reasonable length of time. He also stated that in his opinion the
present method being used for revising the Constitution should be con-
tinued but in the completion of the work there should be no weakening
of the provisions of Article XVIII which provide for the calling of
constitutional conventions, and no discouraging of the use of these
provisions in the future.
The most vital portions of California's basic law were encompassed
in the first phase revision, those involving the effective functioning and
balance among the three branches of state government. Much excess
verbiage has also been cleared away. But monumental tasks remain.
Twenty articles have still to be considered, and some backtracking in
order to take care of minor matters will probably be necessary with
those articles already revised in the publicly approved first phase.
CHAPTER 9
CONSTITUTIONAL REVISION IN OTHER STATES AND
THE RENAISSANCE OF STATE GOVERNMENT
While the California fundamental law was the third longest in the
world, it was not unique in 1965 in having the undesirable character-
istics outlined by distinguished authorities on democratic government.
This condition has been common among most of the states of the union.
It was symptomatic of the decline in the role of state government.
What is now happening in California is a part of a nationwide
movement toward a renaissance of state government. Particularly
since 1950, states in increasing numbers have undertaken projects to
improve and modernize their constitutions. It was about at this time
that the move toward the revitalization of state government began to
accelerate. Proposed amendments to the legislative articles of the consti-
tutions of 20 states were voted upon in general elections in 1966. In
some respects, California has placed itself in a leadership role, as has
been the case in other fields, by the techniques it is developing for con-
stitutional revision.
The nationwide constitutional revision movement among the states
involves the strengthening of state government in order that it can
perform its function more effectively under a dual sovereignty with the
federal government as envisioned by the founding fathers. The success-
ful fruition of these efforts is essential in order to maintain govern-
ment closer to the people and to forestall an excessive centralization
and concentration of power that erodes and undermines democracy.
It is imperative that there be federal protections of rights uniformly
guaranteed by the United States Constitution; and the necessity for
the federal government to take action in this field at times is apparent.
But this need should not lead the citizen into thinking that the states
have a declining function in our governmental system.
Mr. Sid McCausland, research analyst for the Legislative Reference
Service of the California Legislature states in a report upon this sub-
ject prepared for the Assembly Interim Committee on Constitutional
amendments :
"The average state constitution in the United States is 85 years
old. The shortest constitution contains 4,840 words; the longest,
over 200,000. But regardless of the age or length of its constitu-
tion, each state has found it necessary to alter the face of its basic
law as it has sought to cope with the challenges of a dynamic so-
ciety.
"Interest in organized, systematic revision is a fairly new phe-
nomenon. Prior to 1950, many states paid lip service to constitu-
tional revision, but very little work was accomplished. Each year
since 1950 an ever increasing number of states have undertaken
projects aimed at updating their constitutions.
(45)
46 ASSEMBLY INTERIM COMMITTEE
1 ' There are two basic ways to tackle total constitutional revision.
The first involves discarding the old document and drafting a new
one. This one-shot approach is rather drastic and almost always
resisted by the state's power structure. Michigan is the only state
since 1950 to replace an old document by adopting a new con-
stitution.
1 ' The second and most popular method for total revision involves
the piece-by-piece, segment-by-segment review and revision of the
basic document to reflect the needs and trends of a dynamic state.
Most interest in this process of continuous revision dates from the
late 1950 's, and we have no report on the success of any of the
major projects.
"There are several techniques for the accomplishment of consti-
tutional revision. The most common has been the introduction of
constitutional amendments by the state legislatures. Approximately
90 percent of all constitutional revision efforts have been in the
form of amendments proposed by the legislatures.
"In recent years a second method, known as the limited consti-
tutional convention, has become popular as a tool for working out
solutions to specific problems.
"Of special interest to California is the rapid growth in the
popularity of constitutional commissions since 1950. Between 1950
and 1965, 38 constitutional commissions were organized. Eight of
the 38 were created in 1965 alone.
"Most commissions have been created to study and submit gen-
eral recommendations for constitutional change : to draft new sec-
tions, and to recommend deletion of extraneous and obsolete infor-
mation.
"The commissions with limited mandates to study stated issues
and to submit specific amendments have been more successful than
commissions with broad mandates. Their proposals have had a far
higher rate of acceptance than recommendations that would affect
the entire constitutional system. The latter have usually become
embroiled in political controversy, with resultant modifications that
often render them unrecognizable, and sometimes even contrary
to original proposals.
1 ' In conclusion, it should be noted that :
"1. Most interest in constitutional revision emerged during the
1950 's;
"2. The bulk of constitutional changes are taking place on a
piecemeal basis with very few states undertaking system-
atic revision studies ;
"3. A large percentage of constitutional change is accomplished
through legislative initiative ;
"4. The limited constitutional convention has become popular in
several states as a tool for revision.
"5. Since 1960 the Constitutional Commission has become the
popular technique for revision, but its ability for success has
not yet been proven ; and finally,
"6. State constitutions are changing, slowly perhaps, but they
are changing. It is possible to update the document without
CONSTITUTIONAL AMENDMENTS 47
throwing out the whole thing ; but no state has been success-
ful in its efforts for revision unless it has had the whole-
hearted support of its legislative leadership. ' '
Article X of the Bill of Rights, which was adopted in 1791, reads :
1 1 The powers not delegated to the United States by the Constitu-
tion nor prohibited by it to the states are reserved to the states,
or to the people. "
There are many experts in government who appear to believe that
there has been a severe decline of the states in the exercise of this
power during recent decades, and that the states are undergoing a
crisis. Problems of economics, finance, individual relations, population,
traffic, health, conservation, etc., constantly subject the states to se-
vere tests. When states are revitalized with constitutional revision pro-
grams that give them the tools to respond to needs, this danger of de-
cline is eliminated. In its movement for constitutional revision, the
California Legislature is endeavoring to perform a vital public service
for the strengthening and improvement of our American system of
government. In the successful achievement of the first phase constitu-
tional revision and legislative reform program the most difficult ob-
stacles have been overcome. It is incumbent upon it, with the able, con-
scientious, and expert guidance of the California Constitution Revision
Commission, to bend its best efforts to complete this work.
APPENDICES
APPENDICES
Complete text of the bills making up California's first phase constitutional
revision and legislative reform program and their authors, 1966 First Extraor-
dinary Session, California Legislature:
CALIFORNIA LEGISLATURE— 1966 FIRST EXTRAORDINARY SESSION
Assembly Constitutional Amendment No. 13
Introduced by Assemblymen Mills, Allen, Monagan, Unruh, Alquist,
Ashcraft, Badharn, Bagley, Barnes, Bee, Beilenson, Belotti, Biddle,
Britschgi, Brown, Burgener, Burton, Carrell, Casey, Chapel, Chap-
pie, Conrad, Crown, Cusanovich, Danielson, Dannemeyer, Deuk-
mejian, Dills, Donovan, Duffy, Elliott, Fenton, Ferrell, Flournoy,
Garrigus, Gonsalves, Greene, Henson, Hinckley, Harvey Johnson,
Ray E. Johnson, Kennick, Knox, Marks, McMillan, Meyers, Milias,
Moretti, Mulford, Pattee, Petris, Porter, Powers, Quimby, Rumford,
Russell, Ryan, Shoemaker, Song, Soto, Stanton, Stevens, Thelin,
Thomas, Veneman, Veysey, Waldie, Warren, Whetmore, William-
son, Young, and Zenovich
March 29, 1966
REFERRED TO COMMITTEE ON CONSTITUTIONAL AMENDMENTS
Assembly Constitutional Amendment No. 13 — A resolution to
propose to the people of the State of California a revision
of portions of the Constitution of the state by repealing
Articles III, V, VI, VII, and VIII, by repealing Sections
1, lb, lc, Id, 2, 3, 4, 5, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16,
17, 18, 19, 20, 21, 22a, 23, 23a, 23b, 24, 25, 25a, 25\, 25.7,
26, 28, 32, 33, 34, 34a, 35, 36, 37, 38, of Article IV, by amend-
ing and renumbering Sections la, 22, 25%, 29, 30, 31, 31a,
31b, 31c, of Article IV, by amending the heading of Article
IV, and adding Articles III, V, and VI, and by adding Sec-
tions 1, 2, 3, 4, 5, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18,
19, 20, 21, 22, 23, 24, 25, 26, and 28 to Article IV, and by
adding Section 29 to Article XIII, and by adding Sections
(51)
52 ASSEMBLY INTERIM COMMITTEE
4, 5, 6 and 7 to Article XXII, relating to government of the
State of California.
[Filed with Secretary of State July 18, 1966.]
Whereas, The Legislature, in considering a proposal to
revise the provisions of the Constitution which relate to the
separation of the legislative, executive, and judicial depart-
ments, finds it necessary to propose, in a single measure, a
revision of Articles III, V, and VI, and a revision of a portion
of Article IV, in order to accomplish an orderly and coherent
treatment of the constitutional provisions which define the lines
of separation ; now, therefore, be it
Resolved by the Assembly, the Senate concurring, That the
Legislature of the State of California at its 1966 First Ex-
traordinary Session commencing on the 10th day of Febru-
ary, 1966, two-thirds of the members elected to each of the
two houses of the Legislature voting therefor, hereby pro-
poses to the people of the State of California that portions of
the Constitution of the state be revised as follows :
First, that Article III of the Constitution of the state is
repealed.
Second, That Article III is added, to read:
ARTICLE III
SEPARATION OF POWERS
The powers of state government are legislative, executive,
and judicial. Persons charged with the exercise of one power
may not exercise either of the others except as permitted by
this Constitution.
Second and One-half, That the heading of Article IV is
amended to read :
LEGISLATIVE
Third, That Section 1 of Article IV is repealed.
Fourth, That Section la of Article IV is amended and re-
numbered to be Section 20 of Article XIII, to read :
Sec. 20. Notwithstanding any limitations or restrictions
in this Constitution contained, every state office, depart-
ment, institution, board, commission, bureau, or other agency
of the State, whether created by initiative law or otherwise,
shall be subject to the regulations and requirements with re-
spect to the filing of claims with the State Controller and the
submission, approval and enforcement of budgets prescribed
by law.
Fifth, That Section lb of Article IV is repealed.
Sixth, That Section lc of Article IV is repealed.
Seventh, That Section Id of Article IV is repealed.
Eighth, That Section 2 of Article IV is repealed.
CONSTITUTIONAL AMENDMENTS 53
Ninth, That Section 3 of Article IV is repealed.
Tenth, That Section 4 of Article IV is repealed.
Eleventh, That Section 5 of Article IV is repealed.
Twelfth, That Section 7 of Article IV is repealed.
Thirteenth, That Section 8 of Article IV is repealed.
Fourteenth, That Section 9 of Article IV is repealed.
Fifteenth, That Section 10 of Article IV is repealed.
Sixteenth, That Section 11 of Article IV is repealed.
Seventeenth, That Section 12 of Article IV is repealed.
Eighteenth, That Section 13 of Article IV is repealed.
Nineteenth, That Section 14 of Article IV is repealed.
Twentieth, That Section 15 of Article IV is repealed.
Twenty-first, That Section 16 of Article IV is repealed.
Twenty-second, That Section 17 of Article IV is repealed.
Twenty-third, That Section 18 of Article IV is repealed.
Twenty-fourth, That Section 19 of Article IV is repealed.
Twenty-fifth, That Section 20 of Article IV is repealed.
Twenty-sixth, That Section 21 of Article IV is repealed.
Twenty-seventh, That Section 22 of Article IV is amended
and renumbered to be Section 21 of Article XIII, to read:
Sec. 21. No money shall be drawn from the Treasury but
in consequence of appropriation made by law, and upon war-
rants duly drawn thereon by the Controller. No money shall
ever be appropriated or drawn from the State Treasury for
the purpose or benefit of any corporation, association, asylum,
hospital, or any other institution not under the exclusive man-
agement and control of the State as a state institution, nor
shall any grant or donation of property ever be made thereto
by the State, except that notwithstanding anything contained
in this or any other section of the Constitution :
(1) Whenever federal funds are made available for the
construction of hospital facilities by public agencies and non-
profit corporations organized to construct and maintain such
facilities, nothing in this Constitution shall prevent the Legis-
lature from making state money available for that purpose, or
from authorizing the use of such money for the construction
of hospital facilities by nonprofit corporations organized to
construct and maintain such facilities.
(2) The Legislature shall have the power to grant aid to
the institutions conducted for the support and maintenance
of minor orphans, or half -orphans, or abandoned children, or
children of a father who is incapacitated for gainful work by
permanent physical disability or is suffering from tuber-
culosis in such a stage that he cannot pursue a gainful oc-
cupation, or aged persons in indigent circumstances — such aid
to be granted by a uniform rule, and proportioned to the
number of inmates of such respective institutions.
(3) The Legislature shall have the power to grant aid to
needy blind persons not inmates of any institution supported
in whole or in part by the State or by any of its political sub-
divisions, and no person concerned with the administration
of aid to needy blind persons shall dictate how any applicant
54 ASSEMBLY INTERIM COMMITTEE
or recipient shall expend such aid granted him, and all money
paid to a recipient of such aid shall be intended to help him
meet his individual needs and is not for the benefit of any-
other person, and such aid when granted shall not be construed
as income to any person other than the blind recipient of such
aid, and the State Department of Social Welfare shall take
all necessary action to enforce the provisions relating to aid
to needy blind persons as heretofore stated.
(4) The Legislature shall have power to grant aid to needy
physically handicapped persons not inmates of any institution
under the supervision of the Department of Mental Hygiene
and supported in whole or in part by the State or by any
institution supported in whole or part by any political sub-
division of the State.
(5) The State shall have at any time the right to inquire
into the management of such institutions.
(6) Whenever any county, or city and county, or city, or
town, shall provide for the support of minor orphans, or half-
orphans, or abandoned children, or children of a father who
is incapacitated for gainful work by permanent physical dis-
ability or is suffering from tuberculosis in such a stage that
he cannot pursue a gainful occupation, or aged persons in
indigent circumstances, or needy blind persons not inmates
of any institution supported in whole or in part by the State
or by any of its political subdivisions, or needy physically
handicapped persons not inmates of any institution under the
supervision of the Department of Mental Hygiene and sup-
ported in whole or in part by the State or by any institution
supported in whole or part by any political subdivision of the
State ; such county, city and county, city, or town shall be
entitled to receive the same pro rata appropriations as may
be granted to such institutions under church, or other control.
An accurate statement of the receipts and expenditures of
public moneys shall be attached to and published with the
laws at every regular session of the Legislature.
Twenty-eighth, That Section 22a of Article IV is repealed.
Twenty-ninth, That Section 23 of Article IV is repealed.
Thirtieth, That Section 23a of Article IV is repealed.
Thirtieth and one-half, That Section 23b of Article IV is
repealed.
Thirty-first, That Section 24 of Article IV is repealed.
Thirty-second, That Section 25 of Article IV is repealed.
Thirty-third, That Section 25a of Article IV is repealed.
Thirty-fourth, That Section 25% of Article IV is repealed.
Thirty-fifth, That Section 25% of Article IV is amended and
renumbered to be Section 22 of Article XIII, to read :
Sec. 22. All money collected under the provision of any
law of this State relating to the protection, conservation, prop-
agation, or preservation of fish, game, mollusks, or crusta-
ceans and all fines and forfeitures imposed by any court for
the violation of any such law shall be used and expended ex-
clusively for the protection, conservation, propagation, and
CONSTITUTIONAL AMENDMENTS 55
preservation of fish, game, mollusks, or crustaceans and for
the administration and enforcement of laws relating thereto.
The Legislature may provide for the division of money derived
from such fines and forfeitures.
Thirty-sixth, That Section 25.7 of Article IV is repealed.
Thirty-seventh, That Section 26 of Article IV is repealed.
Thirty-eighth, That Section 28 of Article IV is repealed.
Thirty-ninth, That Section 29 of Article IV is amended and
renumbered to be Section 23 of Article XIII, to read :
Sec. 23. The Legislature may provide that any money
belonging to the State in the control of any State agency or
department or collected under the authority of this State from
any source whatever other than money in the control of or
collected by the Regents of The University of California shall
be held in trust by the State Treasurer prior to its deposit in
the State Treasury by the State agency or department as may
be required by law. Any money held in trust may be disbursed
by the State Treasurer upon the order of the State agency or
department in the manner permitted by law and money held
in trust may be deposited in banks to the same extent that
money in the State Treasury may be deposited in banks.
Fortieth, That Section 30 of Article IV is amended and re-
numbered to be Section 24 of Article XIII, to read :
Sec. 24. Neither the Legislature, nor any county, city and
county, township, school district, or other municipal corpora-
tion, shall ever make an appropriation, or pay from any public
fund whatever, or grant anything to or in aid of any religious
sect, church, creed, or sectarian purpose, or help to support
or sustain any school, college, university, hospital, or other
institution controlled by any religious creed, church, or sec-
tarian denomination whatever; nor shall any grant or dona-
tion of personal property or real estate ever be made by the
state, or any city, city and county, town, or other munic-
ipal corporation for any religious creed, church, or sectarian
purpose whatever ; provided, that nothing in this section shall
prevent the Legislature granting aid pursuant to Section 21
of this article.
Forty-first, That Section 31 of Article IV is amended and
renumbered to be Section 25 of Article XIII, to read :
Sec. 25. The Legislature shall have no power to give or
to lend, or to authorize the giving or lending, of the credit
of the State, or of any county, city and county, city, township
or other political corporation or subdivision of the State now
existing, or that may be hereafter established, in aid of or
to any person, association, or corporation, whether municipal
or otherwise, or to pledge the credit thereof, in any manner
whatever, for the payment of the liabilities of any individual,
association, municipal or other corporation whatever ; nor shall
it have power to make any gift or authorize the making of
any gift, of any public money or thing of value to any individ-
ual, municipal or other corporation whatever; provided, that
nothing in this section shall prevent the Legislature granting
56 ASSEMBLY INTERIM COMMITTEE
aid pursuant to Section 21 of this article; and it shall not
have power to authorize the State, or any political subdivision
thereof, to subscribe for stock, or to become a stockholder in
any corporation whatever ; provided, further, that irrigation
districts for the purpose of acquiring the control of any entire
international water system necessary for its use and purposes,
a part of which is situated in the United States, and a part
thereof in a foreign country, may in the manner authorized
by law, acquire the stock of any foreign corporation which is
the owner of, or which holds the title to the part of such sys-
tem situated in a foreign country ; provided, further, that irri-
gation districts for the purpose of acquiring water and water
rights and other property necessary for their uses and pur-
poses, may acquire and hold the stock of corporations, domestic
or foreign, owning waters, water rights, canals, waterworks,
franchises or concessions subject to the same obligations and
liabilities as are imposed by law upon all other stockholders in
such corporation ; and
Provided, further, that nothing contained in this Constitu-
tion shall prohibit the use of State money or credit, in aiding
veterans who served in the military or naval service of the
United States during the time of war, in the acquisition of, or
payments for, (1) farms or homes, or in projects of land
settlement or in the development of such farms or homes or
land settlement projects for the benefit of such veterans, or
(2) any business, land or any interest therein, buildings, sup-
plies, equipment, machinery, or tools, to be used by the veteran
in pursuing a gainful occupation.
And provided, still further, that notwithstanding the re-
strictions contained in this Constitution, the treasurer of any
city, county, or city and county shall have power and it shall
be his duty to make such temporary transfers from the funds
in his custody as may be necessary to provide funds for meet-
ing the obligations incurred for maintenance purposes by any
city, county, city and county, district, or other political sub-
division whose funds are in his custody and are paid out solely
through his office. Such temporary transfer of funds to any
political subdivision shall be made only upon resolution
adopted by the governing body of the city, county, or city
and county directing the treasurer of such city, county, or city
and county to make such temporary transfer. Such temporary
transfer of funds to any political subdivision shall not exceed
85 percent of the taxes accruing to such political subdivision,
shall not be made prior to the first day of the fiscal year nor
after the last Monday in April of the current fiscal year, and
shall be replaced from the taxes accruing to such political sub-
division before any other obligation of such political subdivi-
sion is met from such taxes.
Forty-second, That Section 31a of Article IV is amended
and renumbered to be Section 26 of Article XIII, to read :
Sec. 26. No provision of this Constitution shall be con-
strued as a limitation upon the power of the Legislature to
CONSTITUTIONAL AMENDMENTS 57
provide by general law, from public moneys or funds, for the
indemnification of the owners of livestock taken, slaughtered
or otherwise disposed of pursuant to law to prevent the spread
of a contagious or infectious disease; provided, the amount
paid in any case for such animal or animals shall not exceed
the value of such animal or animals.
Forty-third, That Section 31b of Article IV is amended and
renumbered to be Section 27 of Article XIII, to read :
Sec. 27. No provision of this Constitution shall be con-
strued as a limitation upon the power of the Legislature to pro-
vide that the lien of every tax, whether heretofore or here-
after attaching, shall cease to exist for all purposes after 30
years from the time such tax became a lien, or to provide that
every tax, whether heretofore or hereafter levied shall be con-
clusively presumed to have been paid after thirty years from
the time the same became a lien unless the property subject
thereto has been sold in the manner provided by law for the
payment of said tax.
Forty-fourth, That Section 31c of Article IV is amended
and renumbered to be Section 28 of Article XIII, to read :
Sec. 28. No provision of this Constitution shall be con-
strued as a limitation upon the power of the Legislature to
provide by general law for the refunding, repayment or ad-
justment, from public funds raised or appropriated by the
United States, the State or any city, city and county, or county
for street and highway improvement purposes, of assessments
or bonds, or any portion thereof, which have become a lien
upon real property, and which were levied or issued to pay
the cost of street or highway improvements or of opening and
widening proceedings which may be or may have become of
more than local benefit. Any such acts of the Legislature
heretofore adopted are hereby confirmed and declared valid
and shall have the same force and effect as if adopted after
the effective date of this amendment.
Forty-fifth, That Section 32 of Article IV is repealed.
Forty-sixth, That Section 33 of Article IV is repealed.
Forty-seventh, That Section 34 of Article IV is repealed.
Forty-eighth, That Section 34a of Article IV is repealed.
Forty-ninth, That Section 35 of Article IV is repealed.
Fiftieth, That Section 36 of Article IV is repealed.
Fifty-first, That Section 37 of Article IV is repealed.
Fifty-second, That Section 38 of Article IV is repealed.
Fifty-third, That Section 1 is added to Article IV, to read :
Sec. 1. The legislative power of this State is vested in the
California Legislature which consists of the Senate and As-
sembly, but the people reserve to themselves the powers of
initiative and referendum.
Fifty-fourth, That Section 2 is added to Article IV, to read :
Sec. 2. (a) The Senate has a membership of 40 Senators
elected for 4-year terms, 20 to begin every 2 years. The Assem-
bly has a membership of 80 Assemblymen elected for 2-year
terms.
58 ASSEMBLY INTERIM COMMITTEE
(b) Election of Assemblymen shall be on the first Tuesday
after the first Monday in November of even-numbered years
unless otherwise prescribed by the Legislature. Senators shall
be elected at the same time and places as Assemblymen.
(c) A person is ineligible to be a member of the Legislature
unless he is an elector and has been a resident of his district
for one year, and a citizen of the United States and a resident
of California for 3 years, immediately preceding his election.
(d) When a vacancy occurs in the Legislature the Governor
immediately shall call an election to fill the vacancy.
Fifty-fifth, That Section 3 is added to Article IV, to read :
Sec. 3. (a) The Legislature shall meet annually in regular
session at noon on the Monday after January 1. A measure
introduced at any session may not be deemed pending before
the Legislature at any other session.
(b) On extraordinary occasions the Governor by proclama-
tion may convene the Legislature in special session. When so
convened it has power to legislate only on subjects specified in
the proclamation but may provide for expenses and other mat-
ters incidental to the session.
Fifty-sixth, That Section 4 is added to Article IV, to read :
Sec. 4. Compensation of members of the Legislature, and
reimbursement for travel and living expenses in connection
with their official duties, shall be prescribed by statute passed
by rollcall vote entered in the journal, two thirds of the mem-
bership of each house concurring. Commencing with 1967, in
any statute enacted making an adjustment of the annual com-
pensation of a member of the Legislature, the adjustment may
not exceed an amount equal to 5 percent for each calendar
year following the operative date of the last adjustment, of
the salary in effect when the statute is enacted. Any adjust-
ment in the compensation may not apply until the commence-
ment of the regular session commencing after the next general
election following enactment of the statute.
The Legislature may not provide retirement benefits based
on any portion of a monthly salary in excess of 500 dollars
paid to any member of the Legislature unless the member
receives the greater amount while serving as a member in the
Legislature. The Legislature may, prior to their retirement,
limit the retirement benefits payable to members of the Legis-
lature who serve during or after the term commencing in 1967.
When computing the retirement allowance of a member who
serves in the Legislature during the term commencing in 1967
or later, allowance may be made for increases in cost of living
if so provided by statute, but only with respect to increases in
the cost of living occurring after retirement of the member,
except that the Legislature may provide that no member shall
be deprived of a cost of living adjustment based on a monthly
salary of 500 dollars which has accrued prior to the commence-
ment of the 1967 Regular Session of the Legislature.
Fifty-seventh, That Section 5 is added to Article IV, to read :
CONSTITUTIONAL AMENDMENTS 59
Sec. 5. Each house shall judge the qualifications and elec-
tions of its members and, by rollcall vote entered in the jour-
nal, two thirds of the membership concurring, may expel a
member.
The Legislature shall enact laws to prohibit members of the
Legislature from engaging in activities or having interests
which conflict with the proper discharge of their duties and
responsibilities; provided that the people reserve to themselves
the power to implement this requirement pursuant to Section
22 of this article.
Fifty-eighth, That Section 7 is added to Article IV, to read :
Sec. 7. (a) Each house shall choose its officers and adopt
rules for its proceedings. A majority of the membership con-
stitutes a quorum, but a smaller number may recess from day
to day and compel the attendance of absent members.
(b) Each house shall keep and publish a journal of its pro-
ceedings. The rollcall vote of the members on a question shall
be taken and entered in the journal at the request of 3 mem-
bers present.
(c) The proceedings of each house shall be public except on
occasions that in the opinion of the house require secrecy.
(d) Neither house without the consent of the other may
recess for more than 3 days or to any other place.
Fifty-ninth, That Section 8 is added to Article IV, to read :
Sec. 8. (a) At regular sessions no bill other than the
budget bill may be heard or acted on by committee or either
house until the 31st day after the bill is introduced unless the
house dispenses with this requirement by rollcall vote entered
in the journal, three fourths of the membership concurring.
(b) The Legislature may make no law except by statute and
may enact no statute except by bill. No bill may be passed
unless it is read by title on 3 days in each house except that
the house may dispense with this requirement by rollcall vote
entered in the journal, two thirds of the membership concur-
ring. No bill may be passed until the bill with amendments has
been printed and distributed to the members. No bill may be
passed unless, by rollcall vote entered in the journal, a major-
ity of the membership of each house concurs.
(c) No statute may go into effect until the 91st day after
adjournment of the session at which the bill was passed, except
statutes calling elections, statutes providing for tax levies or
appropriations for the usual current expenses of the State,
and urgency statutes.
(d) Urgency statutes are those necessary for immediate
preservation of the public peace, health, or safety. A statement
of facts constituting the necessity shall be set forth in one sec-
tion of the bill. In each house the section and the bill shall be
passed separately, each by rollcall vote entered in the journal,
two thirds of the membership concurring. An urgency statute
may not create or abolish any office or change the salary, term,
or duties of any office, or grant any franchise or special priv-
ilege, or create any vested right or interest.
60 ASSEMBLY INTERIM COMMITTEE
Sixtieth, That Section 9 is added to Article IV, to read :
Sec. 9. A statute shall embrace but one subject, which
shall be expressed in its title. If a statute embraces a subject
not expressed in its title, only the part not expressed is void.
A statute may not be amended by reference to its title. A sec-
tion of a statute may not be amended unless the section is
re-enacted as amended.
Sixty-first, That Section 10 is added to Article IV, to read:
Sec. 10. (a) Each bill passed by the Legislature shall be
presented to the Governor. It becomes a statute if he signs it.
He may veto it by returning it with his objections to the house
of origin, which shall enter the objections in the journal and
proceed to reconsider it. If each house then passes the bill by
rollcall vote entered in the journal, two thirds of the member-
ship concurring, it becomes a statute. A bill presented to the
Governor that is not returned within 12 days, becomes a stat-
ute unless the Legislature by adjournment of the session pre-
vents the return. It does not then become a statute unless the
Governor signs the bill and deposits it in the office of the
Secretary of State within 35 days after adjournment.
(b) The Governor may reduce or eliminate one or more
items of appropriation while approving other portions of a bill.
He shall append to the bill a statement of the items reduced
or eliminated with the reasons for his action. If the Legislature
is in session, the Governor shall transmit to the house originat-
ing the bill a copy of his statement and reasons. Items reduced
or eliminated shall be separately reconsidered and may be
passed over the Governor 's veto in the same manner as bills.
Sixty-second, That Section 11 is added to Article IV, to
read:
Sec. 11. The Legislature or either house may by resolu-
tion provide for the selection of committees necessary for the
conduct of its business, including committees to ascertain facts
and make recommendations to the Legislature on a subject
within the scope of legislative control. Committees may be au-
thorized to act during sessions or after adjournment of a
session.
Sixty -third, That Section 12 is added to Article IV, to read :
Sec. 12. (a) Within the first 30 days of each regular ses-
sion, the Governor shall submit to the Legislature, with an
explanatory message, a budget for the ensuing fiscal year con-
taining itemized statements of recommended state expenditures
and estimated state revenues. If recommended expenditures ex-
ceed estimated revenues, he shall recommend the sources from
which the additional revenues should be provided.
(b) The Governor and the Governor-elect may require a
state agency, officer or employee to furnish him whatever in-
formation he deems necessary to prepare the budget.
(c) The budget shall be accompanied by a budget bill
itemizing recommended expenditures. The bill shall be intro-
duced immediately in each house by the chairmen of the com-
mittees that consider appropriations. Until the budget bill has
CONSTITUTIONAL AMENDMENTS 61
been enacted, neither house may pass any other appropriation
bill, except emergency bills recommended by the Governor or
appropriations for the salaries and expenses of the Legislature.
(d) No bill except the budget bill may contain more than
one item of appropriation, and that for one certain, expressed
purpose. Appropriations from the general funds of the State,
except appropriations for the public schools, are void unless
passed in each house by rollcall vote entered in the journal,
two thirds of the membership concurring.
Sixty-fourth, That Section 13 is added to Article IV, to
read:
Sec. 13. A member of the Legislature may not, during the
term for which he is elected, hold any office or employment
under the State other than an elective office.
Sixty-fifth, That Section 14 is added to Article IV, to read :
Sec. 14. A member of the Legislature is not subject to
civil process during a session of the Legislature or for 5 days
before and after a session.
Sixty-sixth, That Section 15 is added to Article IV, to read :
Sec. 15. A person who seeks to influence the vote or action
of a member of the Legislature in his legislative capacity by
bribery, promise of reward, intimidation, or other dishonest
means, or a member of the Legislature so influenced, is guilty
of a felony.
Sixty-seventh, That Section 16 is added to Article IV, to
read:
Sec. 16. A local or special statute is invalid in any case if
a general statute can be made applicable.
Sixty-eighth, That Section 17 is added to Article IV, to read :
Sec. 17. The Legislature has no power to grant, or to au-
thorize a city, county, or other public body to grant, extra
compensation or extra allowance to a public officer, public em-
ployee, or contractor after service has been rendered or a con-
tract has been entered into and performed in whole or in part,
or to authorize the payment of a claim against the State or a
city, county, or other public body under an agreement made
without authority of law.
Sixty-ninth, That Section 18 is added to Article IV, to read :
Sec. 18. (a) The Assembly has the sole power of impeach-
ment. Impeachments shall be tried by the Senate. A person may
not be convicted unless, by rollcall vote entered in the journal,
two thirds of the membership of the Senate concurs.
(b) State officers elected on a statewide basis, members of
the State Board of Equalization, and judges of state courts
are subject to impeachment for misconduct in office. Judgment
may extend only to removal from office and disqualification to
hold any office under the State, but the person convicted or
acquitted remains subject to criminal punishment according
to law.
62 ASSEMBLY INTERIM COMMITTEE
Seventieth, That Section 19 is added to Article IV, to read :
Sec. 19. (a) The Legislature has no power to authorize
lotteries and shall prohibit the sale of lottery tickets in the
State.
(b) The Legislature may provide for the regulation of horse
races and horse race meetings and wagering on the results.
Seventy-first, That Section 20 is added to Article IV, to read :
Sec. 20. (a) The Legislature may provide for division of
the State into fish and game districts and may protect fish and
game in districts or parts of districts.
(b) There is a Fish and Game Commission of 5 members
appointed by the Governor and approved by the Senate, a
majority of the membership concurring, for 6-year terms and
until their successors are appointed and qualified. Appoint-
ment to fill a vacancy is for the unexpired portion of the term.
The Legislature may delegate to the commission such powers
relating to the protection and propagation of fish and game as
the Legislature sees fit. A member of the commission may be
removed by concurrent resolution adopted by each house, a
majority of the membership concurring.
Seventy-second, That Section 21 is added to Article IV, to
read:
Sec. 21. To meet the needs resulting from war-caused or
enemy-caused disaster in California, the Legislature may pro-
vide for :
(a) Filling the offices of members of the Legislature should
at least one fifth of the membership of either house be killed,
missing, or disabled, until they are able to perform their duties
or successors are elected.
(b) Filling the office of Governor should he be killed, miss-
ing, or disabled, until he or his successor designated in this
Constitution is able to perform his duties or a successor is
elected.
(c) Convening the Legislature.
(d) Holding elections to fill offices that are elective under
this Constitution and that are either vacant or occupied by
persons not elected thereto.
(e) Selecting a temporary seat of state or county govern-
ment.
Seventy-third, That Section 22 is added to Article IV, to
read
initiative and referendum
Sec. 22. (a) The initiative is the power of the electors to
propose statutes and amendments to the Constitution and to
adopt or reject them.
(b) An initiative measure may be proposed by presenting to
the Secretary of State a petition that sets forth the text of the
proposed statute or amendment to the Constitution and is
certified to have been signed by electors equal in number to 5
percent in the case of a statute, and 8 percent in the case of
an amendment to the Constitution, of the votes for all candi-
dates for Governor at the last gubernatorial election.
CONSTITUTIONAL AMENDMENTS 63
(c) The Secretary of State shall then submit the measure
at the next general election held at least 131 days after it
qualifies or at any special statewide election held prior to that
general election. The Governor may call a special statewide
election for the measure.
(d) An initiative measure embracing more than one subject
may not be submitted to the electors or have any effect.
Seventy-fourth, That Section 23 is added to Article IV, to
read:
Sec. 23. (a) The referendum is the power of the electors
to approve or reject statutes or parts of statutes except urgency
statutes, statutes calling elections, and statutes providing for
tax levies or appropriations for usual current expenses of the
State.
(b) A referendum measure may be proposed by presenting
to the Secretary of State, within 90 days after adjournment of
the session at which the statute was passed, a petition certified
to have been signed by electors equal in number to 5 percent of
the votes for all candidates for Governor at the last guberna-
torial election, asking that the statute or part of it be sub-
mitted to the electors.
(c) The Secretary of State shall then submit the measure at
the next general election held at least 31 days after it qualifies
or at a special statewide election held prior to that general
election. The Governor may call a special statewide election for
the measure.
Seventy-fifth, That Section 24 is added to Article IV, to
read:
Sec. 24. (a) An initiative or referendum measure ap-
proved by a majority of the votes thereon takes effect 5
days after the date of the official declaration of the vote by
the Secretary of State unless the measure provides otherwise.
If a referendum petition is filed against a part of a statute the
remainder of the statute shall not be delayed from going into
effect.
(b) If provisions of 2 or more measures approved at the
same election conflict, those of the measure receiving the high-
est affirmative vote shall prevail.
(c) The Legislature may amend or repeal referendum stat-
utes. It may amend or repeal an initiative statute by another
statute that becomes effective only when approved by the elec-
tors unless the initiative statute permits amendment or repeal
without their approval.
(d) Prior to circulation of an initiative or referendum peti-
tion for signatures, a copy shall be submitted to the Attorney
General who shall prepare a title and summary of the measure
as provided by law.
(e) The Legislature shall provide the manner in which peti-
tions shall be circulated, presented, and certified, and measures
submitted to the electors.
64 ASSEMBLY INTERIM COMMITTEE
Seventy-sixth, That Section 25 is added to Article IV, to
read:
Sec. 25. Initiative and referendum powers may be exer-
cised by the electors of each city or county under procedures
that the Legislature shall provide. This section does not affect
a city having a charter.
Seventy-seventh, That Section 26 is added to Article IV, to
read:
Sec. 26. No amendment to the Constitution, and no stat-
ute proposed to the electors by the Legislature or by initiative,
that names any individual to hold any office, or names or iden-
tifies any private corporation to perform any function or to
have any power or duty, may be submitted to the electors or
have any effect.
Seventy-eighth, That Section 28 is added to Article IV, to
read:
MISCELLANEOUS
Sec. 28. A person holding a lucrative office under the
United States or other power may not hold a civil office of
profit. A local officer or postmaster whose compensation does
not exceed 500 dollars per year or an officer in the militia
or a member of a reserve component of the armed forces of
the United States except where on active federal duty for
more than 30 days in any year is not a holder of a lucrative
office, nor is his holding of a civil office of profit affected by
this military service.
Seventh-ninth, That Article V is repealed.
Eightieth, That Article V is added, to read :
ARTICLE V
EXECUTIVE
Sec. 1. The supreme executive power of this State is
vested in the Governor. He shall see that the law is faithfully
executed.
Sec. 2. The Governor shall be elected every fourth year at
the same time and places as Assemblymen and hold office from
the Monday after January 1 following his election until his
successor qualifies. He shall be an elector who has been a
citizen of the United States and a resident of this State for 5
years immediately preceding his election. He may not hold
other public office.
Sec. 3. The Governor shall report to the Legislature at
each session on the condition of the State and may make
recommendations. He may adjourn the Legislature if the Sen-
ate and Assembly disagree as to adjournment.
Sec. 4. The Governor may require executive officers and
agencies and their employees to furnish information relating
to their duties.
CONSTITUTIONAL AMENDMENTS 65
Sec. 5. Unless the law otherwise provides, the Governor
may fill a vacancy in office by appointment until a successor
qualifies.
Sec. 6. Authority may be provided by statute for the
Governor to assign and reorganize functions among executive
officers and agencies and their employees, other than elective
officers and agencies administered by elective officers.
Sec. 7. The Governor is commander in chief of a militia
that shall be provided by statute. He may call it forth to
execute the law.
Sec. 8. Subject to application procedures provided by
statute, the Governor, on conditions he deems proper, may
grant a reprieve, pardon, and commutation, after sentence,
except in case of impeachment. At each session he shall report
to the Legislature each reprieve, pardon, and commutation
granted, stating the pertinent facts and his reasons for grant-
ing it. He may not grant a pardon or commutation to a person
twice convicted of a felony except on recommendation of the
Supreme Court, 4 judges concurring.
Sec. 9. The Lieutenant Governor shall have the same
qualifications as the Governor. He is President of the Senate
but has only a casting vote.
Sec. 10. The Lieutenant Governor shall become Governor
when a vacancy occurs in the office of Governor.
He shall act as Governor during the impeachment, absence
from the State, or other temporary disability of the Governor
or of a Governor-elect who fails to take office.
The Legislature shall provide an order of precedence after
the Lieutenant Governor for succession to the office of Gover-
nor and for the temporary exercise of his functions.
The Supreme Court has exclusive jurisdiction to determine
all questions arising under this section.
Standing to raise questions of vacancy or temporary disa-
bility is vested exclusively in a body provided by statute.
Sec. 11. The Lieutenant Governor, Attorney General, Con-
troller, Secretary of State, and Treasurer shall be elected at
the same time and places and for the same term as the Gov-
ernor.
Sec. 12. Compensation of the Governor, Lieutenant Gover-
nor, Attorney General, Controller, Secretary of State, Superin-
tendent of Public Instruction, and Treasurer shall be pre-
scribed by statute but may not be increased or decreased
during a term.
Sec. 13. Subject to the powers and duties of the Gover-
nor, the Attorney General shall be the chief law officer of the
State. It shall be his duty to see that the laws of the State are
uniformly and adequately enforced. He shall have direct
supervision over every district attorney and sheriff and over
such other law enforcement officers as may be designated by
law, in all matters pertaining to the duties of their respective
offices, and may require any of said officers to make to him
such reports concerning the investigation, detection, prosecu-
66 ASSEMBLY INTERIM COMMITTEE
tion, and punishment of crime in their respective jurisdictions
as to him may seem advisable. Whenever in the opinion of the
Attorney General any law of the State is not being adequately
enforced in any county, it shall be the duty of the Attorney
General to prosecute any violations of law of which the supe-
rior court shall have jurisdiction, and in such cases he shall
have all the powers of a district attorney. When required by
the public interest or directed by the Governor, he shall assist
any district attorney in the discharge of his duties.
Eighty-first, That Article VI is repealed.
Eighty-second, That Article VI is added, to read :
ARTICLE VI
JUDICIAL
Sec. 1. The judicial power of this State is vested in the
Supreme Court, courts of appeal, superior courts, municipal
courts, and justice courts. All except justice courts are courts
of record.
Sec. 2. The Supreme Court consists of the Chief Justice
of California and 6 associate justices. The Chief Justice
may convene the court at any time. Concurrence of 4 judges
present at the argument is necessary for a judgment.
An acting Chief Justice shall perform all functions of the
Chief Justice when he is absent or unable to act. The Chief
Justice or, if he fails to do so, the court shall select an associate
justice as acting Chief Justice.
Sec. 3. The Legislature shall divide the State into dis-
tricts each containing a court of appeal with one or more divi-
sions. Each division consists of a presiding justice and 2 or
more associate justices. It has the power of a court of appeal
and shall conduct itself as a 3-judge court. Concurrence of 2
judges present at the argument is necessary for a judgment.
An acting presiding justice shall perform all functions of
the presiding justice when he is absent or unable to act. The
presiding justice or, if he fails to do so, the Chief Justice shall
select an associate justice of that division as acting presiding
justice.
Sec. 4. In each county there is a superior court of one or
more judges. The Legislature shall prescribe the number of
judges and provide for the officers and employees of each su-
perior court. If the governing body of each affected county
concurs, the Legislature may provide that one or more judges
serve more than one superior court.
The county clerk is ex officio clerk of the superior court in
his county.
Sec. 5. Each county shall be divided into municipal
court and justice court districts as provided by statute, but a
city may not be divided into more than one district. Each
municipal and justice court shall have one or more judges.
CONSTITUTIONAL AMENDMENTS 67
There shall be a municipal court in each district of more
than 40,000 residents and a justice court in each district of
40,000 residents or less. The number of residents shall be ascer-
tained as provided by statute.
The Legislature shall provide for the organization and pre-
scribe the jurisdiction of municipal and justice courts. It shall
prescribe for each municipal court and provide for each justice
court the number, qualifications, and compensation of judges,
officers, and employees.
Sec. 6. The Judicial Council consists of the Chief Justice
as chairman and one other judge of the Supreme Court, 3
judges of courts of appeal, 5 judges of superior courts, 3
judges of municipal courts, and 2 judges of justice courts, each
appointed by the chairman for a 2-year term; 4 members of
the State Bar appointed by its governing body for 2-year
terms; and one member of each house of the Legislature ap-
pointed as provided by the house.
Council membership terminates if a member ceases to hold
the position that qualified him for appointment. A vacancy
shall be filled by the appointing power for the remainder of
the term.
The council may appoint an Administrative Director of the
Courts, who serves at its pleasure and performs functions dele-
gated by the council or its chairman, other than adopting rules
of court administration, practice and procedure.
To improve the administration of justice the council shall
survey judicial business and make recommendations to the
courts, make recommendations annually to the Governor and
Legislature, adopt rules for court administration, practice and
procedure, not inconsistent with statute, and perform other
functions prescribed by statute.
The chairman shall seek to expedite judicial business and to
equalize the work of judges; he may provide for the assign-
ment of any judge to another court but only with the judge's
consent if the court is of lower jurisdiction. A retired judge
who consents may be assigned to any court.
Judges shall report to the chairman as he directs concerning
the condition of judicial business in their courts. They shall
cooperate with the council and hold court as assigned.
Sec. 7. The Commission on Judicial Appointments con-
sists of the Chief Justice, the Attorney General, and the pre-
siding justice of the court of appeal of the affected district or,
if there are 2 or more presiding justices, the one who has
presided longest or, when a nomination or appointment to the
Supreme Court is to be considered, the presiding justice who
has presided longest on any court of appeal.
Sec. 8. The Commission on Judicial Qualifications con-
sists of 2 judges of courts of appeal, 2 judges of superior
courts, and one judge of a municipal court, each appointed
by the Supreme Court ; 2 members of the State Bar who have
practiced law in this state for 10 years, appointed by its gov-
erning body ; and 2 citizens who are not judges, retired judges,
or members of the State Bar, appointed by the Governor and
68 ASSEMBLY INTERIM COMMITTEE
approved by the Senate, a majority of the membership con-
curring. All terms are 4 years.
Commission membership terminates if a member ceases to
hold the position that qualified him for appointment. A va-
cancy shall be filled by the appointing power for the remainder
of the term.
Sec. 9. The State Bar of California is a public corpora-
tion. Every person admitted and licensed to practice law in
this state is and shall be a member of the State Bar except
while holding office as a judge of a court of record.
Sec. 10. The Supreme Court, courts of appeal, superior
courts, and their judges have original jurisdiction in habeas
corpus proceedings. Those courts also have original jurisdic-
tion in proceedings for extraordinary relief in the nature of
mandamus, certiorari, and prohibition.
Superior courts have original jurisdiction in all causes ex-
cept those given by statute to other trial courts.
The court may make such comment on the evidence and the
testimony and credibility of any witness as in its opinion is
necessary for the proper determination of the cause.
Sec. 11. The Supreme Court has appellate jurisdiction
when judgment of death has been pronounced. With that ex-
ception courts of appeal have appellate jurisdiction when
superior courts have original jurisdiction and in other causes
prescribed by statute.
Superior courts have appellate jurisdiction in causes pre-
scribed by statute that arise in municipal and justice courts
in their counties.
The Legislature may permit appellate courts to take evi-
dence and make findings of fact when jury trial is waived or
not a matter of right.
Sec. 12. The Supreme Court may, before decision becomes
final, transfer to itself a cause in a court of appeal. It may,
before decision, transfer a cause from itself to a court of ap-
peal or from one court of appeal or division to another. The
court to which a cause is transferred has jurisdiction.
Sec. 13. No judgment shall be set aside, or new trial
granted, in any cause, on the ground of misdirection of
the jury, or of the improper admission or rejection of evidence,
or for any error as to any matter of pleading, or for any error
as to any matter of procedure, unless, after an examination of
the entire cause, including the evidence, the court shall be of
the opinion that the error complained of has resulted in a
miscarriage of justice.
Sec. 14. The Legislature shall provide for the prompt pub-
lication of such opinions of the Supreme Court and courts of
appeal as the Supreme Court deems appropriate, and those
opinions shall be available for publication by any person.
Decisions of the Supreme Court and courts of appeal that
determine causes shall be in writing with reasons stated.
Sec. 15. A person is ineligible to be a judge of a court of
record unless for 5 years immediately preceding selection to
CONSTITUTIONAL AMENDMENTS 69
a municipal court or 10 years immediately preceding selection
to other courts, he has been a member of the State Bar or
served as a judge of a court of record in this state. A judge
eligible for municipal court service may be assigned by the
chairman of the Judicial Council to serve on any court.
Sec. 16. (a) Judges of the Supreme Court shall be elected
at large and judges of courts of appeal shall be elected in their
districts at general elections at the same time and places as the
Governor. Their terms are 12 years beginning the Monday after
January 1 following their election, except that a judge elected
to an unexpired term serves the remainder of the term. In cre-
ating a new court of appeal district or division the Legislature
shall provide that the first elective terms are 4, 8, and 12
years.
(b) Judges of other courts shall be elected in their counties
or districts at general elections. The Legislature may provide
that an unopposed incumbent 's name not appear on the ballot.
(c) Terms of judges of superior courts are 6 years begin-
ning the Monday after January 1 following their election. A
vacancy shall be filled by election to a full term at the next
general election after the January 1 following the vacancy, but
the Governor shall appoint a person to fill the vacancy tem-
porarily until the elected judge's term begins.
(d) Within 30 days before August 16 preceding the expira-
tion of his term, a judge of the Supreme Court or a court of
appeal may file a declaration of candidacy to succeed himself.
If he does not, the Governor before September 16 shall nomi-
nate a candidate. At the next general election, only the candi-
date so declared or nominated may appear on the ballot, which
shall present the question whether he shall be elected. If he
receives a majority of the votes on the question he is elected.
A candidate not elected may not be appointed to that court but
later may be nominated and elected.
The Governor shall fill vacancies in those courts by appoint-
ment. An appointee holds office until the Monday after Janu-
ary 1 following the first general election at which he had the
right to become a candidate or until an elected judge qualifies.
A nomination or appointment by the Governor is effective
when confirmed by the Commission on Judicial Appointments.
Electors of a county, by majority of those voting and in a
manner the Legislature shall provide, may make this system of
selection applicable to judges of superior courts.
Sec. 17. A judge of a court of record may not practice
law and during the term for which he was selected is ineligible
for public employment or public office other than judicial em-
ployment or judicial office. A judge of the superior or munici-
pal court may, however, become eligible for election to other
public office by taking a leave of absence without pay prior to
filing a declaration of candidacy. Acceptance of the public
office is a resignation from the office of judge.
A judicial officer may not receive fines or fees for his own
use.
70 ASSEMBLY INTERIM COMMITTEE
Sec. 18. (a) A judge is disqualified from acting as a
judge, without loss of salary, while there is pending (1) an
indictment or an information charging him in the United
States with a crime punishable as a felony under California or
federal law, or (2) a recommendation to the Supreme Court by
the Commission on Judicial Qualifications for his removal or
retirement.
(b) On recommendation of the Commission on Judicial
Qualifications or on its own motion, the Supreme Court may
suspend a judge from office without salary when in the United
States he pleads guilty or no contest or is found guilty of a
crime punishable as a felony under California or federal law
or of any other crime that involves moral turpitude under that
law. If his conviction is reversed suspension terminates, and
he shall be paid his salary for the period of suspension. If he
is suspended and his conviction becomes final the Supreme
Court shall remove him from office.
(c) On recommendation of the Commission on Judicial
Qualifications the Supreme Court may (1) retire a judge for
disability that seriously interferes with the performance of his
duties and is or is likely to become permanent, and (2) censure
or remove a judge for action occurring not more than 6
years prior to the commencement of his current term that con-
stitutes wilful misconduct in office, wilful and persistent
failure to perform his duties, habitual intemperance, or con-
duct prejudicial to the administration of justice that brings
the judicial office into disrepute.
(d) A judge retired by the Supreme Court shall be consid-
ered to have retired voluntarily. A judge removed by the
Supreme Court is ineligible for judicial office and pending
further order of the court he is suspended from practicing law
in this State.
(e) The Judicial Council shall make rules implementing
this section and providing for confidentiality of proceedings.
Sec. 19. The Legislature shall prescribe compensation for
judges of courts of record.
A judge of a court of record may not receive his salary while
any cause before him remains pending and undetermined for
90 days after it has been submitted for decision.
Sec. 20. The Legislature shall provide for retirement, with
reasonable allowance, of judges of courts of record for age or
disability.
Sec. 21. On stipulation of the parties litigant the court
may order a cause to be tried by a temporary judge who is a
member of the State Bar, sworn and empowered to act until
final determination of the cause.
Sec. 22. The Legislature may provide for the appoint-
ment by trial courts of record of officers such as commissioners
to perform subordinate judicial duties.
Eighty-third, That Article VII is repealed.
Eighty-fourth, That Article VIII is repealed.
CONSTITUTIONAL AMENDMENTS 71
Eighty-fifth, That Section 29 is added to Article XIII, to
read:
Sec. 29. Not more than 25 percent of the total appropria-
tions from all funds of the State shall be raised by means
of taxes on real and personal property according to the value
thereof.
Eighty-sixth, That Section 4 is added to Article XXII, to
read:
Sec. 4. Nothing in Section 15 of Article VI affects the
eligibility of a judge to serve in or be elected to his office if the
judge was selected prior to the operative date of Section 15
and was eligible under the law at the time of that selection.
Eighty-seventh, That Section 5 is added to Article XXII, to
read:
Sec. 5. In any case in which, under the law in effect prior
to the operative date of this section, the term of a judge of
a municipal or justice court expires in January in a year in
which a general election is held, that term shall be extended
until the Monday after January 1 following the next general
election following the date when the term would otherwise ex-
pire, at which general election a successor shall be elected.
Eighty-eighth, That Section 6 is added to Article XXII, to
read:
Sec. 6. Any law enacted at the 1966 First Extraordinary
Session of the Legislature and providing for increased compen-
sation for members of the Legislature shall become operative
only at the time the 1967 Regular Session of the Legislature
is convened. Any such law enacted at the 1966 First Extraor-
dinary Session of the Legislature is not subject to the require-
ment of Section 4 of Article IV as to passage by a two thirds
vote or to the requirement of Section 4 of Article IV that any
adjustment of the annual compensation of a member of the
Legislature may not exceed an amount equal to 5 percent for
each calendar year following the operative date of the last
adjustment, of the salary in effect when the statute is en-
acted. The provisions of Assembly Bill No. 173 of the 1966
First Extraordinary Session are hereby ratified.
Eighty-ninth, That Section 7 is added to Article XXII, to
read:
Sec. 7. To the extent there is a conflict, constitutional
amendments adopted by the electors at the November 1966
General Election shall prevail over the provisions transferred
from Article IV to Article XIII by Assembly Constitutional
Amendment No. 13, adopted by the Legislature at the 1966
First Extraordinary Session.
And he it further resolved, That the Legislature having
adopted Assembly Constitutional Amendment No. 90 at its
1965 Regular Session to propose an amendment to portions of
Sections 1, 2 and 16 of Article IV of the State Constitution
for the sole purpose of requiring the Legislature to reconvene
and reconsider measures submitted to the Governor during the
last ten days of a general session (Sundays excepted) which he
72 ASSEMBLY INTERIM COMMITTEE
fails to sign, and since said amendment did not propose any-
other change in the length, duration or scope of general or
budget sessions of the Legislature, it is the intent of the Legis-
lature, if both Assembly Constitutional Amendment No. 90
and Assembly Constitutional Amendment (Revision) No. 13,
1966 First Extraordinary Session, are approved by the elec-
tors, that both shall be given effect regardless of the vote by
which they are approved and that their provisions be con-
strued together so as to give effect to both in the following
manner :
First, That subdivision (a) be added to Section 3 of Article
IV thereof, to read :
(a) The Legislature shall meet annually in regular session
at noon on the Monday after January 1. At the end of each
regular session the Legislature shall recess for 30 days. It shall
reconvene on the Monday after the 30-day recess, for a period
not to exceed 5 days, to reconsider vetoed measures.
A measure introduced at any session may not be deemed
pending before the Legislature at any other session.
Second, That Section 4 be added to Article IV thereof, to
read:
Sec. 4. Compensation of members of the Legislature, and
reimbursement for travel and living expenses in connection
with their official duties, shall be prescribed by statute passed
by rollcall vote entered in the journal, two thirds of the mem-
bership of each house concurring. Commencing with 1967, in
any statute enacted making an adjustment of the annual com-
pensation of a member of the Legislature the adjustment may
not exceed an amount equal to 5 percent for each calendar
year following the operative date of the last adjustment, of the
salary in effect when the statute is enacted. Any adjustment
in the compensation may not apply until the commencement
of the regular session commencing after the next general elec-
tion following enactment of the statute.
Members of the Legislature shall receive 5 cents per mile for
traveling to and from their homes in order to attend reconven-
ing following the 30-day recess after a regular session.
The Legislature may not provide retirement benefits based
on any portion of a monthly salary in excess of 500 dollars
paid to any member of the Legislature unless the member re-
ceives the greater amount while serving as a member in the
Legislature. The Legislature may, prior to their retirement,
limit the retirement benefits payable to members of the Legis-
lature who serve during or after the term commencing in
1967.
When computing the retirement allowance of a member
who serves in the Legislature during the term commencing in
1967 or later, allowance may be made for increases in cost of
living if so provided by statute, but only with respect to in-
creases in the cost of living occurring after retirement of the
member, except that the Legislature may provide that no
member shall be deprived of a cost of living adjustment based
CONSTITUTIONAL AMENDMENTS 73
on a monthly salary of 500 dollars which has accrued prior to
the commencement of the 1967 Regular Session of the Legis-
lature.
Third, That subdivision (c) be added to Section 8 of Article
IV thereof, to read :
(c) No statute may go into effect until the 61st day after
adjournment of the regular session at which the bill was
passed, or until the 91st day after adjournment of the special
session at which the bill was passed, except statutes calling
elections, statutes providing for tax levies or appropriations
for the usual current expenses of the State, and urgency
statutes.
Fourth, That subdivision (a) be added to Section 10 of
Article IV thereof, to read :
(a) Each bill passed by the Legislature shall be presented
to the Governor. It becomes a statute if he signs it. He may
veto it by returning it with his objections to the house of ori-
gin, which shall enter the objections in the journal and proceed
to reconsider it. If each house then passes the bill by rollcall
vote entered in the journal, two thirds of the membership
concurring, it becomes a statute. A bill presented to the Gov-
ernor that is not returned within 12 days becomes a statute.
If the 12-day period expires during the recess at the end of a
regular session, the bill becomes a statute unless the Governor
vetoes it within 30 days from the commencement of the recess.
If the Legislature by adjournment of a special session pre-
vents the return of a bill it does not become a statute unless
the Governor signs the bill and deposits it in the office of the
Secretary of State within 30 days after adjournment.
Fifth, That subdivision (b) be added to Section 23 of Article
IV thereof, to read :
(b) A referendum measure may be proposed by presenting
to the Secretary of State, within 60 days after adjournment of
the regular session at which the statute was passed or within
90 days after adjournment of the special session at which the
statute was passed, a petition certified to have been signed by
electors equal in number to 5 percent of the votes for all can-
didates for Governor at the last gubernatorial election, asking
that the statute or part of it be submitted to the electors.
Sixth, That the provisions of the second resolved clause of
this measure shall become operative only if the amendment to
Article IV of the State Constitution proposed by Assembly
Constitutional Amendment No. 90 of the 1965 Regular Session
are approved by a majority of the electors, in which case sub-
division (a) of Section 3, Section 4, subdivision (c) of Section
8, subdivision (a) of Section 10 and subdivision (b) of Section
23 of Article IV of the Constitution, as appearing in the first
resolved clause of Assembly Constitutional Amendment (Re-
vision) No. 13, shall not become operative.
74 ASSEMBLY INTERIM COMMITTEE
CALIFORNIA LEGISLATURE— 1966 FIRST EXTRAORDINARY SESSION
ASSEMBLY BILL No. 147
Introduced by Assemblymen Mills and Elliott
March 31, 1966
REFERRED TO COMMITTEE ON CONSTITUTIONAL AMENDMENTS
An act to add Section 18608 to the Business and Professions
Code, and to add Section 29104 to the Corporations Code,
and to add Sections 3500.5, 3501.5, and 3502.5 to, and Ar-
ticles 1.3 (commencing with Section 3510) and 1.7 (com-
mencing with Section 3520) to Chapter 1 of Division 4 of,
the Elections Code, and to amend Section 100 of, to add
Sections 399, 403, 9501.5, 12016, 12017, 12159, 12503, 12504,
12505, 68210, 68500.1, 68508, 68509, 68510, 68704, 68808,
69107, 69108, 69109, 69110, 69500.1, 69508, and 69741.5 to,
and to add Article 5.5 (commencing with Section 12058) to
Chapter 1 of Part 2 of Division 3 of Title 2 of, Chapter 1.3
(commencing with Section 68120) to Title 8 of, Article 3.5
(commencing with Section 68915) to Chapter 3 of Title 8 of,
Article 3.6 (commencing with Section 68920) to Chapter 3
of Title 8 of, Chapter 4.5 (commencing with Section 69300)
to Title 8 of, and Article 2.5 (commencing with Section
69560) to Chapter 5 of Title 8 of, the Government Code, re-
lating to codification of various provisions to be omitted
from the California Constitution in its revision, and provid-
ing for the submission of a portion thereof to the electors,
to take effect immediately.
The people of the State of California do enact as follows:
Section 1. Section 29104 is added to the Corporations
Code, to read :
29104. All contracts for the purchase or sale of shares of
the capital stock of any corporation or association without any
intention on the part of one party to deliver and of the other
party to receive the shares, and contemplating merely the pay-
ment of differences between the contract and market prices on
divers days, shall be void, and neither party to any such con-
tract shall be entitled to recover any damages for failure to
CONSTITUTIONAL AMENDMENTS 75
perform the same, or any money paid thereon, in any court
of this state.
Sec. 2. Section 3500.5 is added to the Elections Code, to
read :
3500.5. Prior to circulation of any initiative or referendum
petition for signatures thereof, a draft of the said petition
shall be submitted to the Attorney General with a written re-
quest that he prepare a title, and summary of the chief pur-
pose and points of said proposed measure, said title and sum-
mary not to exceed 100 words in all. The persons presenting
such request to the Attorney General shall be known as "pro-
ponents" of said proposed measure. The Attorney General
shall preserve said written request until after the next general
election.
Sec. 3. Section 3501.5 is added to said code, to read :
3501.5. If for any reason any initiative or referendum
measure, proposed by petition as provided by this article, is
not submitted to the voters at the next succeeding general elec-
tion, such failure shall not prevent its submission at a suc-
ceeding general election.
Sec. 4. Section 3502.5 is added to said code, to read :
3502.5. All such initiative petitions shall have printed
across the top thereof in 12-point blackface type the follow-
ing : ' ' Initiative measure to be submitted directly to the elec-
tors."
Sec. 5. Article 1.3 (commencing with Section 3510) is
added to Chapter 1 of Division 4 of said code, to read :
Article 1.3. Petition Signatures
3510. Any initiative or referendum petition may be pre-
sented in sections, but each section shall contain a full and
correct copy of the title and text of the proposed measure.
3511. Each signer shall add to his signature his place of
residence, giving the street and number if such exist. His elec-
tion precinct shall also appear on the paper after his name.
The number of signatures attached to each section shall be at
the pleasure of the person soliciting signatures to the same.
3512. Any qualified elector of the state shall be competent
to solicit said signatures within the county or city and county
of which he is an elector. Each section of the petition shall bear
the name of the county or city and county in which it is cir-
culated, and only qualified electors of such county or city and
county shall be competent to sign such section.
3513. Each section shall have attached thereto the affidavit
of the person soliciting signatures to the same, stating his own
qualifications and that all the signatures to the attached sec-
tion were made in his presence and that to the best of his
knowledge and belief each signature to the section is the gen-
uine signature of the person whose name it purports to be,
and no other affidavit thereto shall be required. The affidavit
76 ASSEMBLY INTERIM COMMITTEE
of any person soliciting signatures hereunder shall be verified
free of charge by any officer authorized to administer oaths.
3514. Such petitions so verified shall be prima facie evi-
dence that the signatures thereon are genuine and that the per-
sons signing the same are qualified electors. Unless and until it
be otherwise proven upon official investigation, it shall be pre-
sumed that the petition presented contains the signatures of
the requisite number of qualified electors.
Sec. 6. Article 1.7 (commencing with Section 3520) is
added to Chapter 1 of Division 4 of said code, to read :
Article 1.5. Filing Petitions
3520. (a) Each section of the petition shall be filed with
the clerk or registrar of voters of the county or city and county
in which it was circulated, but all sections circulated in any
county or city and county shall be filed at the same time.
(b) Within 20 days after the filing of such petition in his
office the clerk or registrar of voters shall determine from the
records of registration what number of qualified electors have
signed the petition and if necessary the board of supervisors
shall allow the clerk or registrar additional assistance for the
purpose of examining the petition and provide for their com-
pensation.
(c) The clerk or registrar, upon the completion of the ex-
amination, shall immediately attach to the petition, except the
signatures thereto appended, his certificate, properly dated,
showing the result of the examination and shall immediately
transmit the petition, together with his certificate, to the
Secretary of State and also file a copy of the certificate in his
office.
(d) Within 40 days from the transmission of the petition
and certificate by the clerk or registrar to the Secretary of
State, a supplemental petition identical with the original as
to the body of the petition but containing supplemental names,
may be filed with the clerk or registrar of voters, as aforesaid.
3521. The right to file the original petition shall be re-
served to its proponents, and any section thereof or supple-
ment thereto presented for filing by any person or persons other
than the proponents of a measure or by persons duly author-
ized in writing by the proponents shall be disregarded by the
county clerk or registrar of voters.
3522. The clerk or registrar of voters shall within 10 days
after the filing of a supplemental petition make like examina-
tion thereof, as of the original petition, and upon the comple-
tion of such examination shall forthwith attach to said petition
his certificate, properly dated, showing the result of said ex-
amination, and shall forthwith transmit a copy of said supple-
mental petition, except the signatures thereto appended,
together with his certificate, to the Secretary of State.
3523. When the Secretary of State shall have received
from one or more county clerks or registrars of voters a peti-
tion certified as herein provided to have been signed by the
CONSTITUTIONAL AMENDMENTS 77
requisite number of qualified electors, he shall forthwith trans-
mit to the county clerk or registrar of voters of every county
or city and county in the state his certificate showing such
fact. A petition shall be deemed to be filed with the Secretary
of State upon the date of the receipt by him of a certificate or
certificates showing said petition to be signed by the requisite
number of electors of the state. Any county clerk or registrar
of voters shall, upon receipt of such copy, file the same for
record in his office. The duties imposed by this article upon the
clerk or registrar of voters shall be performed by such registrar
of voters in all cases where the office of registrar of voters exist.
Sec. 8. Section 100 of the Government Code is amended
to read :
100. (a) The sovereignty of the state resides in the people
thereof, and all writs and processes shall issue in their name.
(b) The style of all process shall be "The People of the
State of California," and all prosecutions shall be conducted
in their name and by their authority.
Sec. 8.5. Section 399 is added to Chapter 1 of Division 2
of Title 1 of the Government Code, to read :
399. (a) There shall be a seal of this state, which shall be
called ' ' The Great Seal of the State of California. ' '
(b) The Great Seal of the state shall be kept by the Gover-
nor and used by him officially.
Sec. 8.7. Section 403 as added to said code, to read :
403. All grants and commissions shall be kept in the name
and by the authority of the people of the State of California,
sealed with the Great Seal of the state, signed by the Gover-
nor, and countersigned by the Secretary of State.
Sec. 9. Section 9501.5 is added to said code, to read :
9501.5. The enacting clause of every law shall be "The
people of the State of California do enact as follows : ' \
Sec. 9.3. Section 12016 is added to the Government Code,
to read :
12016. The budget required by the State Constitution to be
submitted by the Governor at each regular session of the Legis-
lature shall contain a complete plan and itemized statement of
all proposed expenditures of the state provided by existing law
or recommended by him, and all of its institutions, depart-
ments, boards, bureaus, commissions, officers, employees and
other agencies, and of all estimated revenues, for the ensuing
fiscal year, together with a comparison, as to each item of
revenues and expenditures, with the actual revenues and ex-
penditures for the last completed fiscal year and the actual
revenues and expenditures for the existing fiscal year.
Sec. 9.4. Section 12017 is added to the Government Code,
to read :
12017. At each session the Governor shall report to the
Legislature each reprieve, pardon, and commutation granted,
stating the name of the convict, the crime of which he was
convicted, the sentence, its date, the date of the pardon, re-
prieve or commutation, and the reasons for granting the same.
78 ASSEMBLY INTERIM COMMITTEE
Sec. 9.45. Article 5.5 (commencing with Section 12058)
is added to Chapter 1 of Part 2 of Division 3 of Title 2 of the
Government Code, to read :
Article 5.5. Succession to the Office of
Governor
12058. In case of vacancy in the office of Governor and
in the office of Lieutenant Governor, the last duly elected Presi-
dent pro Tempore of the Senate shall become Governor for the
residue of the term ; or if there be no President pro Tempore
of the Senate, then the last duly elected Speaker of the As-
sembly shall become Governor for the residue of the term;
or if there be none, then the Secretary of State; or if there be
none, then the Attorney General ; or if there be none, then the
Treasurer; or if there be none, then the Controller; or if, as
the result of a war or enemy-caused disaster, there be none,
then such person designated as provided by law. In case of im-
peachment of the Governor or officer acting as Governor, his
absence from the state, or his other temporary disability to
discharge the powers and duties of office, then the powers and
duties of the office of Governor devolve upon the same officer
as in the case of vacancy in the office of Governor, but only
until the disability shall cease.
12058.5. In case of the death, disability or other failure to
take office of the Governor-elect, whether occurring prior or
subsequent to the returns of election, the Lieutenant Governor-
elect shall act as Governor from the same time and in the same
manner as provided for the Governor-elect and shall, in the
case of death, be Governor for the full term or, in the case of
disability or other failure to take office, shall act as Governor
until the disability of the Governor-elect shall cease.
12059. In case of the death, disability or other failure to
take office of both the Governor-elect and the Lieutenant Gov-
ernor-elect, the last duly elected President pro Tempore of the
Senate, or in case of his death, disability, or other failure to
take office, the last duly elected Speaker of the Assembly, or
in case of his death, disability, or other failure to take office,
the Secretary of State-elect, or in case of his death, disability,
or other failure to take office, the Attorney General-elect, or
in case of his death, disability, or other failure to take office,
the Treasurer-elect, or in case of his death, disability, or other
failure to take office, the Controller-elect shall act as Governor
from the same time and in the same manner as provided for
the Governor-elect. Such person shall, in the case of death, be
Governor for the full term or in the case of disability or other
failure to take office shall act as Governor until the disability
of the Governor-elect shall cease.
Sec. 9.5. Section 12159 is added to Article 2 of Chapter 3
of Part 2 of Division 3 of Title 2 of said code, to read :
12159. The Secretary of State shall keep a correct record
of the official acts of the legislative and executive departments
CONSTITUTIONAL AMENDMENTS 79
of the government, and shall, when required, lay the same and
all matters relative thereto before either branch of the Legis-
lature, and shall perform such other duties as may be assigned
him by law.
Sec. 9.6. Section 12503 is added to the Government Code,
to read ;
12503. No person shall be eligible to the office of Attorney
General unless he shall have been admitted to practice before
the Supreme Court of the state for a period of at least five
years immediately preceding his election or appointment to
such office.
Sec. 9.7. Section 12504 is added to the Government Code,
to read :
12504. The Attorney General shall not engage in the pri-
vate practice of law, nor shall he be associated directly or in-
directly with any attorney in private practice, but instead he
shall devote his entire time to the service of the state.
Sec. 9.8. Section 12505 is added to said code, to read:
12505. The Attorney General shall receive the same salary
as that now or hereafter prescribed by law for an Associate
Justice of the Supreme Court.
Sec. 10. Chapter 1.3 (commencing with Section 68120) is
added to Title 8 of said code, to read :
Chapter 1.3. Elections of Justices and
Judges of Courts of Record
68120. A declaration of candidacy for election or a nomin-
ation by the Governor, made pursuant to Section 17(d) of
Article VI of the California Constitution, shall be filed with
the officer charged with the duty of certifying nominations for
publication in the official ballot.
68121. A confirmation by the Commission on Judicial Ap-
pointments, pursuant to Section 17(d) of Article VI of the
California Constitution, shall not be effective unless filed in
writing with the Secretary of State.
68122. If two or more presiding justices designated in
Section 7 of Article VI of the California Constitution shall
have served terms of equal length they shall choose the one
who is to be a member of the Commission on Judicial Appoint-
ments by lot, whenever occasion for action arises.
Sec. 11. Section 68210 is added to said code, to read :
68210. No judge of a court of record shall receive his salary
unless he shall make and subscribe before an officer entitled to
administer oaths, an affidavit stating that no cause before him
remains pending and undetermined for 90 days after it has
been submitted for decision.
Sec. 12. Section 68500.1 is added to said code, to read :
68500.1. The Clerk of the Supreme Court shall serve as
secretary of the Judicial Council.
80 ASSEMBLY INTERIM COMMITTEE
Sec. 13. Section 68508 is added to said code, to read :
68508. No act of the Judicial Council shall be valid unless
concurred in by a majority of its members.
Sec. 14. Section 68509 is added to said code, to read :
68509. The Judicial Council shall meet at the call of its
chairman or as otherwise provided by it.
Sec. 15. Section 68510 is added to said code, to read :
68510. No member of the Judicial Council shall receive any
compensation for his services as such, but he shall be allowed
his necessary expenses for travel, board and lodging incurred
in the performance of his duties as such. Any judge assigned
to a court wherein a judge's compensation is greater than his
own shall receive while sitting therein the compensation of a
judge thereof. The extra compensation shall be paid in such
manner as may be provided by law. Any judge assigned to a
court in a county other than that in which he regularly sits
shall be allowed his necessary expenses for travel, board, and
lodging incurred in the discharge of the assignment.
Sec. 16. Section 68704 is added to said code, to read:
68704. No act of the commission shall be valid unless con-
curred in by a majority of its members. The commission shall
select one of its members to serve as chairman.
Sec. 17. Section 68808 is added to said code, to read :
68808. Each of the justices of the Supreme Court shall
have power to issue writs of habeas corpus to any part of the
state, upon petition by or on behalf of any person held in
actual custody, and may make such writs returnable before
himself or the Supreme Court or before any court of appeal,
or before any justice thereof, or before any superior court in
the state, or before any judge thereof.
Sec. 18. Article 3.5 (commencing with Section 68915) is
added to Chapter 3 of Title 8 of said code, to read :
Article 3.5. Transfer of Cases Appealed to the
Supreme Court and Courts of Appeal
68915. No appeal taken to the Supreme Court or to a
court of appeal shall be dismissed for the reason only that
the same was not taken to the proper court, but the cause
shall be transferred to the proper court upon such terms as to
costs or otherwise as may be just, and shall be proceeded with
therein, as if regularly appealed thereto.
Sec. 19. Article 3.6 (commencing with Section 68920) is
added to Chapter 3 of Title 8 of said code, to read :
Article 3.6. Clerks and Reporters of the Supreme
Court and Courts of Appeal
68920. The Supreme Court shall appoint a Clerk of the
Supreme Court. Said court may also appoint a reporter and
assistant reporters of the decisions of the Supreme Court and
of the courts of appeal. Bach of the courts of appeal shall ap-
CONSTITUTIONAL AMENDMENTS 81
point its own clerk. All the officers herein mentioned shall hold
office and be removable at the pleasure of the courts by which
they are severally appointed, and they shall receive such com-
pensation as shall be prescribed by law, and discharge such
duties as shall be prescribed by law, or by the rules or orders
of the courts by which they are severally appointed.
Sec. 20. Section 69107 is added to said code, to read :
69107. Upon the creation of any additional division of the
court of appeal the Governor shall appoint three persons
to serve as justices thereof as provided in Section 17(d)
of Article VI of the California Constitution. The justices of
said division elected at such general election shall so classify
themselves by lot that one of them shall go out of office at the
end of four years, one of them at the end of eight years, and
one of them at the end of 12 years, and entry of such classifica-
tion shall be made in the minutes of said division, signed by
the three justices thereof, and a duplicate thereof filed in the
office of the Secretary of State.
Sec. 21. Section 69108 is added to said code, to read :
69108. The courts of appeal in the First, Second and Third
Appellate Districts shall always be open for the transaction
of business.
Sec. 22. Section 69109 is added to said code, to read :
69109. Each of the justices of the courts of appeal shall
have power to issue writs of habeas corpus to any part of his
appellate district upon petition by or on behalf of any person
held in actual custody, and may make such writs returnable
before himself or the court of appeal of his district, or before
any superior court within his district, or before any judge
thereof.
Sec. 23. Section 69110 is added to said code, to read :
69110. (a) Superior courts, municipal courts and justices'
courts in cities having a population of more than 40,000 in-
habitants shall always be open, legal holidays and nonjudicial
days excepted. The process of superior courts shall extend to
all parts of the state; provided, that all actions for the re-
covery of the possession of, quieting the title to, or for the
enforcement of liens upon real estate, shall be commenced in
the county in which the real estate, or any part thereof, af-
fected by such action or actions, is situated.
(b) Injunctions and writs of prohibition may be issued
and served on legal holidays and nonjudicial days. The proc-
ess of any municipal court shall extend to all parts of the
county or city and county in which the city is situated where
such court is established, and to such other parts of the state
as may be provided by law, and such process may be executed
or enforced in such manner as the Legislature shall provide.
Sec. 24. Chapter 4.5 (commencing with Section 69300) is
added to Title 8 of said code, to read :
82 assembly interim committee
Chapter 4.5. Basic Instructions to Juries
69300. (a) The court may instruct the jury regarding the
law applicable to the facts of the case.
(b) The court shall inform the jury in all cases that the
jurors are the exclusive judges of all questions of fact sub-
mitted to them and of the credibility of the witnesses.
Sec. 25. Section 69500.1 is added to said code, to read :
69500.1. The provisions of this section apply to the superior
courts in any county or city and county containing a popula-
tion of more than 700,000 as determined by the last preceding
federally published decennial census.
When only the incumbent has filed nomination papers for
the office of judge, his name shall not appear on the ballot
unless there is filed with the county clerk or registrar of voters,
within 20 days after the final date for filing nomination papers
for the office, a petition indicating that a write-in campaign
will be conducted for the office and signed by 100 registered
voters qualified to vote with respect to the office.
If a petition indicating that a write-in campaign will be con-
ducted for the office at the general election, signed by 100
registered voters qualified to vote with respect to the office,
is filed with the county clerk or registrar of voters not less
than 45 days before the general election, the name of the in-
cumbent shall be placed on the general election ballot if it has
not appeared on the direct primary ballot.
If in conformity with this section, the name of the incumbent
does not appear either on the primary ballot or general elec-
tion ballot, the clerk or registrar of voters, on the day of the
general election, shall declare the incumbent reelected.
Sec. 26. Section 69508 is added to said code, to read :
69508. The judges of each superior court in which there
are more than two judges sitting, shall choose, from their own
number, a presiding judge, who may be removed as such at
their pleasure. Subject to the regulations of the Judicial Coun-
cil, he shall distribute the business of the court among the
judges, and prescribe the order of business.
Sec. 27. Article 2.5 (commencing with Section 69560) is
added to Chapter 5 of Title 8 of said code, to read :
Article 2.5. Reduction of Number of Judges
in Superior Court
69560. If the Legislature diminishes the number of judges
of the superior court in any county or city and county, the
offices which first become vacant, to the number of judges di-
minished, shall be deemed to be abolished.
Sec. 28. Section 69741.5 is added to said code, to read :
69741.5. There may be as many sessions of a superior
court, at the same time, as there are judges elected, appointed
or assigned thereto. The judgments, orders, and proceedings of
any session of a superior court, held by any one or more of the
CONSTITUTIONAL AMENDMENTS 83
judges sitting therein, shall be equally effectual as though all
the judges of said court presided at such session.
Sec. 30. Section 18608 is added to the Business and Pro-
fessions Code, to read :
18608. The Legislature may amend, revise, or supplement
any part of that certain initiative act relating to boxing and
wrestling, approved by the electors on November 4, 1924, as
embodied in Chapter 2 (commencing with Section 18600) of
Division 8 of the Business and Professions Code.
Sec. 31. (a) A special election is hereby called to be held
throughout the state on the same day that Assembly Consti-
tutional Amendment No. 13 of the 1966 First Extraordinary
Session is submitted to the people. The special election shall
be consolidated with the general election to be held on that
date. The consolidated election shall be held and conducted in
all respects as if there were only one election and only one
form of ballot shall be used. Except as otherwise provided in
this section, all of the provisions of law relating to the sub-
mission of measures proposed by the Legislature shall apply to
the measure submitted pursuant to this section. A ballot pam-
phlet shall be prepared, compiled, and distributed relating
to such measure. The Secretary of State shall distribute the
ballot pamphlets to the county clerks not less than 30 days
before the election, and the county clerks shall commence to
mail these pamphlets to the voters not less than five days
before the election. The distribution of ballot pamphlets in all
other respects shall be conducted in accordance with the pro-
visions of Section 3573 of the Elections Code.
(b) At the special election called by this section there shall
be submitted to the electors Section 30 of this act.
(c) The special election provided for in this section shall be
proclaimed, held, conducted, the ballots shall be prepared,
marked, collected, counted and canvassed, and the results shall
be ascertained and the returns thereof made in all respects in
accordance with the provisions of the Constitution applicable
thereto and the laws governing general elections insofar as
provisions thereof are applicable to the election provided for
in this section ; provided, however, that the Governor need not
issue his election proclamation until 30 days before the election.
(d) Upon the effective date of this section the Secretary of
State shall request the Attorney General to prepare a ballot
title for the measure and shall also request the Legislative
Counsel to prepare an analysis of the measure in accordance
with Section 3566 of the Elections Code. The title and analysis
shall be filed with the Secretary of State within five days after
the effective date of this section. The measure submitted pur-
suant to this section shall be designated on the ballots at the
election by its ballot title.
(e) This section, inasmuch as it provides for the calling of
an election, shall, under the provisions of Section 1 of Article
IV of the Constitution, take effect immediately.
84 ASSEMBLY INTERIM COMMITTEE
Sec. 32. Sections 30 and 31 of this act shall become op-
erative only if Assembly Constitutional Amendment No. 13 of
the 1966 First Extraordinary Session is passed by the Legis-
lature. Section 30 of this act shall become operative only if such
constitutional amendment is passed by the Legislature and ap-
proved by the people and Section 30 of this act is approved by
the people.
Sec. 33. Except as otherwise provided in Section 31 and
32 of this act, this act shall become operative only if Assembly
Constitutional Amendment No. 13 of the 1966 First Extraor-
dinary Session is adopted by the people, in which event it shall
become operative at the same time as Assembly Constitutional
Amendment No. 13.
CONSTITUTIONAL AMENDMENTS 85
CALIFORNIA LEGISLATURE— 1966 FIRST EXTRAORDINARY SESSION
ASSEMBLY BILL No. 164
Introduced by Assemblymen Mills and Elliott
April 11, 1966
REFERRED TO COMMITTEE ON RULES
An act to add Article 7 (commencing with Section 12070)
to Chapter 1 of Part 2, Division 3, Title 2 of the Govern-
ment Code, relating to the Governor.
The people of the State of California do enact as follows:
Section 1. Article 7 (commencing with Section 12070) is
added to Chapter 1 of Part 2, Division 3, Title 2 of the Gov-
ernment Code, to read :
Article 7. Commission on the Governorship
12070. There is in the state government a Commission on
the Governorship, consisting of the President pro Tempore of
the Senate, the Speaker of the Assembly, the President of the
University of California, the Chancellor of the California State
Colleges, and the Director of Finance.
12071. The commission shall have exclusive authority to
petition the Supreme Court to determine any questions that
arise relating to vacancies in and succession to the office of
Governor.
12072. The commission shall have exclusive authority to
petition the Supreme Court to decide any questions relating
to the existence of a temporary disability of the Governor.
12073. The commission shall have exclusive authority
to petition the Supreme Court to decide any questions relating
to the termination of the temporary disability of the Governor.
12074. The President pro Tempore of the Senate shall be
chairman of the commission and the Speaker of the Assembly
shall be vice chairman. The commission shall meet at the times
and places designated by the chairman, and, in his absence, the
times and places designated by the vice chairman.
86 ASSEMBLY INTERIM COMMITTEE
12075. The commission may file a petition pursuant to Sec-
tions 12071, 12072, or 12073 only if a majority of the members
of the commission vote to take such action.
12076. The commission shall have the power of a head of a
department to make investigations to determine whether or not
a petition should be filed pursuant to this article. Every state
agency shall, on request of the commission, make available to
the commission the facilities and personnel of the agency to
enable the commission to perform its functions.
Sec. 2. Section 1 of this act shall become operative only if
Assembly Constitutional Amendment No. 13, 1966 First Ex-
traordinary Session, revising Article V of the California Con-
stitution, is passed by the Legislature and adopted by the
people, in which event Section 1 of this act shall become
operative at the same time as the provisions of said Assembly
Constitutional Amendment No. 13.
CONSTITUTIONAL AMENDMENTS 87
CALIFORNIA LEGISLATURE— 1966 FIRST EXTRAORDINARY SESSION
ASSEMBLY BILL No. 167
Introduced by Assemblymen Mills and Elliott
April 14, 1966
REFERRED TO COMMITTEE ON ELECTIONS AND REAPPORTIONMENT
An act relative to the 1966 general election
ballot and ballot pamphlets.
The people of the State of California do enact as follows:
Section 1. Notwithstanding the provisions of Section
10212 of the Elections Code, Assembly Constitutional Amend-
ment No. 13 of the 1966 First Extraordinary Session of the
Legislature, if adopted by the Legislature for submission to
the people, shall appear first, numbered 1-a, on the ballot and
in the ballot pamphlets of the 1966 general election.
88 ASSEMBLY INTERIM COMMITTEE
CALIFORNIA LEGISLATURE— 1966 FIRST EXTRAORDINARY SESSION
ASSEMBLY BILL No. 173
Introduced by Assemblymen Waldie, Unruh, Monagan, Lanterman,
Elliott, Alquist, Bee, Belotti, Biddle, Britschgi, Burgener, Burton,
Casey, Chapel, Conrad, Cusanovich, Danielson, Dannemeyer, Duffy,
Dymally, Fenton, Flournoy, Garrigus, Gonsalves, Henson, Kennick,
McMillan, Meyers, Milias, Mills, Moretti, Pattee, Petris, Porter,
Quimby, Rumford, Russell, Shoemaker, Song, Thelin, Thomas,
Veysey, Warren, and Williamson
(Coauthors : Senators Gibson and Lagomarsino)
April 20, 1966
REFERRED TO COMMITTEE ON RULES
An act to amend and renumber the heading of Chapter 1 (com-
mencing with Section 9000) of Part 1 of Division 2 of Title
2 of, and to add Chapter 1 (commencing with Section 8900)
to Part 1 of Division 2 of Title 2 of, and to add Sections
9359.11, 9359.12, and 9360.10 to, the Government Code, re-
lating to public officers and employees.
The people of the State of California do enact as follows:
Section 1. The heading of Chapter 1 (commencing with
Section 9000) of Part 1 of Division 2 of Title 2 of the Govern-
ment Code is amended and renumbered to read :
Chapter 1.5. General
Sec. 2. Chapter 1 (commencing with Section 8900) is
added to Part 1 of Division 2 of Title 2 of the Government
Code, to read :
Chapter 1. Legislative Organization
Article 1. Legislative Compensation
8900. From the operative date of this section until noon of
January 2, 1967, each Member of the Legislature shall receive
as compensation for his services six thousand dollars ($6,000)
CONSTITUTIONAL AMENDMENTS 89
annually, during the term for which he was elected, payable
at the rate of five hundred dollars ($500) per month.
8901. Commencing at noon on January 2, 1967, each
Member of the Legislature shall receive as compensation for
his services sixteen thousand dollars ($16,000) per year,
during the term for which he was elected, payable in equal
monthly amounts.
8902. During such times as a Member of the Legislature
is required to be in Sacramento to attend a session of the
Legislature and during such times as a member is traveling
to and from, or is in attendance at, any meeting of a committee
of which he is a member or is attending to any other legisla-
tive function or responsibility as authorized or directed by the
rules of the house of which he is a member or by the joint
rules, he shall be entitled to reimbursement of his living ex-
penses at the same rate as may be established by the State
Board of Control for other elected state officers.
8903. When traveling to and from a session of the Legis-
lature, or when traveling to and from a meeting of a com-
mittee of which he is a member, or when traveling pursuant to
any other legislative function or responsibility as authorized
or directed by the rules of the house of which he is a member
or by the joint rules, when such travel is by a common carrier
of passengers, a Member of the Legislature shall be entitled to
reimbursement for the actual costs of travel by the common
carrier. If the member travels by other means and common car-
rier service is available and feasible he shall be reimbursed in
the amount of the fare of available common carrier service. If
common carrier service is unavailable or not feasible, a mem-
ber shall be reimbursed at the rate of fifteen cents ($0.15) per
mile. No mileage shall be allowed or paid for travel in a con-
veyance owned or provided by and at the expense of a public
agency. As used in this section ''common carrier" means car-
rier by aircraft, railroad, bus, or vessel.
Article 2. Code of Ethics
8920. (a) No Member of the Legislature, state elective of-
ficer or appointee of any such officer, or judge or justice shall,
while serving as such, have any interest, financial or other-
wise, direct or indirect, or engage in any business or transac-
tion or professional activity, or incur any obligation of any
nature, which is in substantial conflict with the proper dis-
charge of his duties in the public interest and of his responsi-
bilities as prescribed in the laws of this state.
(b) No Member of the Legislature shall, during the term
for which he was elected :
(1) Accept other employment which he has reason to be-
lieve will either impair his independence of judgment as to
his official duties or require him, or induce him, to disclose
confidential information acquired by him in the course of and
by reason of his official duties ;
90 ASSEMBLY INTERIM COMMITTEE
(2) Willfully and knowingly disclose, for pecuniary gain,
to any other person, confidential information acquired by him
in the course of and by reason of his official duties or use any
such information for the purpose of pecuniary gain ;
(3) Accept or agree to accept, or be in partnership with
any person who accepts or agrees to accept, any employment,
fee, or other thing of value, or portion thereof, in considera-
tion of his appearing, agreeing to appear, or taking any other
action on behalf of another person regarding a licensing or
regulatory matter, before any state board or agency which is
established by law for the primary purpose of licensing or
regulating the professional activity of persons licensed,
pursuant to state law; provided, that this section shall
not be construed to prohibit a member who is an attorney at
law from practicing in such capacity before the Workmen's
Compensation Appeals Board or the Commissioner of Corpo-
rations, and receiving compensation therefor, or from prac-
ticing for compensation before any state board or agency in
connection with, or in any matter related to, any case, action,
or proceeding filed and pending in any state or federal court ;
and provided that this section shall not act to prohibit a mem-
ber from making inquiry for information on behalf of a con-
stituent before a state board or agency, if no fee or reward
is given or promised in consequence thereof; and provided
that the prohibition contained in this subdivision shall not
apply to a partnership in which the Member of the Legisla-
ture is a member if the Member of the Legislature does not
share directly or indirectly in the fee resulting from the
transaction ; and provided that the prohibition contained in
this subdivision shall not apply in connection with any matter
pending before any state board or agency on the operative
date of this subdivision if the affected Member of the Legis-
lature is attorney of record or representative in the matter
prior to such operative date ;
(4) Receive or agree to receive, directly or indirectly, any
compensation, reward, or gift from any source except the
State of California for any service, advice, assistance or other
matter related to the legislative process, except fees for
speeches or published works on legislative subjects and ex-
cept, in connection therewith, reimbursement of expenses for
actual expenditures for travel and reasonable subsistence for
which no payment or reimbursement is made by the State of
California ;
(5) Participate, by voting or any other action, on the floor
of either house, or in committee or elsewhere, in the enactment
or defeat of legislation in which he has a personal interest,
except as follows :
(i) If, on the vote for final passage by the house of which
he is a member, of the legislation in which he has a personal
interest, he first files a statement (which shall be entered ver-
batim on the journal) stating in substance that he has a per-
sonal interest in the legislation to be voted on and notwith-
CONSTITUTIONAL AMENDMENTS 91
standing such interest, he is able to cast a fair and objective
vote on such legislation, he may cast his vote without violating
any provision of this article ;
(ii) If the member believes that, because of his personal
interest, he should abstain from participating in the vote on
the legislation, he shall so advise the presiding officer prior
to the commencement of the vote and shall be excused from
voting on the legislation without any entry on the journal of
the fact of his personal interest. In the event a rule of the
house, requiring that each member who is present vote aye
or nay is invoked, the presiding officer shall order the member
excused from compliance and shall order entered on the
journal a simple statement that the member was excused from
voting on the legislation pursuant to law.
8921. A person subject to this article has an interest which
is in substantial conflict with the proper discharge of his
duties in the public interest and of his responsibilities as pre-
scribed in the laws of this state or a personal interest, arising
from any situation, within the scope of this article, if he has
reason to believe or expect that he will derive a direct mone-
tary gain or suffer a direct monetary loss, as the case may be,
by reason of his official activity. He does not have an interest
which is in substantial conflict with the proper discharge of
his duties in the public interest and of his responsibilities as
prescribed by the laws of this state or a personal interest,
arising from any situation, within the scope of this article,
if any benefit or detriment accrues to him as a member of a
business, profession, occupation, or group to no greater extent
than any other member of such business, profession, occupa-
tion, or group.
8922. A person subject to the provisions of this article
shall not be deemed to be engaged in any activity which is
in substantial conflict with the proper discharge of his duties
in the public interest and of his responsibilities as prescribed
by the laws of this state, arising from any situation, or to
have a personal interest, arising from any situation, within
the scope of this article, solely by reason of any of the fol-
lowing :
(a) His relationship to any potential beneficiary of any
situation is one which is defined as a remote interest by Sec-
tion 1091 of this code or is otherwise not deemed to be a
prohibited interest by Sections 1091.1 or 1091.5.
(b) Receipt of a campaign contribution regulated, re-
ceived, reported, and accounted for pursuant to Division 8
(commencing with Section 11500) of the Elections Code, so
long as the contribution is not made on the understanding
or agreement, in violation of law, that the person's vote, opin-
ion, judgment, or action will be influenced thereby.
8923. The enumeration in this article of specific situations
or conditions which are deemed not to result in substantial
conflicts with the proper discharge of the duties and responsi-
92 ASSEMBLY INTERIM COMMITTEE
bilities of a legislator or legislative employee or in a personal
interest shall not be construed as exclusive.
The Legislature in enacting this chapter recognizes that
Members of the Legislature and legislative employees may
need to engage in employment, professional, or business activ-
ities other than legislative activities, in order to maintain a
continuity of professional or business activity, or may need
to maintain investments, which activities or investments do
not conflict with the specific provisions of the chapter. How-
ever, in construing and administering the provisions of the
chapter, weight should be given to any coincidence of income,
employment, investment, or other profit from sources which
may be identified with the interests represented by those
sources which are seeking action of any character on matters
then pending before the Legislature.
8924. No employee of either house of the Legislature shall
during the time he is so employed, commit any act or engage
in any activity prohibited by any part of this article.
8925. No person shall induce or seek to induce any Mem-
ber of the Legislature to violate any part of this article.
8926. Every person who knowingly and willfully violates
any part of this article is guilty of a misdemeanor. Every
person who conspires to violate any part of this article is
guilty of a felony.
Article 3. Joint Legislative Ethics Committee
8940. The Joint Legislative Ethics Committee is hereby
created. The committee shall consist of three Members of the
Senate and three Members of the Assembly who shall be
selected in the manner provided for in the Joint Rules of the
Senate and Assembly. Of the three members appointed from
each house, at least one from each house shall be a member of
the political party having the largest number of members in
that house and at least one from each house shall be a member
of the political party having the second largest number of
members in that house. The committee shall elect its own chair-
man. Vacancies occurring in the membership of the committee
shall be filled in the manner provided for in the Joint Rules
of the Senate and Assembly. A vacancy shall be deemed to
exist as to any member of the committee whose term is ex-
piring whenever such member is not reelected at the general
election.
8941. The committee is authorized to make rules governing
its own proceedings. The provisions of Rule 36 of the Joint
Rules of the Senate and Assembly relating to investigating
committees shall apply to the committee.
Prior to the issuance of any subpoena by the committee with
respect to any matter before the committee, it shall by a reso-
lution adopted by a vote of two members of the committee
from each house of the Legislature define the nature and scope
of its investigation in the matter before it.
CONSTITUTIONAL AMENDMENTS 93
8942. Funds for the support of the committee shall be pro-
vided from the Contingent Funds of the Assembly and the
Senate in the same manner that such funds are made avail-
able to other joint committees of the Legislature.
8943. The committee shall have power, pursuant to the pro-
visions of this article, to investigate and make findings and
recommendations concerning alleged violations by Members of
the Legislature of the provisions of Article 2 of this chapter.
8944. Any person may: (a) file with the committee a
verified complaint in writing which shall state the name of the
Member of the Legislature alleged to have committed the vio-
lation complained of, and which shall set forth the particulars
thereof, or (b) file a complaint concerning the alleged violation
by a Member of the Legislature with the district attorney of
the appropriate county.
If a person files a complaint with respect to any alleged
violation by a Member of the Legislature with the committee,
he may not thereafter file a complaint to institute a criminal
prosecution for such violation until the committee has ren-
dered its report or until a period of 120 days has elapsed
since the filing of the complaint. If a complaint is filed with
the appropriate district attorney by any person concerning
an alleged violation by a Member of the Legislature of any
provision of Article 2, such person may not thereafter file
a complaint with respect to such alleged violation with the
committee.
If a complaint is filed with the committee, the committee
shall promptly send a copy of the complaint to the Member
of the Legislature alleged to have committed the violation
complained of, who shall thereafter be designated as the re-
spondent.
No complaint may be filed with the committee after the
expiration of six months from the date upon which the al-
leged violation occurred.
8945. If the committee determines that the verified com-
plaint does not allege facts, directly or upon information and
belief, sufficient to constitute a violation of any of the pro-
visions of Aricle 2 of this chapter, it shall dismiss the com-
plaint and notify the complainant and respondent thereof. If
the committee determines that such verified complaint does
allege facts, directly or upon information and belief, suf-
ficient to constitute a violation of any of the provisions of
Article 2 of this chapter, the committee shall promptly in-
vestigate the alleged violation and, if after such preliminary
investigation, the committee finds that probable cause exists
for believing the allegations of the complaint, it shall fix a
time for a hearing in the matter, which shall be not more
than 30 days after such finding. If, after the preliminary
investigation, the committee finds that probable cause does
not exist for believing the allegations of the complaint, the
committee shall dismiss the complaint. In either event the
94 ASSEMBLY INTERIM COMMITTEE
committee shall notify the complainant and respondent of its
determination.
8946. After the complaint has been filed the respondent
shall be entitled to examine and make copies of all evidence
in the possession of the committee relating to the complaint.
8947. If a hearing is to be held pursuant to Section 8945
the committee, before the hearing has commenced, shall issue
subpoenas and subpoenas duces tecum at the request of any
party in accordance with the provisions of Chapter 4 (com-
mencing with Section 9400), Part 1, Division 2, Title 2 of
the Government Code. All of the provisions of Chapter 4,
except Section 9410, shall be applicable to the committee and
the witnesses before it.
8948. At any hearing held by the committee :
(a) Oral evidence shall be taken only on oath or affirma-
tion.
(b) Each party shall have these rights: to be represented
by legal counsel; to call and examine witnesses; to introduce
exhibits ; and to cross-examine opposing witnesses.
(c) The hearing shall be open to the public.
8949. Any official or other person whose name is mentioned
at any investigation or hearing of the committee and who be-
lieves that testimony has been given which adversely affects
him, shall have the right to testify or, at the discretion of the
committee, to file a statement of facts under oath relating
solely to the material relevant to the testimony of which he
complains.
8950. After the hearing the committee shall state its find-
ings of fact. If the committee finds that the respondent has
not violated any provisions of Article 2 of this chapter, it shall
order the action dismissed, and shall notify the respondent
and complainant thereof and shall also transmit a copy of the
complaint and the fact of dismissal to the Attorney General
and to the district attorney of the appropriate county. If the
committee finds that the respondent has violated any provisions
of Article 2 of this chapter, it shall state its findings of fact
and submit a report thereon to the house in which the respon-
dent serves, send a copy of such findings and report to the
complainant and respondent, and the committee shall also re-
port thereon to the Attorney General and to the district at-
torney of the appropriate county.
8951. Nothing in this chapter shall preclude any person
from instituting a prosecution for violation of any provision
of Article 2 of this chapter unless such person has filed a com-
plaint with the committee concerning such violation, in which
case such person may not file a complaint with the district
attorne}^ of the appropriate county to institute a criminal
prosecution for such violation until the committee has made
its determination of the matter or a period of 120 days has
elapsed since the filing of the complaint with the committee.
CONSTITUTIONAL AMENDMENTS 95
8952. The filing of a complaint with the committee pur-
suant to this article suspends the running of the statute of
limitations applicable to any violation of the provisions of
Article 2 of this chapter while such complaint is pending.
8953. The committee shall maintain a record of its investi-
gations, inquiries, and proceedings. All records, complaints,
documents, reports filed with or submitted to or made by the
committee, and all records and transcripts of any investiga-
tions, inquiries or hearings of the committee under this article
shall be deemed confidential and shall not be open to inspec-
tion by any person other than a member of the committee, an
employee of the committee, or a state employee designated to
assist the committee, except as otherwise specifically provided
in this article. The committee may, by adoption of a resolution,
authorize the release to the Attorney General or to the district
attorney of the appropriate county of any information, rec-
ords, complaints, documents, reports, and transcripts in its
possession material to any matter pending before the Attor-
ney General or the district attorney. All matters presented at
a public hearing of the committee and all reports of the com-
mittee stating a final finding of fact pursuant to Section 8950
shall be public records and open to public inspection. Any em-
ployee of the committee who divulges any matter which is
deemed to be confidential by this section is guilty of a misde-
meanor.
8954. All actions of the committee shall require the con-
currence of two members of the committee from each house.
8955. The committee may render advisory opinions to
Members of the Legislature with respect to the provisions of
Article 2 of this chapter and their application and construc-
tion. The committee may secure an opinion from the Legisla-
tive Counsel for this purpose or issue its own opinion.
Sec. 3. Section 9359.11 is added to the Government Code,
to read :
9359.11. Any contrary provisions of Section 9359.1 not-
withstanding, in computing the retirement allowance of a leg-
islator member of the Legislators' Retirement System whose
service as a legislator ended prior to the term commencing
in 1967, the salary to which the applicable formula shall be
applied shall be five hundred dollars ($500) per month, and
any increase in salary of legislators above such amount shall
be disregarded for such purpose.
Sec. 4. Section 9359.12 is added to the Government Code,
to read :
9359.12. (a) Any contrary provisions of Section 9359.1 or
Section 9360.9 notwithstanding, and subject to the further
limitations in subdivision (b), the retirement allowance of any
member of the Legislators' Retirement System who serves as
a legislator during or after the term commencing in 1967 shall
be the sum of: (1) the amount determined by application of
the formula provided by Section 9359.1 to the first five hun-
96 ASSEMBLY INTERIM COMMITTEE
dred dollars ($500) per month of salary payable to the legis-
lator at the time of his retirement, plus (2) an amount equal
to 3 percent of the amount of such salary in excess of five hun-
dred dollars ($500) per month multiplied by the number of
years the member has served in the Legislature, or two-thirds
of the amount of such salary payable to the legislator at the
time of his retirement, whichever is the lesser, plus, in the case
of members credited with service prior to the term commencing
in 1967, an amount equal to a cost-of-living increase computed
under Section 9360.9 as of January 1, 1967, on that portion of
the allowance based on five hundred dollars ($500) per month,
and said total to be further adjusted to reflect cost-of-living
increases occurring after the member's retirement as deter-
mined under Section 9360.10.
(b) During such time as he serves in any salaried public
office any retired member of the Legislators' Retirement Sys-
tem who served as a legislator during or after the term com-
mencing in 1967 shall receive a retirement allowance computed
by application of the formula set forth in Section 9359.1 to a
salary of five hundred dollars ($500), and any increase in
salary above such amount shall, for such purpose, be dis-
regarded.
Sec. 5. Section 9360.10 is added to the Government Code,
to read :
9360.10. On or before January 15, 1968, and on or before
January 15 of each year thereafter, the amount of any allow-
ances provided by this chapter and not subject to Section
9360.9 shall be adjusted by the board to reflect any increase
in cost of living occurring after January 1 of the immediately
preceding fiscal year. The average of the separate indices of
the cost of living for Los Angeles and San Francisco, as pub-
lished by the United States Bureau of Labor Statistics; shall
be used as the basis for determining the changes in the cost of
living. The cost-of-living increase shall equal or exceed 1
percent before any adjustment is made in the allowance. The
adjustment provided by this section shall be made only if it
operates to effect an increase over the allowance payable for
the calendar year immediately preceding.
Sec. 6. This act shall become operative only in the event
that Assembly Consitutional Amendment No.. 13 of the 1966
First Extraordinary Session is adopted by the people, in
which case this act shall become operative at the time the 1967
Regular Session of the Legislature is convened except that
Section 8900 of the Government Code as added by this act
shall become operative at the same time as Assembly Consti-
tutional Amendment No. 13. Upon becoming operative, the
provisions of this act shall supersede any conflicting provi-
sions of any other law.
Sec. 7. This act shall be known and may be cited as the
Gibson-Waldie-Lanterman Act.
Report of Legislative Reference Service, California Legislature, on A Study
of American States (Sid McCausland, Research Analyst):
A STUDY OF AMERICAN STATES
Purpose and Progress
(The following statement quotes liberally from the publications issued by
A Study of American States. The emphasis is on conveying the tone and
intent of the study, rather than providing an evaluation of its methods or
findings. Any critical analysis of A Study of American States prior to the
release of the study's major report next spring would be premature.)
/nfroducf/on
A Study of American States was begun in March 1965 at Duke Uni-
versity with funds from the Ford Foundation and the Carnegie Corpo-
ration. At its inception Terry Sanford, former Governor of North Caro-
lina, envisioned a two-phase program : First, an initial action phase
aimed at organizing the interstate Compact for Education, which Cali-
fornia joined last June; and second, a research project designed to
accomplish for state government what Dr. James Conant had done for
education — namely, the setting up of some priorities for interstate co-
operation and action.
Both phases of the study were begun simultaneously and work has
continued on each, although the compact demanded more time during
its organizational phase. The Compact for Education serves as an ex-
ample of the type of creative state action which Governor Sanford sees
as a necessary role for state government. The Education Commission
of the States, also known as the Compact for Education, became a
reality last summer, with an office and staff of its own, and the Study
of American States has now entered its own research phase on a full-
time basis.
Background for the Study
The term ' ' state government ' ' refers to 50 distinct entities, each with
its own history, its favored methods, its established laws and prece-
dents. Some of them have legislatures in continuous session ; some have
legislatures which meet for relatively brief periods every other year.
Some have a governor elected for two years, some for four. In some
the governor can succeed himself, in others he cannot. Some are rich,
some are poor, and all of them claim to need more money most of the
time.
State governments share one thing in common : For the last quarter
of a century, their effectiveness has been declining. The nature of their
diversity makes it difficult to work with them as a group. The tendency
has been to dismiss them as obsolete and unmanageable, and to turn
to the federal government for help. However, no one has seriously sug-
gested that we do away with state government, and even a casual look
shows that they play a role in almost every aspect of our lives.
(97)
98 ASSEMBLY INTERIM COMMITTEE
They pass most of our laws. They control most of our courts. They
make the ground rules for all of our local governments. They run most
of our prisons. They operate and support public schools, colleges, and
universities. They build and repair roads and highways. They operate
hospitals. They control major areas of taxation. They regulate banking.
They borrow money.
They do all this and more, usually with a sense of desperation,
waging activities on many fronts, frequently without guidelines other
than those half -forgotten lessons from history, without independent
standards of judgment or time to make needed preliminary studies.
Through these 50 state governments flow more than $45,000,000,000
of public money each year.
A Study of American States
The goal of the present study is to help renew interest in the re-
vitalization of state government within the federal system. Its method
will be to publish reports, in book form, written for popular appeal,
demonstrating where state governments now stand, and indicating some
of the actions state governments and citizens might take to improve
the effectiveness of the states. The initial efforts of the study have been
to investigate the future role of state government in the federal sys-
tem with special emphasis on the following questions :
1. How can the states exercise their responsibilities more effectively
and efficiently?
2. What are the proper relationships of the states to each other, to
their local governments, and to the federal government ?
The organization of the Education Commission of the States, under
an interstate compact, has been the major tangible accomplishment of
the study. This phase served several purposes. It enabled the study
to demonstrate official state interest in action for improvement. It has
helped establish the reputation of the study in a manner that should
assure broader attention to future action and reports.
The major product of this study is still in the development stage,
though several short articles have been published. The general themes
of these reports can be found in the words of Governor Sanf ord :
Our question is not whether states should be retained and
strengthened. Our question is how can we do it.
I do not believe we should aspire to weaken the federal govern-
ment. . . . Kather I believe we should strengthen the states. . . .
One of the characteristics of any system is that a vacuum does
not long exist when a service needs to be performed. Because of
the states ' inactivity and timidity, the federal government has tried
to fill their role.
(But monumental) social problems confront us at the same mo-
ment that the federal government is beset by increasingly numer-
ous and time-consuming problems of national security and interna-
tional relations. Our margin for error in (international diplomacy)
has decreased to the point of being nonexistent, and the time he
must spend on considering the ramifications of alternative actions
CONSTITUTIONAL AMENDMENTS 99
leaves a President less and less time for the consideration of do-
mestic social problems.
It is possible to cite several recent federal programs which ap-
pear hastily conceived and poorly coordinated. The best that can be
said for many is that they provide a partial stop-gap solution;
the worst . . . that they are ineffectual and wasteful. ... As Gov-
ernor Pat Brown recently pointed out, while the governors are get-
ting increased responsibility for administering federal programs,
they are rarely consulted before the legislation is drafted.
(For example) The federal manpower training program served
an excellent purpose. The trouble was the delay in getting courses
approved under procedures too complicated and cumbersome. . . .
In one program we had 287 recruits and, by the time we got federal
approval, only 118 were left. . . .
However, we must not allow ourselves to get caught blindly cas-
tigating the federal government for the weaknesses of state gov-
ernment. . . . My good friend Carl Sanders of Georgia ... re-
cently told a meeting . . . that "We've carried as much govern-
ment to Washington as any group and laid it on the doorstep
there because we didn 't want the responsibilities. ' '
So when we begin to talk about the evils of centralization of
power in Washington and the decline of state authority, ... it
might be well to remember the words of . . . Pogo, who said : "We
have met the enemy, and they is us."
I think it is time for the states to get to where the people are
. . . and where the problems are. It is time to reassert their his-
torical role in the American experiment. For the states were once
the innovators in this country, and they must innovate again. The
first antitrust statutes were developed by the states ; the first max-
imum-hours-minimum-wage legislation was developed by the states ;
the states fashioned the first antidiscrimination statutes, the first
child labor laws, the first unemployment insurance.
Proposals
. . . What can the states do to make themselves more effective
instruments of government? ... In North Carolina, we realized
early that if we did not begin to think about the future, we were
abandoning that future to haphazard growth. . . . We called in
the department heads of all the agencies and asked three questions :
Where were we in . . . 1900? Where are we now? Where do you
hope to be in 1976?
My hope was that we could develop a master plan for the future
in every field of the state 's activity. . . .
I think each state should have an office which formulates long-
range plans of action for every area of government . . . located
in the Governor 's office, because planning has to be relevant to the
everyday task of government, and it needs to be fed back into the
system, rather than evolve into just another report for the shelf.
In addition to the need for long-range planning, Governor Sanford
also feels that serious consideration must be given to the collection and
100 ASSEMBLY INTERIM COMMITTEE
dissemination of the cumulative experiences of the various Governors
and their states.
(During my term as Governor) we had learned a lot, but it had
taken us a long time to learn it. Other states would have to learn
our lessons all over again.
For that reason, we need an agency serving all the states which
could collect and store the experiences of past Governors and their
states. The Council of State Governments can probably do this.
. . . We need this cumulative knowledge and the experience gained
from past battles in planning our future ones. . . .
Governor Sanford also stresses the need for the revision of state tax
structures. But the major thrust of his study tends to center on the
need for a strong Governor who can channel and direct the energies
of state government.
The executive branch should be strengthened. In too many states
the executive power is too diffused. Wouldn't it be better to con-
centrate executive authority and responsibility in the Governor,
the one state official the voters can and do watch ?
But, saying that the Governors must be able to exert strong
leadership implies a great deal more than just that. No Governor
can be strong with a weak or sick legislature, an invidious interest
group atmosphere, a weak political party structure or public
apathy. What this means is that by truly strengthening our Gov-
ernors, we revitalize state government. But we focus our effort
rather than take a shotgun approach.
Conclusion
In the immediate future, A Study of American States will concen-
trate on the major report of the study which should be ready for
publication in early 1967.
There will also be a number of articles, speeches, and pamphlets on
aspects of state government, incorporating proposals and techniques for
state initiative in specific areas of the greatest needs.
The essential purpose of this study is to stimulate public concern
and debate over the frequent unwillingness of the states to act; to
suggest policies and techniques to improve the ability of state govern-
ment to act quickly and effectively ; to demonstrate their potentials for
good if they do act ; and to offer concrete ideas and proposals for recog-
nizing and responding to new priorities.
In the final analysis Governor Sanford believes that ' ' The American
people will respond to state government when state government re-
sponds to the needs of the American people. ' '
A STUDY OF AMERICAN STATES
Selected References
September 27, 1966
The following publications from Governor Terry Sanford 's "A
Study of American States" have been presented to the Assembly In-
CONSTITUTIONAL AMENDMENTS 101
terim Committee on Constitutional Amendments for inclusion in the
committee 's library by the Assembly Legislative Reference Service :
"A Study of American States," Statement by Terry Sanford, Wash-
ington, D.C., April 6, 1965 (4 pages).
"Study of the Future Role of States," The Ford Foundation, Pub-
lic Affairs, New York, (undated), (6 pages).
"A Study of American States," Press Conference Release by Terry
Sanford, Washington, D.C., April 6, 1965 (3 pages).
"New Era Ahead for Your State," Nation's Business, July 1965,
pp. 56-62.
"Where the Action Is," Speech by Terry Sanford to Midwestern
Governor's Conference, Mackinac Island, September 21, 1965 (8
pages).
"A Study of American States, Annual Report," Duke University,
Durham, North Carolina, July 1966 (8 pages).
"Poverty's Challenge to the States," Law and Contemporary
Problems, Duke University School of Law, Durham, North Caro-
lina, winter 1966, pp. 77-89.
102
ASSEMBLY INTERIM COMMITTEE
A SUMMARY OF EFFORTS ON BEHALF OF
CONSTITUTIONAL REVISION IN THE UNITED STATES
SINCE 1950
States*
Constitutioiial
conventions
Called
(a)
Call
rejected
(b)
Constitutional
commissions and
study groups
(c)
Initi-
ative
(d)
Remarks
Alaska.
1955
1949-1956.
Arizona
California. . .
Connecticut.
Florida
Georgia.
Hawaii.
Idaho..
Illinois.
Iowa...
Kansas
Kentucky.
Louisiana.
Maine
Maryland
Massachusetts .
Michigan
Minnesota-
Mississippi.
Missouri...
Nebraska
New Hampshire
New Jersey
New Mexico.
New York...
North Carolina
North Dakota .
Ohio
Oklahoma
Oregon
Pennsylvania.
Puerto Rico
Rhode Island...
South Carolina.
Tennessee
Texas.
1965
1959
1965
1950
1960
1960
1956
1961
1958
1955
1958
1962
1951
1956,
59 &64
1966
1967
1957
1952
1950
1951,
3 and 6
1951
1955, 8
& 1964
1953, 9
& 1965
1959, 1963L
1950 — Citizens Consti-
tutional Commission ;
1954E; 1955L; 1958E;
19668
1963s
1947-1956.
1965s
1965»
1957, 1961E
1950, 1960 & 64s Legis.
Res. Com.
Louisiana State Law
Institute
1961s.
1965E.
1962s.
I960, 1961E.
1948, 1962E.
1964; Leg. Council.
1963s
1963s
1956s, 1958L, 1959s,
1965s
1957L
Leg. Res. Com..
1949
1931-1953
1953, 1961L--
1957s, 1963E.
1961L
1948-1950...
Legislative Council.
1957L
X
X
X
X
(c) ConConPrepCom (Constitutional Conven-
tion Preparatory Commission)
Arizona Academy studying revision
(a) Recommendations approved by electorate;
(b) Rejected by Legislature
(c) Seeking revision of Constitution which allows
amendments to only one article per election
(a) Legislature sitting as convention and draft-
ing new Constitution; (c) Drafted Constitu-
tion, later invalidated by federal court for
apportionment clause
(c) ConConPrepCom
(c) Report due 12/1/66
Adopted amendment to simplify revision in 1950
(b) Electorate has rejected call for convention
every decade for 100 years
(c) Reported late 1962 — no further news
(b) Calls repeatedly defeated at polls
(c) No news of fate of recommendations
Has the longest Constitution in the U.S. (over
200,000 words); effort for section-by-section
continuous revision; no definitive action re-
ported to date
(c) No report on fate of recommendations
(c) ConConPrepCom in anticipation of call
(a) Joint session of Legislature serves as conven-
tion; (c) Final report scheduled for 1967
1958 call defeated because of strict constitutional
provisions related to call; subsequent use of
initiative ease the call requirements and the
1961 Convention was called to draft a new
Constitution. Cost of Convention: $2,075,000
(b) Defeated by Legislature; (c) Continuous re-
vision efforts since 1962 — no report on
success
(b) Defeated by Legislature
Has successfully called six conventions, four of
which have resulted in basic changes to the
Constitution; (b) Voters
(b) Defeated by Legislature; (c) Effort to estab-
lish continuous revision
(a) Call every seven years; means for all con-
stitutional changes; (c) ConConPrepCom
(a) Limited to apportionment; 1947 Conven-
tion framed present Constitution
(c) Report due in 1967
(b) Defeated by electorate; (c) Interested in
continuous revision ('56 and '65 are ConCon-
PrepCom's)
Issued report in 1965
(b) Defeated by electorate; (c) ConConPrep
(c) ConConPrepCom; (b) Defeated by voters
(c) Drafted new Constitution, rejected by State
Senate in 1963 over apportionment
(b) 2 rejected by Legislature, 1 by electorate;
(c) 1957 ConConPrep recommended no con-
vention; 1963 still pending
Interested in continuous revision
(a) '58 limited to elections
'64 limited to apportionment
(c) ConConPrepCom— no call issued
All limited; '65 was on apportionment
No provisions in Constitution for calling con-
vention; (c) Reported in 1961, no report on
outcome of recommendations
CONSTITUTIONAL AMENDMENTS
103
A SUMMARY OF EFFORTS ON BEHALF OF
CONSTITUTIONAL REVISION IN THE UNITED STATES
SINCE 1950 — Continued
Constitutional
conventions
Constitutional
commissions and
study groups
(c)
Initi-
ative
(d)
States*
Called
(a)
Call
rejected
(b)
Remarks
Utah
Special study due in 1967
1949-50, 1959s
(c) No report of outcome
Virginia. .
1956
(a) Limited to study and recommendations on
19651'
segregation of schools after Supreme Court
decisions re education
(c) ConConPrepCom
19571-
(a) Call on 1965 ballot, no report of outcome;
Wisconsin
1960, 1963E
(c) two out of three recommendations
approved
* Excluding states for which no data was immediately available, as follows: Alabama, Arkansas, Colorado, Delaware,
Indiana, Montana, Nevada, South Dakota and Wyoming. Of these, Arkansas, Colorado and Nevada have the con-
stitutional initiative noted in Column "d."
L Commission created by legislative action.
E Commission created by executive action.
s Commission created by statute.
Compiled from numerous sources including the following:
The Book of the States, 1949-1966, Council of State Governments, Chicago.
Sturm, Albert L., "State Constitutional Commissions: Fifteen Years of Increasing Use," State Government, winter
1966, pp. 56-63.
Prepared by the Assembly Legislative Reference Service, August 31, 1966.
L-17S1— 100 12-66
printed in California office of state printing
1M
ASSEMBLY INTERIM COMMITTEE REPORT
1965-1967
Volume 27 Number 5
FINAL REPORT OF THE
ASSEMBLY INTERIM COMMITTEE ON
CONSTITUTIONAL AMENDMENTS
House Resolution No. 710(d)
THE INITIATIVE AND THE EFFECTIVE
DATES OF STATUTES
MEMBERS OF THE COMMITTEE
EDWARD E. ELLIOTT, Chairman
JACK R. FENTON, Vice Chairman
ROBERT E. BADHAM NICHOLAS C. PETRIS
JOHN L. E. COLLIER ALFRED H. SONG
CHARLES J. CONRAD GEORGE A. WILLSON
MILTON MARKS GEORGE N. ZENOVICH
JAMES R. MILLS
FRANCES MORTON, Secretary
Published by ihe
ASSEMBLY
OF THE STATE OF CALIFORNIA
HON. JESSE M. UNRUH HON. CARLOS BEE
Speaker Speaker pro Tempore
HON. GEORGE N. ZENOVICH HON. ROBERT MONAGAN
Majority Floor Leader Minority Floor Leader
JAMES D. DRISCOLL
Chief Clerk
THE INITIATIVE AND
THE EFFECTIVE DATES OF STATUTES
A Report of the Assembly Interim Committee
on Constitutional Amendments
1965-1966
ACKNOWLEDGMENT
The committee expresses its thanks to Mr. Terry Baum, Principal
Deputy, Office of the Legislative Counsel, Mr. Edward F. Nowak,
Deputy, Office of the Legislative Counsel, Mr. Sid McCausland, Re-
search Analyst, Assembly Legislative Reference Service, Mrs. Marjorie
Loheit, Assembly Secretary, and Mr. Timothy Lemucchi, who served
as consultant for the committee from October 1, 1965, to April 15, 1966,
for their assistance in conducting meetings and preparing material for
the work of the committee.
(4)
TABLE OF CONTENTS
Page
Letter of Transmittal 7
Part I — Initiative
Meetings 11
Witnesses 13
Findings 15
Recommendations 15
CHAPTER 1
The Initiative and Its Purpose 17
CHAPTER 2
Problems and Proposed Changes Referred for Study 21
CHAPTER 3
Other Significant Testimony 27
CHAPTER 4
Summary 31
Part II — Effective Dates of Statutes
Meetings 37
Witnesses 37
Findings 39
Recommendations 39
The Problem and Possible Remedies 39
APPENDICES
Assembly Constitutional Amendment No. 3 55
Assembly Constitutional Amendment No. 7 58
Assembly Constitutional Amendment No. 21 59
Assembly Constitutional Amendment No. 23 . — 61
States Having Provision for the Initiative in Their Constitutions 63
Number of Initiatives on Ballot since 1912 and Subject Matter 67
(5)
2— L-1994
LETTER OF TRANSMITTAL
Assembly Chamber, State Capitol
Sacramento, January 2, 1967
Hon. Jesse M. Unruh, Speaker of the Assembly
and Members of the Assembly
Assembly Chamber
Sacramento, California
Dear Mr. Speaker and Members :
Your Interim Committee on Constitutional Amendments, established
by House Resolution Number 710(d), 1965 Regular Session, submits
herewith the second of two final reports of its activities. This report is
on the subjects of the initiative and the effective dates of statutes.
The reports contain the committee's findings and recommendations
on the subjects referred to it for interim study by the Assembly Rules
Committee.
Respectfully submitted,
Edward E. Elliott
Chairman
Members:
Jack R. Fenton, Vice Chairman
Robert E. Badham Nicholas C. Petris
John L. E. Collier Alfred H. Song
Charles J .Conrad George A. Willson
Milton Marks George N. Zenovich
James R. Mills
(7)
PART I
THE INITIATIVE
PART I
The Initiative
Meetings
The following is a list of meetings on the subject of the initiative
held during 1965-1966 :
November 17, 1965 San Francisco
December 13-14, 1965 Los Angeles
January 13, 1966 Montebello
January 14, 1966 Pico Rivera
(11)
LIST OF WITNESSES
November 17, 1965
Mr. Thomas Casstevens, Political Science Specialist from the Institute
of Governmental Studies, University of California
Dr. Nancy Jewell Cross, Menlo Park
Mr. Grandvel A. Jackson, Community Organization Representative,
Human Rights Commission of San Francisco
Mr. Timothy Lemucchi, Consultant, Assembly Committee on Constitu-
tional Amendments
Mr. Joseph Robinson, President of Robinson and Company, San Fran-
cisco
Mrs. Edward Rudin, Representative, League of Women Voters of
California
December 13, 7965
Mr. Charles A. Barrett, Assistant Attorney General, Sacramento Office
of Attorney General
Mr. Leon Cooper, Chairman, Advisory Committee, Democratic State
Central Committee of Southern California
Mr. Timothy Lemucchi, Consultant, Assembly Committee on Constitu-
tional Amendments
Mr. Richard L. Patsey, Special Counsel to California Constitution Revi-
sion Commission
Honorable Bruce Sumner, Judge of Superior Court, Orange County,
and Chairman, California Constitution Revision Commission
Mrs. Carmen H. Warschaw, Chairman, Democratic State Central Com-
mittee of Southern California
December 14, 1965
Mr. Herbert M. Baus, Baus & Ross Company, Public Relations Adver-
tising, Los Angeles
Mr. Lee Blincoe, Los Angeles
Mr. Robert L. Hamm, County Clerk and Recorder, Ventura County
Mr. William G. Sharp, County Clerk, County of Los Angeles
January 13, 1966
Mr. George Feinberg, Chief of the Representation Division, California
State Employees ' Association
Mr. John F. Fisher, Executive Officer, State Personnel Board
Mr. Timothy Lemucchi, Consultant, Constitutional Amendments Com-
mittee
Mr. Richard L. Patsey, Special Counsel, Constitution Revision Com-
mission
(13)
14 ASSEMBLY INTERIM COMMITTEE
January 14, 1966
Mr. John F. Fisher, Executive Officer, State Personnel Board
Mr. L. H. Halcomb, Jr., Deputy Officer, Little Hoover Commission
Mr. Richard L. Patsey, Special Counsel, Constitution Revision Com-
mission
Honorable Leo J. Ryan, Assemblyman 27th District
Mr. Richard E. Sherwood, Member, Commission on California State
Government, Organization and Economy
THE INITIATIVE
Findings
1. The provision in the first phase revision of the State Constitution
which provides for the qualification of statutory initiatives by a
lesser percentage than constitutional initiatives, should help to
avoid cluttering up the State Constitution with matter enacted by
initiative that is not of such a nature as belonging properly in
the state 's fundamental law.
2. Assembly Bill 742 (Marks) of the 1965 General Session of the
Legislature, providing for an explanation by the Legislative Coun-
sel in the ballot pamphlet of the effect of an affirmative and a
negative vote, while tested only at one election, appears to be a
substantial step toward avoiding the confusion in the public mind
as to the effect of ballot measures which was clearly evident in
the 1964 state general election. The committee observed no evi-
dence of this type of widespread confusion at the 1966 general
elections.
3. The contention that the initiative has been used almost exclusively
during recent decades by socalled "special interest groups, " while
containing some validity, is an oversimplification of a complex
matter. The operation of special interest groups advancing par-
ticular causes is inherent in the processes of our form of govern-
ment. Such socalled "special interest" groups have included
commercial interests, teachers' organizations, senior citizen or-
ganizations, organized labor, etc.
4. The Legislature has acted responsibly in recent years in endeavor-
ing to make the initiative more meaningful.
5. The committee believes that continuing scrutiny of the use of the
initiative in order to curb any future abuses and to improve its
functioning is needed.
6. The committee believes that the right of the initiative is one that
should be preserved. It expresses its strong support of it as one
of those rights that should be reserved to the people. It is a safe-
guard that along with the referendum and recall should always
be available to the people though the need for their use may
seldom arise.
Recommendations
1. That further study be given to the feasibility of legislation pro-
hibiting employers from requiring their employees to circulate
initiative petitions during their on-duty hours or as a condition
of employment during their off-duty hours.
2. That further study be given to extending the time for circulating
and qualifying initiative petitions from the time of certification
of title by the State Attorney General.
(15)
CHAPTER 1
The Initiative and Its Purpose
Article IV of the California Constitution reserves to the people the
power known as the initiative. This right of the people was placed in the
state's Constitution in 1911 during a period in which the referendum,
recall, and initiative were being widely adopted throughout the United
States.
The initiative is essentially a form of the exercise of direct democ-
racy. In its employment citizens acting in concert take direct action in
proposing the enactment of legislation instead of acting through elected
representatives. While instances of the people making laws in this
fashion can be traced back to ancient times, Switzerland appears to
have pioneered in its acceptance in the modern era. In the 19th century
the Swiss Federal Constitution provided that any laws or resolutions
of general application and not of an urgent character must on demand
of eight cantons, or 30,000 voters, be submitted to the people for a vote.
By 1888, the Swiss procedure of direct legislation was familiar to
many groups in both England and the United States and the desirabil-
ity of adopting direct legislation as a defense against unpopular legis-
lation was widely discussed. The first large, well-organized body in the
United States to favor adoption of the initiative and referendum at
the state level was the American Federation of Labor, which officially
supported the idea in 1892.
In that same year the National People's Party, an outgrowth of the
Farmer's Alliance Party and certain labor organizations in the cities,
adopted a resolution at their first national convention recommending
the adoption of the initiative and referendum. Four years later, in
1896, when the National People's Party came to power in South Dakota,
a constitutional amendment favoring the initiative and referendum was
passed in the South Dakota Legislature. The amendment, after being
submitted to a popular vote, became part of the state 's Constitution in
1898. By 1910, eight states — Utah, Oregon, Montana, Oklahoma, Mis-
souri, Michigan, Arkansas and Colorado — had followed South Dakota's
lead by adopting both the initiative and referendum as amendments to
their Constitutions. The following states today provide for legislative
initiatives :
Alaska
Massachusetts
Ohio
Arizona
Michigan
Oklahoma
Arkansas
Missouri
Oregon
California
Montana
South Dakota
Colorado
Nebraska
Utah
Idaho
Nevada
Washington
Maine
North Dakota
The following states provide for initiative
»nts :
on constitution
Arizona
Michigan
North Dakota
Arkansas
Missouri
Ohio
California
Nebraska
Oklahoma
Massachusetts
Nevada
Oregon
(17)
18 ASSEMBLY INTERIM COMMITTEE
It is interesting to note that the reform movement leading to the
adoption of the initiative and referendum laws by the states occurred
toward the early part of this century. Actually, the first state, South
Dakota, adopted it in 1898. Sixteen states had adopted the initiative
and referendum procedures by 1914. By 1928, only four other states
had adopted the initiative. After that no state adopted any initiative
or referendum procedure except for the newly admitted state of Alaska
(1959).
In modern popular government the initiative was apparently devel-
oped either because of dissatisfaction with state legislatures or the con-
viction that this tool should be available to the people as a safeguard
and protection in cases where the legislature failed to act on a matter
in which there was extensive interest. As now constituted the California
constitutional provisions on the initiative provide that an initiative
measure amending the State Constitution can qualify through obtain-
ing valid signatures of registered voters equal to 8 percent of the vote
for the office of Governor at the last general election. In 1966 this was
468,259 signatures. Under California's first phase constitutional revi-
sion, statutory initiatives can qualify with signatures of registered
voters amounting to 5 percent of the votes for Governor at the last
election for the office. The State Elections Code provides for an initial
90-day period for the collection of signatures after the petition has
been titled by the Attorney General and an additional 40-day period
if the petition fails to qualify in this time. The general procedure as
outlined in the code provides that a group submit a proposed initiative
measure wth a $200 fee to the Attorney General, who in turn titles it
and makes a brief summary. The petitions are cleared through county
clerks or county registrars of voters and sent to the Secretary of State.
Of 311 ballot measures approved by the people between 1912 and
1964, 12J percent have been initiatives. Seven and four-tenths percent
of the amendments to the State Constitution were by means of the
initiative. Sixty-eight percent of the ballot measures submitted to the
people during this period were placed on the ballot by the Legislature.
Legislative proposals account for over 70 percent of those adopted.
In testifying before the committee, Assistant Attorney General
Charles A. Barrett stated :
' ' I am in charge of the Government Law Section of the Attorney
General's office and in my section the summaries and titles which
are provided for under the Constitution are prepared. I have a
short statement that I could go over and at the end I would like
to have a few comments on some of the testimony that previously
was given.
"Requests for titling of the initiative measures must be for-
warded to the office of the Attorney General under the provisions
of Article IV, Section 1, of the California Constitution. A $200
fee is charged to the proponent at the time of receipt of the appli-
cation in accordance with the provisions of Section 3501 of the
Elections Code. That fee is returned to the proponent if he is suc-
cessful in having the initiative measure qualified for the ballot,
otherwise the fee is paid into the General Fund of the state.
"Although the Constitution and the Elections Code sections do
not specifically spell out that the proponent must be a registered
CONSTITUTIONAL AMENDMENTS 19
voter, the provisions of Article IV, Section 1, paragraph 13, and
Section 3501 of the Elections Code have been interpreted by all
Attorneys General to require that a registered voter be identified
as a specific proponent for a proposed initiative measure.
"When the application is first received, it is quickly reviewed
to make sure that all necessary provisions are included in the pro-
posed draft. Quite frequently, we bring to the attention of the
proponent some provision which would preclude us from preparing
a title.' '
CHAPTER 2
Problems and Proposed Changes Referred for Study
At the Constitutional Amendments Interim Committee hearing on
December 13 and 14, 1965, in Los Angeles, Chairman Elliott declared :
"I would like to emphasize again what was stated at the pre-
vious hearing of this committee and what was stated in the press
releases that have been issued in conjunction with these hearings
on the initiative. That is, that the matter of the outright repeal of
the initiative is not under consideration by this committee. I know
that no serious thought has been given by the Legislature to repeal-
ing the initiative. This is a fundamental right that the people
have, and I think there is strong feeling that this right of the
people should be retained.
"What the committee is interested in is whether or not the
initiative is being used in the fullest and fairest manner and
whether or not this committee of the Legislature can make recom-
mendations to the Legislature which would facilitate its use in
the fullest and fairest manner."
During the 1965 General Session, three constitutional amendments
were introduced which proposed changes in the use of the initiative.
These amendments by Assemblymen Gordon Winton, Joe A. Gonsalves,
and Alfred E. Alquist were referred to the committee for interim
study. There were also a number of bills concerning the initiative that
were introduced during the 1965 General Session.
While only the three constitutional amendments were referred for
interim study, the deliberations were not limited to their contents
alone.
The following is the Legislative Counsel's digest of ACAs pertain-
ing to initiatives proposed in 1965 :
AC A 3 (Winion) 1 965 General Session
Limits initiative petitions to the proposing of statutes, thus
restricting the proposing of constitutional amendments to the
Legislature.
Authorizes Legislature, by a two-thirds vote, to repeal or amend
an initiative statute without a vote of the electorate.
Requires initiative proposals to receive a majority vote of those
voting at the election at which the measure is submitted, rather
than only a majority of those voting on the particular proposition.
AC A 7 (Gonsalves) 1965 General Session
Provides that if initiative measure proposes to prohibit a speci-
fied activity or to terminate an existing right or privilege, the
measure shall be submitted to the voters in such form that they
may vote in the affirmative if they favor the right to engage in the
activity or the continuance of the right or privilege.
Requires the Attorney General to frame the question to be sub-
mitted to the people with respect to any such measure.
(21)
3— L-1994
22 ASSEMBLY INTERIM COMMITTEE
ACA 23 (Alquist) 1965 General Session
Provides that initiative measure proposing constitutional amend-
ment shall not be adopted unless approved by two-thirds, rather
than a majority, of the electors voting thereon.
The following are pertinent statements made at the Constitutional
Amendments Committee meeting in San Francisco on November 17,
1965:
"My name is Thomas W. Casstevens. I am a research political
scientist with the Institute of Governmental Studies at the Univer-
sity of California but I speak for myself since the Institute of
Governmental Studies, of course, takes no position or views ex-
pressed in this statement. My remarks will stress the basis for
reform of the statewide initiative process and will analyze in detail
some proposed reforms. A copy of my recent article on the initia-
tive is amended to the typescript of my remarks since that article
provides some supplementary information.
"California's statewide initiative is a legacy of the progressive
era. Under the leadership of Governor Hiram W. Johnson, the
initiative process was written into the State Constitution in 1911
by a virtually unanimous vote of both houses of the Legislature
and by a margin of almost exactly 3 to 1 in a special statewide
election. Repeal of the initiative process has never appeared to be
a practical political prospect, but from time to time, the process
has been modified by constitutional amendments, legislative acts
and judicial decisions.
"Further changes and reforms are being advocated at the pres-
ent time on the grounds that the statewide initiative no longer
functions as intended by the Progressives. The Progressives con-
ceived of the initiative as a mechanism for breaking the power of
a wealthy lobby — the so-called 'Southern Pacific machine' — and
for preventing the resurgence of such a lobby. Thus, the initiative
was originally intended to be an instrument of the volunteer citi-
zens; it was not intended to be a tool of the special interest pres-
sure groups.
"Perhaps the initiative functioned as intended for several dec-
ades after its adoption, but in recent years, the initiative has rarely
been used by citizens as such, and has frequently been used by
large and/or wealthy special interests. Thus, by a curious reversal
of history, the initiative now tends to serve the pressure groups.
California's phenomenal population boom, with the concurrent
growth of the electorate, has fundamentally affected the initiative
process. The basic formula for qualifying an initiative petition
has remained the same since 1911, namely, the signatures of a
number of registered voters equal to 8 percent of the vote in the
preceding gubernatorial election are needed if the initiative is
submitted directly to the people. The signatures of a number of
registered voters equal to 5 percent of the vote in the preceding
gubernatorial election are needed if the initiative is submitted to
the Legislature before being submitted to the people. The latter
indirect initiative proceeding has been used very rarely, so subse-
quent remarks will refer primarily to initiatives submitted directly
to the people.
CONSTITUTIONAL AMENDMENTS 23
"The number of signatures needed to qualify an initiative peti-
tion has increased enormously since 1911, and continues to grow.
After the 1910 gubernatorial election, 30,858 signatures were neces-
sary. By contrast, 468,259 signatures were necessary after the 1962
gubernatorial election. The number of signatures needed to qualify
an initiative at the present time is greater than the total guberna-
torial vote in 1910.
' ' The number of required signatures is now so great that only a
very large, dedicated and highly organized group of volunteer pe-
tition circulators could hope to obtain enough signatures. Conse-
quently, professional petition circulators are customarily hired for
this task. The cost was about 10 cents per valid signature in the
1930 's, and roughly 30 to 40 cents per valid signature in the
1960 's, a 400 percent increase in 30 years. The cost per valid peti-
tion has increased even more due to the increase in the number of
required signatures. The cost of a valid petition has increased in
round figures, from about $10,000 in the 1930 's to about $125,000
in the 1960 's — a 1,200 percent rise in 30 years. Even if allowance
is made for the general inflation of the last 30 years, the cost per
signature has increased by a multiple of 2 and the cost per petition
has increased by a multiple of 5. I can only give these rough and
approximate figures since I am not in the business of circulating
petitions. This committee would, in my opinion, perform a valuable
public service by calling witnesses who are in that business, and
by making the actual total cost of recent petitions a matter of pub-
lic record.
"The demand for (and cost of) professional petition circulators
can be expected to increase further as California 's population, elec-
torate and signature requirements continue to grow. The initiative
process, as a result, can be expected to become still more the pre-
serve of wealthier and wealthier — or larger and larger — organiza-
tions.
"The trend in campaign costs has, of course, reenforced this
tendency for the initiative to become a tool of wealthy interests."
MR. JOSEPH ROBINSON: I am Joe Robinson, President of
Robinson and Company, San Francisco.
CHAIRMAN ELLIOTT : Mr. Robinson, do you have any state-
ment that you would like to make to the committee regarding the
initiative and with particular reference to the constitutional
amendments proposing changes in the initiative which were intro-
duced at the last session of the Legislature ?
MR. ROBINSON : The only statement I would like to make as
far as the initiative and referendum business is concerned is that I
think this state, in having growing pains every four years, the
number of signatures required is getting out of proportion. I
would like to see that reduced. There might be many other organi-
zations instead of having to get 700 and some odd 1,000 gross
names to get 500,000 valid signatures every four years with the
state growing, it might get up to 6 or 700,000 names. I think when
it gets up to that point it might become impossible to get the sig-
24 ASSEMBLY INTERIM COMMITTEE
natures within the time limit allowed by the Constitution. I would
rather see the thing go down to maybe 300,000 signatures.
MRS. EDWARD RUDIN : I am Mrs. Edward Rudin, represent-
ing the League of Women Voters of California ; I am a member of
the board of directors of the league. The measure I wish to speak
about is ACA 7, which provides that initiatives be submitted
to the voters in such form that they may vote in the affirmative
if they favor the right to engage in that activity. In the interest
of making ballot propositions more easily understood by the voter,
the League of Women Voters of California support ACA 7, which
requires that initiatives be worded so that a yes vote would indi-
cate approval of the activity covered by the initiative. For many
years the league has worked for clear and democratic election
procedures to safeguard the rights of the voter. This has included
interest in the effective operation of the initiative, which has pro-
duced many solid accomplishments during the half-century since
its adoption in California, such as the state civil service system,
the State Executive Budget Law, and permanent registration.
We welcome measures such as ACA 7, which we feel would make
the initiative measures clearer and more understandable to the
voter and facilitate his informed participation in government. We
believe since it is demonstrably possible for the Legislature itself
to propose to the people constitutional amendments worded so
that a yes or no vote is clear, it should also be possible to word
initiatives with similar clarity for the benefit of the voters. The
right to initiate is a peoples' right, not just a proponents' right.
The purpose is to enable voters to express their will and adopt
the law they want, not just to enable proponents to get a law
passed. Preceding each general election, league speakers explain
the meaning of ballot measures before hundreds of groups
throughout the state. We have long recognized the difficulty and
confusion the voter faces when it is explained that if you are
against something you should vote yes, or if you are for something
you should vote no. ACA 7 would eliminate an unnecessary com-
plication the voter faces in expressing his will. The league sup-
ports ACA 7 as a positive step toward improving the initiative
which we consider an important means in a system of government
responsive to the will of the people.
MR. GRAND VEL A. JACKSON: My name is Grandvel Jack-
son. I represent the Human Rights Commission of San Francisco.
Mr. Chairman, honorable members of this committee, I am
happy to have an opportunity to speak before your honorable
committee for the purpose of discussing the initiative process. I
am particularly interested in the subject as it applies to amend-
ments to the State Constitution.
The state is spending a considerable amount of money, at the
present time, attempting to revise its Constitution into a document
that will be concise and understandable to the layman as well as
the legislator.
CONSTITUTIONAL AMENDMENTS 25
I would like to make the following points: One, a Constitution
should be relatively difficult to amend. Two, the primary responsi-
bility for legislation should be in the hands of the Legislature.
And, three, the right to amend the Constitution should be equally
available to all citizens.
During the past two years as I have pondered the pages of the
Constitution and discussed it with others, many people have
reflected the Federal Constitution, speaking of its brevity and
the manner in which it has stood the test over the centuries.
Although almost 200 years old, there have been only 24 amend-
ments. This has been so because the Federal Constitution cannot
be easily tampered with. It has been amended only to keep up
with the changing social order. I don't believe anyone in the
Legislature or any political scientist will deny that the Federal
Constitution has served its purpose for the American people.
Conversely, the State Constitution has been amended countless
times, and many other proposed amendments have failed. I submit
to you that the manner in which our State Constitution can be
amended is too attractive for those who long to change the law
for special interest.
Our Constitution is our basic law. It was so framed to protect
all of the people of the State of California, equally. But let me
point out to you that if the Constitution can be amended by a
simple majority vote, as it can be at present, this basic law will
be changed at every election. It is presently possible to amend the
Constitution of the State of California with fewer than half the
people registered to vote in the state. If, for instance, only 10 or
20 percent of the registered voters do vote, then the State Constitu-
tion can be amended with this number of people. To be a little
more explicit on this point about the 10 to 20 percent of the people
who don't go to the polls, and this very often happens, if a
measure gets 51 percent actually, fewer than 50 percent of the
people who are registered to vote amend the State Constitution. A
two-thirds majority should be required to amend the Constitution.
The primary responsibility to make laws should remain in the
hands of the Legislature. Let me hasten to add that I am not
advocating doing away with the initiative process. I realize that
in the days of Hiram Johnson the people of this state needed some
protection against big business and the corrupt politicians who
sat in the statehouse in Sacramento. Today, we do not have this
kind of Legislature and it is likely that that day has gone forever.
Being a legislator requires knowledgeable skills and our elec-
torate are .demanding that our representatives possess these skills.
For those who argue that this is a right that must be pro-
tected at all costs, let me point out that only few states in the
United States use this process. While I believe this is extra
insurance that the electorate will be protected, it is not at all
essential.
The third and final point is that I am unalterably opposed to
the practice of paying professional signature getters for the pur-
pose of placing initiative statutes before the Legislature or before
the people. This practice allows the rich and the people with
26 ASSEMBLY INTERIM COMMITTEE
special interests a decided advantage over the poor, the politically
unsophisticated, and the uneducated. It is tyrannical, it is unfair
and unjust and should be stopped.
When this matter was before the Constitution Revision Commis-
sion I offered a resolution which would have made this practice
not only unlawful but unconstitutional. The resolution was tabled.
I here again submit to you today that the Legislature should make
this an unlawful practice for the sake of all of the citizens of
California regardless of race, color, affiliation, or station.
Let me summarize : The Constitution should be rather difficult
to amend in order to preserve its meaning and form and to
protect the people of this state. Legislation should be left primarily
to the legislators who are held responsible to the electorate. The
Constitution should remain the basic document which protects
equally the rights and privileges of all of the people of this state.
The right to amend the Constitution should be equal to all the
citizens of this state. That paid professional signature takers should
be a violation of the law. A two-thirds majority should be required
to amend the Constitution.
CHAPTER 3
Other Significant Testimony
Assemblyman Gordon Winton of Merced County was one of the
authors of legislation designed to improve the California initiative
law. In an appearance before the committee at a meeting in San Fran-
cisco on November 17, 1965, he stated:
"I want to make clear that AC A 3 was not given to me by any-
body. It was my own idea — no pressure groups except if you call
myself a pressure group, well, that was it. The thing that initiated
my interest in this goes back a good many years. Part of it has
been discussed here today and that was the initiative in 1948,
which designated a Director of Social Welfare and made some
other changes. I shouldn't admit this but over some 30 years ago,
I was a political science major and my field was state govern-
ment and state administration, and even at that time I was con-
cerned about the use of the initiative process in California. I was
particularly concerned about the Constitution of the State of
California because I think all of us here know what a hodgepodge
the State Constitution is. I think most of us know that there is
only one state in the nation that has a longer constitution than
the State of California and that is Louisiana. It seemed to me
that part of the reason that it is so long is because of the fact
that measures were enacted into it by initiative process concerning
subjects which really should not be in the State Constitution.
I can refer to one which I think of offhand and that's a min-
imum salary for teachers. Why this should be an item in the
State Constitution really distresses me. For this reason, I thought
in our consideration of the revision of the Constitution in the
State of California some consideration should be given to limit-
ing the Constitution to the basic outlines of our form of govern-
ment and exclude the specifics and details. The main idea of
ACA 3 was to provide that the initiative should be limited to
statutes and not to constitutional amendments. In our cauldron
of legislative hearings, where we have a proposed constitutional
amendment, such as I do, we go through hearings in the legislative
session, amendments are offered, they may be accepted or rejected
but at least they are talked about. In all of this, we have a process
of give and take, of discussion and improvement of the proposed
amendment. When we have a constitutional amendment that is
proposed by initiative, somebody draws it up, it is put on the
ballot, there is no chance for amendment or discussion or all
the processes that we in the Legislature go through before an
amendment ever gets on the ballot. It seems to me that this is not
a wise way to amend a constitution. I think the requirement should
be there that the people must ratify an amendment to the Con-
stitution. They must do this on legislative proposed ones but I
think very often, under our present system, we find amendments
to the Constitution appearing from the initiative. Through the
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28 ASSEMBLY INTERIM COMMITTEE
initiative, many amendments fortunately are defeated. But over
the years, a great many have appeared in the Constitution which
basically, I believe, do not belong in the Constitution. I have one
amendment on the proposed ACA 3 which I would not urge you
gentlemen to consider seriously and that is the requirement that
you should have a majority of all those voting in the general
election to vote for the measure. I think a simple majority of those
voting on the initiative should be sufficient.
1 ' 1 think the initiative should be limited to statutes, and I think
the Legislature should have the right by two-thirds majority vote
to amend the statute or by a 50-percent majority vote to refer an
amendment to the people; either way. We have the one now by a
50-percent majority vote of the Legislature. "We can refer to the
people an amendment of something that has been put into the
statutes by initiative but I think that the Legislature should have
the power by a two-thirds vote to amend an initiative statute. In
studing this, I had some correspondence with North Dakota where
they have a Constitutional Revision Commission now sitting. One
of the problems in North Dakota is that they have had this two-
thirds regulation ever since they adopted the initiative process in
1914. They have allowed the Legislature to amend initiative
statutes by a two-thirds vote of each house. This is now giving
them considerable problems. Therefore, one of the recommenda-
tions I had was that the Legislature should be able to amend an
initiative measure by a 50-percent majority after it has been on
the books for five years. I think that two-thirds requirement would
be safe all the way through because we have the other process where
with a 50-percent majority we can put an amendment on the
ballot for the people to consider. From the correspondence I have,
I assume that in North Dakota they cannot put a measure on
the ballot by a 50-percent majority of each house. But in North
Dakota they found there are many statutes that were enacted by
the initiative 20, 30, and even 40 years ago, and that one-third of
the members of one house of the State of North Dakota can prevent
amendment to the Constitution. They found that this really fouled
them up. ' '
Mr. Caspar Weinberger, a former Member of the Legislature and a
prominent attorney and journalist, provided the following statement
to the committee :
1 'It has long been my feeling that the initiative in California,
under current conditions, completely fails to fulfill the objectives
that Hiram Johnson had in mind for it. As everyone recalls,
Governor Johnson recommended the adoption of the initiative
process because he felt the Legislature was not responsive to the
will of the people, and because of his feeling that the people
should have direct legislative power.
''The theory was that the people always would be able to pass
legislation they wished and needed if such legislation had been
denied to them by a legislature subservient to special interests and
CONSTITUTIONAL AMENDMENTS 29
pressure groups. As it actually worked out, the theory however
has completely failed to keep pace with the practice.
"The costs of statewide elections being what they are, it is
usually only heavily financed pressure groups that can utilize the
initiative to secure passage of measures that no representative
Legislature would dream of passing. It is, in short, now possible
for any group to qualify and place on the ballot any measure they
wish, no matter how outlandish, if they are able to spend $250,000
to $300,000.
"This comes about because of the willingness of a sufficient
number of California voters to sign any kind of petition that is
placed before them by professional signature gatherers. I believe
quite literally that if a sufficient number of signature gatherers
were employed, at say 50 cents a signature, they could gather
enough names to qualify a measure providing for the immediate
execution of the Governor. This comes about because there are few,
if any, voters who read any petition that is put before them. If
a professional signature gatherer hands 10 voters a petition with
the oral statement "Sign here to cut taxes," at least seven voters
will probably sign.
"It is true that occasionally the initiative process has been used
by large groups of volunteer workers. This occurred in 1952 when
the California Teachers Association, using thousands of volunteer
workers, qualified a measure increasing the basic state aid to public
schools.
"More often, however, the initiative is used by groups who
have put together sufficient funds to enable them to employ the
highly competent professional firms that can guarantee qualifying
any measure for the ballot. Then, if these interest groups are will-
ing to spend additional funds, they have a very good chance of
securing passage of their measure, unless other groups are also will-
ing to contribute the large sums necessary to defeat such a measure,
once it is on the ballot.
"It is scarcely conceivable that any Legislature elected by the
people would have passed the measure that later became Propo-
sition 14. It is also scarcely conceivable that any Legislature would
pass a bill making illegal the legitimate business of pay television.
It is also inconceivable that any Legislature would have passed a
measure giving a private corporation an exclusive franchise to
run a lottery — yet all three of these were qualified for the ballot
in 1964 by means of signatures gathered by professional firms.
"I have a very simple solution to propose which, I believe,
would go a long way toward eliminating the qualification of ob-
viously unwise measures, such as these, and would perhaps re-
store the initiative to the kind of procedure it was originally in-
tended to be.
"I recommend that the law be amended so as to provide that
signatures on initiative petitions, to be counted, must be signed by
the voter himself in the office of the county clerk or county regis-
trar of voters in the county seat. This would cause a little more
trouble and inconvenience to the voter, but it would ensure that
he signed only petitions in which he was sufficiently interested
30 ASSEMBLY INTERIM COMMITTEE
to incur that small, additional amount of trouble. It would also
eliminate professional signature gatherers and eliminate any ques-
tion as to whether or not misrepresentations were being made by
them as to the content of the initiative petition."
CHAPTER 4
Summary
There was some expressions of concern to the committee about the
effective use of the initiative and its fulfillment of the purpose for which
it was adopted. These concerns included use of the initiative process
and methods of qualifying initiatives, their financing, and ballot titling.
The committee found testimony often to represent vague and general-
ized mental grappling indicative of a sincere desire to improve the
initiative and avoid abuses but not productive of any concrete proposals
capable of transformation into legislative action.
This is well illustrated by the following dialogue at the December 17
meeting of the committee in San Francisco :
CHAIRMAN ELLIOTT: Mr. Casstevens, when you get right
down to it, any group that is sufficiently strong and sufficiently or-
ganized to qualify an initiative would probably be a pressure group,
would it not ? To define your terminology, when you use the words
"pressure group," any concerted effort on the part of a group
of citizens with respect to legislative activity whether it is in con-
nection with a measure before Congress or the Legislature, or to
qualify an initiative measure, constitutes action on the part of a
pressure group, doesn't it?
ASSEMBLYMAN CONRAD: That's exactly my point, Mr.
Chairman. I want to know when he says, "it seems desirable to
facilitate the use of the initiative by public-spirited citizens and
to restrict the use by pressure groups," I want to know who are
the public-spirited citizens as compared to the pressure groups.
CHAIRMAN ELLIOTT : Mr. Casstevens, what you really need
to get down to, is it not true, to use rather colored language, is the
good and evil aspect of the thing and not the pressure group.
Pressure group, in itself, is not necessarily anything of a nefarious
nature. It is the identification of a particular pressure group acting
in a manner not calculated to be in the best public interest and
even perhaps knowingly sometimes not being in the best public
interest.
MR. CASSTEVENS : I quite agree with that, Mr. Chairman. It
is quite true that if one defines one's use of "pressure group" in
a very wide sense, it does include citizens because presumably it
is composed of residents and qualified voters in California. In that
sense, any sort of organization among citizens would be a pressure
group. On the other hand, it seems to me that the sort of volun-
teer association dedicated to no special interest, I would say, the
League of Women Voters, is dedicated to no real special interest
whereas in the trade associations, say, the railroad companies, are
dedicated to a more special interest.
CONRAD : How do you classify, then, the old age pension groups
or organized labor ?
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32 ASSEMBLY INTERIM COMMITTEE
CASSTEVBNS : Well, certainly, I would say that organized la-
bor would fall, rather obviously, in what I would call a special
interest group. The old age pension groups, I suppose, to take that
famous measure to name the new director, etc., that one I would
personally classify as a special interest group.
CONRAD: How about the teachers' association?
CASSTEVENS : Well, most of these sorts of associations I would
say would fall in the area of what I have referred to as a special
interest pressure group.
CONRAD : Then, how do you segregate the good guys from the
bad guys ? In other words, what you say, the good guys should get
something on the ballot and the bad guys should be kept off. Now,
how are you going to find the good guys and the bad guys ?
Specific support was offered by the League of Women Voters for
Assembly Constitutional Amendment No. 7, 1965 General Session. Mr.
Grandvel A. Jackson, member of the San Francisco Human Relations
Commission and also of the California Constitution Revision Commis-
sion, expressed his convictions that professional petition circulation
should be prohibited and amending the State Constitution made more
difficult.
Assembly Bill 135 of the 1965 General Session of the Legislature pro-
vided for a curtailment of professional petition circulation. It was de-
feated on the Assembly floor. There continues to be considerable op-
position to such a proposal, and it appears to the committee that strong
arguments can be made on both sides of this matter. The committee
does not recommend any action in this area at this time.
The Legislature has from time to time considered improvements in
the initiative and the amending of the State Constitution. Some desir-
able changes have been made over the years. These include :
A provision that initiative proposals must conform to state budget-
ary practices (1934) j prohibition against more than one subject matter
being included in an initiative act or amendment in the State Consti-
tution (1948) ; prohibiting the name of an individual to serve in a
public office to appear in an initiative proposal (1950) ; provisions for
an analysis by the Legislative Counsel appearing in the ballot pam-
phlet (1949). Legislation was enacted in 1957 systematizing the ballot
order of propositions by providing that they will apply in this order :
(a) legislative proposals in the order determined by the Secretary of
State; (b) initiative measures in the order in which they qualify; and
(c) referendum measures in the order in which they qualify.
The latest such improvement was the passage of Assembly Bill 742
by Assemblyman Milton Marks in 1965. This bill requires the Legisla-
tive Counsel to prepare impartial analysis in general terms showing
effect of "yes" and "no" vote on ballot measure, as well as impartial
detailed analysis of measure. The law applies both to measures placed
on the ballot by the Legislature and initiative measures.
This new law met its first test at the 1966 general election. It is pos-
sible that it will meet some of the concerns expressed about the need
to make ballot measures easier for the general public to comprehend.
CONSTITUTIONAL AMENDMENTS 33
In the first phase constitutional revision and companion legislative
reform program approved by the voters as Proposition 1-a at the 1966
general election, some further improvements were achieved. In accord-
ance with one proposal made to the committee, under the first phase
revision Article IV of the Constitution now provides that statutory-
initiatives can qualify for the ballot by the collection of signatures equal
to 5 percent of the vote for Governor at the last general election instead
of the 8 percent required for initiative measures amending the State
Constitution. Remaining constitutional revision work also should en-
able the Legislature to give more attention to this general subject area,
particularly as it relates to the amending of the Constitution. Regard-
ing a related matter in the second phase of constitutional revision
due in 1968, there should be some safeguards against excessive use of
the legislative constitutional amendment.
The initiative is an important vehicle reserved to the people. The
Legislature should give continued attention to the study of its function-
ing and ways of improving its employment. All such activities should
be predicated upon the understanding that the initiative should be an
instrument carefully preserved as a basic right of the people.
PART II
EFFECTIVE DATES OF STATUTES
PART II
EFFECTIVE DATES OF STATUTES
Meetings
The following is a list of meetings on the subject of the Effective
Dates of Statutes held during 1965 :
December 13, 1965 Los Angeles
December 14, 1965 Los Angeles
LIST OF WITNESSES
December 13, 7965 — Los Angeles:
Mr. Charles A. Barrett, Assistant Attorney General, Sacramento
Office of Attorney General
Mr. Leon Cooper, Chairman, Advisory Committee, Democratic
State Central Committee of Southern California
Mr. Timothy Lemucchi, Consultant, Assembly Committee on
Constitutional Amendments
Mr. Richard L. Patsey, Special Counsel to California Constitu-
tion Revision Commission
Honorable Bruce Sumner, Judge of Superior Court, Orange
County, and Chairman, California Constitution Revision Com-
mission
Mrs. Carmen H. Warschaw, Chairman, Democratic State Cen-
tral Committee of Southern California
December 74, 7965 — Los Angeles:
Mr. Herbert M. Baus, Baus & Ross Company, Public Relations
Advertising, Los Angeles
Mr. Lee Blincoe, Los Angeles
Mr. Robert L. Hamm, County Clerk and Recorder, Ventura
County
Mr. William G. Sharp, County Clerk, County of Los Angeles
(37)
PART II
EFFECTIVE DATES OF STATUTES
Findings
1. A genuine problem exists with certain governmental agencies in
securing in sufficient time information regarding changes in the stat-
utes or new statutes. However, it is not necessary to amend the State
Constitution so as to extend the effective dates of statutes in order to
remedy this situation. In addition, amending the Constitution in this
manner would create new problems, such as a disruption of time sched-
ule for the referendum. This situation probably could be alleviated by
improving the channels of communication between the Legislature and
the local governmental jurisdictions involved.
Recommendations
1. That changes be made in the Joint Eules of the Legislature in
order to expedite information to local governmental agencies regarding
statutory changes affecting them.
The Problem and Possible Remedies
At the 1965 session of the Legislature, Assemblyman Burt Henson
introduced ACA 21, proposing to the people of the State of California
an amendment to the Constitution of the state, by amending the fourth
paragraph of Section 1 of Article IV thereof, by extending (with cer-
tain exceptions) the effective dates of statutes to January 1, after
adjournment of the Legislature sine die.
The measure was introduced at the request of the County Clerk of
Ventura County, the county Assemblyman Henson then represented in
the Legislature. It was supported by the County Clerks' Association. It
was referred to Assembly Interim Committee on Constitutional Amend-
ments for study.
A hearing was held upon this matter in Los Angeles on December 13
and 14, 1965. Additional testimony was also received in Montebello on
January 13, 1966, and in Pico Rivera on January 14, 1966.
The following testimony involving direct testimony and interro-
gation by members of the committee of Mr. William G. Sharp, Clerk of
the Superior Court for Los Angeles County, and Mr. Robert L. Hamm,
County Clerk of Ventura County appears to develop this problem and
to suggest the possible remedy:
Mr. William G. Sharp: Mr. Chairman and gentlemen, I am Wil-
liam G. Sharp. I am County Clerk and ex officio Clerk of the Su-
perior Court for the County of Los Angeles. I am here represent-
ing the County Clerks' Association at the request of our executive
committee and I am here to state our association's views and rec-
ommendations with respect to the proposition that the effective
date of new legislation be extended from the present 90-day pro-
vision to January 1st after adjournment of the Legislature.
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40 ASSEMBLY INTERIM COMMITTEE
I believe Mr. Les Brown, County Clerk of Fresno and vice
president of the association, directed a letter to the chairman of
this committee in which he briefly set forth the reasons in support
of this proposition. I have also reviewed the statement of Mr.
Hamm, County Clerk of Ventura, who apparently wrote to the
committee independently, and I might say it would certainly be
the views of the association to support both Mr. Brown's letter
and the statements by Mr. Hamm.
There is little more that I could say beyond the facts stated by
Mr. Brown and Mr. Hamm, other than to say that our county
clerks are involved in three major matters. We are concerned with
the election laws ; we are concerned with all of the matters involv-
ing the counties and the board of supervisors, and the clerk of the
board of supervisors. And, of course, the county clerk is interested
in the county clerks' laws affecting the corporations and marriage
licenses, and primarily 90 percent of his work is concerned as clerk
of the court, which involves a tremendous amount of new statutes
each session.
In our last analysis in our last session, we had the job of analyz-
ing some 5,000 bills and in excess of 2,000 which were passed. We
do this through our committees and through the legislative bill
service. Our main problem is this : We have to analyze these bills,
have a statewide meeting to discuss their impact on our offices. We
have to determine the amount of staffing that is required and go to
our board of supervisors, if necessary, to obtain their legislative
approval in giving us the additional staff that is necessary. We
have to get out publicity. We have to obtain legal opinions from
our county counsel and from the State Attorney General, and all
of this takes a considerable amount of time.
Our statewide meeting was held in the first part of September
shortly before the laws became effective, and here is the real prob-
lem. We do not have in our hands by that time the laws by which
we can make a thorough analysis. We have the bills, but sometimes
we find them somewhat dangerous to work with without somebody
meticulously checking all of the histories and the journals to de-
termine whether there have been amendments. Many times we do
not have the chaptered laws in our possession in time to give ade-
quate and accurate evaluation of the law and its impact on our
offices. In fact, the pocket supplement to the statutes is not in our
hands until after the laws are passed .
So this is our problem. Even after we have our state meeting,
we are working somewhat in the dark as to how the final bill ac-
tually reads. Then even after these meetings and after we have
had some decisions from our counsel, problems arise that we have
to resolve in an effort to acquaint the public, to acquaint the at-
torneys, and to obtain a uniform application of these laws through-
out the state. While we are doing the job now it could be done
more efficiently with a great deal more accuracy, with more ade-
quate publicity to all of the public and to the attorneys if we had
a longer period — if the laws were in our hands. And, of course,
this is impossible, I presume. At the time the Governor signs the
bill, if it could be in our hands and we had printed copies right at
CONSTITUTIONAL AMENDMENTS 41
that time and something to go on definitely, then the 90-day period
wouldn't be quite as short. But here we are struggling, trying to
get the laws so we can get this application and get our opinions
and proceed in an orderly way. I believe that's the crux of the
whole problem.
CHAIRMAN ELLIOTT: Mr. Sharp, you are aware that the
Legislature does print copies of all bills and amendments ; in fact,
the Constitution requires them to be printed at the time they are
introduced. Before a bill goes to the Governor it is printed in its
final form and available from the legislative bill room to the gen-
eral public or anyone who wants to obtain a copy. You are aware
of that, are you not ?
SHARP: Mr. Chairman, we knew that. We subscribe to the
legislative bill service and we get the bill service and all bills be-
fore they are signed. The 5,000 bills are all gone over by members
of our staff, and we generally divide this into three parts : the clerk
of the board, the clerk of the court, and the elections officers each
take a phase of it and they are responsible for their bills. But some
of our problems have come up here, I believe, I have been to some
of the meetings that last until midnight when bills are passed, and
sometimes I have left committee meetings wondering just exactly
how an amendment might turn out. We have taken the bills and
tried to determine what this final bill is going to be, but we don't
always promptly have the bill, as it is signed by the Governor, in
our hands.
CHAIRMAN ELLIOTT : The bill has to be printed before it
goes to the Governor and it is available to the general public from
the legislative bill room and, in fact, available to anyone. I fail to
see the problem as far as obtaining the printed copy of the bill is
concerned and distributing the printed copy of the bill that has
passed the Legislature and is to become a statute after the 90-day
period from the adjournment sine die of the session.
If you are referring to the codes, the printing of the codes, this
is a matter that I think would be impractical to delay the effective
date of the statute sufficiently to obtain printed copies of the codes,
as this takes a much longer period.
SHARP: We have been working with the chaptered laws and
we have had some difficulty in getting the chaptered laws promptly.
CHAIRMAN ELLIOTT : This takes time.
SHARP: I know Mr. Hite assigned us to first-class or airmail
delivery through the legislative bill room; but even with that we
have a little difficulty and, of course, we have a real good working
relationship with the Secretary of State. As soon as the Governor
signs the bill, Frank Jordan's office will notify us. There is one
problem though — they won't notify us of all of them. We have to
know the specific bills we are interested in. When the Welfare and
Institutions Code is amended and all the other codes, we have got
to look these over pretty carefully to see whether the clerk of the
court or whether the judges are interested in some particular word-
ing. Perhaps when the amendment came in we weren't concerned
about it because you didn't change the statutory time that the
clerk was to perform an act, but when it gets up to the last meet-
42 ASSEMBLY INTERIM COMMITTEE
ings of the Legislature, you may change a certain date in there that
will vitally affect us, even affect our liability. And those are some
of the problems. What I am saying is, we may say we are not in-
terested in this bill or that and so we won 't tell Frank Jordan ; but
when we get the chaptered law, we want to know and read it again
and be very sure that we are not interested in it or we are in-
terested in it. If we know the bills that we are interested in and
we definitely know that they concern us, at that point then we can
spot that bill and get a very good distribution. I might say, in our
bills last time we put out these digests. The clerk of the board
found there were 83 measures affecting about 11 codes. The regis-
trar of voters had about 158 measures affecting about 10 or 15
codes, and the clerk of the court had 78 measures affecting about a
dozen different codes. We had to watch all of these; for example,
20 bills in the Code of Civil Procedure, 11 in Civil and 1 in Cor-
porations, and 24 in the Penal Code, 14 in the Welfare and Insti-
tutions Code, and several scattered out through Probate, Revenue
and Taxation, and Vehicle Codes.
CHAIRMAN ELLIOTT : Of course, the bills are chaptered by
the Secretary of State shortly after they are signed by the Gov-
ernor. There is no great time lapse here, on the part of the Secre-
tary of State, as far as the technical job of chaptering the bills
3,nd getting the printed bill is concerned. But as far as buying
the paperbound copy of the statutes, that is, the printed statutes
that are distributed, this, of course, takes time, and usually they
are printed as they are passed and many of them are available
before the Legislature adjourns. But those that pass during the
final weeks of the session and those bills that are passed in the
final days but remain for the Governor to sign, that is, come in
that pocket-veto period, would be chaptered later on. But there
is a fairly efficient and fast operation in making the chaptered
copies available. I would say all of them would be available with-
in 30 days after the adjournment of the legislative session, all of
the printed paperbound copies of the chaptered bills.
SHARP: Mr. Chairman, really this last time we just gave up
on getting the chaptered laws. We had to rely on West to finally
get them, and we just couldn't get them. We made a number of
calls. Now, maybe they were available in some other form from
the Bill Room and maybe due to some tie-up they were unavail-
able, but we just had terrific difficulty in getting the chaptered
laws in our hands to have adequate material to do the work with.
I mean no criticism of the printing office or the distribution ; they
had too much to do at the last minute.
CHAIRMAN ELLIOTT: I am, of course, describing my ex-
perience as a Member of the Legislature receiving these publica-
tions. There would be a distribution to the Members of the
Legislature first since this is required. Now, isn't this your ex-
perience, Mr. Collier?
COLLIER: I have been listening to his testimony, and he isn't
in any more awkward position than we are. A bill has to be in
its final form before we can pass upon it, so if we even change
a date, that is in italics as is anything that is changed in a bill
CONSTITUTIONAL AMENDMENTS 43
at the last minute. So you are not in any more awkward position
than we, who have to pass upon the bill. We have to see it ourselves.
We have to examine it. We don't read all the bills that have been
introduced. We only read those bills that come before us for action.
So it seems to me that the approach for you people to be more ef-
ficient in your office is not to read all the bills but watch the daily
file and keep abreast with the bills before the Legislature. Now,
if we can do it, it seems to me that you can do it.
SHARP : We have in each of our three main offices, and Los
Angeles does most of it here. It prepares these digests for the
three respective phases of our work.
COLLIER: You are from Los Angeles County, are you not?
SHARP: Yes.
COLLIER: Now, if you were from some little county away
back in the sticks that had to look at all of them — just one clerk —
then I would say maybe your job is a little bit heavy, but in Los
Angeles County you have a staff here to give you an assist.
SHARP : Again I am saying that our main problem was in
getting the chaptered bills and, of course, then after we get them
in many cases, we have to get legal opinions — in fact, one bill
now that is not effective until January 1st is the new divorce
statistics law. We are still going to come up with new problems.
COLLIER: You know we have a high-salaried man in Sac-
ramento for Los Angeles County and maybe that should be one
of his jobs, to be sure that you get a copy of the bill.
CHAIRMAN ELLIOTT : Perhaps ; also something could be done
in regard to requiring the Legislature to make these publications
available more expeditiously to public officials, such as yourself.
SHARP: I think so. All we want is a tool for getting bills
promptly. I said there were about 300-and-some-odd bills we were
very vitally interested in that were finally signed by the Governor.
And we have to go over those very carefully and get our opinions,
determining what staffing, determining all these facts.
COLLIER: But they come trickling to you. They don't come
to you all at once.
SHARP : That 's true. Those that are passed early, we can have
pretty well out of the way and then we only have to watch to see
whether there is another bill that might supersede it or change it.
So, we have a lot of that done. As soon as your Legislature
commences we have a person assigned almost full time to watch
and read the legislative bill service. In fact, I have an attorney
on my staff who spends a good portion of his time right from the
opening of the session of the Legislature. I don 't think, personally,
it is a really critical matter. If we could just get a little faster
distribution of some of the final bills into our hands. I am a
little worried with the great volume and the impact on our rela-
tion with the courts and getting all this out to all the counties
throughout the state, for which we have taken the responsibility to
do. I would like to get the final bill as it was finally passed in our
hands so that we know what we are definitely talking about. Some
of our digest was a little bit wrong, our mistake, perhaps, in work-
44 ASSEMBLY INTERIM COMMITTEE
ing with the bill itself and not picking up some amendment that
was included in the journal, and we just didn't pick up.
COLLIER: May I make a suggestion to you?
SHARP : Yes, sir.
COLLIER: Los Angeles County is a member of the County
Supervisors Association. We have to pay a nice stipend to that
outfit and they have a pretty good staff. We have to pay a nice
stipend to the lobbyist for Los Angeles County up there. It ap-
pears to me as long as they are on the scene and they have to
watch those bills as well as we watch them up there, that there
could be closer communication and liaison between those lobbyists
up there and the County of Los Angeles.
FENTON: Don't you have the facilities of the county counsel
available to you for opinions on these bills, too?
SHARP: Oh, yes, and the Attorney General, too. Many times
we are involved in other counties so we prefer to get the Attorney
General so that we have state uniformity in certain areas.
Yes, we work very closely with George Wakefield. Of course,
George and those boys at Sacramento have to somewhat rely on
our offices. They are not acquainted with the whole field of legal
procedure. As you well know, you get into a lot of technicalities
and they will want to know the impact, or what the problems are,
and we are in communication with that office. But i am sure that
Mr. Wakefield and his staff up there would have a tremendous job
if he was following 5,000 or 2,000 bills and not giving the concen-
tration on, say, the 350 that we are interested in.
FENTON : Yes, but they certainly can give you every bill that
was passed and let you cull them over for yourself to determine.
You have a staff. You can throw them out fast enough; just have
George or someone give you all the bills that have been passed.
No problem.
I think, as Mr. Collier said, it is just a question there of liaison
with people who are being paid to represent the County of Los
Angeles.
SHARP: I think it's merely getting distribution, Mr. Collier
and Mr. Fenton. I don't think it is a real critical thing if we can
get the distribution in our hands. But even with county counsel,
when I called them and asked for distribution on a particular bill,
I will get it done ; but by the time we get the chaptered bills and
get them in our hands, we are working under quite a deadline.
I think we can straighten that out.
CHAIRMAN ELLIOTT : Mr. Sharp, the referendum provisions
were placed in Article IV of the Constitution for the purpose of
permitting members of the public or groups of citizens to referen-
dum an act passed by the Legislature if they felt they disagreed
with the legislation. That was the purpose of it.
Your concern and your sponsorship of ACA 21 of the 1965
General Session was because, was it not, of the problems you have
in regard to gearing your operation to new legislation that becomes
effective after the Legislature adjourns? Is that the problem?
SHARP: Yes, more or less, that is the problem.
CONSTITUTIONAL! AMENDMENTS 45
CHAIRMAN ELLIOTT : If there is a problem in that regard,
bills can be delayed in the effective date of the bill, as you know.
That is frequently done. In fact, you cited an example.
SHARP : AB 347, yes. I think we had a big problem two years
ago when you overhauled the Welfare and Institutions Code ex-
tensively. Of course, we got the job done. Some judges were down
working from 7 in the morning until 10 at night revising all of
the forms when the whole attitude toward the juvenile was
changed, and this was quite a major overhaul — I think it was four
years ago.
CHAIRMAN ELLIOTT : One of the problems would be if there
were a referendum of an act after the general session, the referen-
dum measure would not go on the ballot until the next general
election, which would be the year later ; but if there were a special
election, there would be a problem in regard to delay on the
referendum.
I think you have brought an important problem to our attention
even though the committeee members might not feel we have to
deal with it at this point as drastically as recommending an amend-
ment to the State Constitution to extend the 90-day referendum. I
think the committee should explore the feasibility of some legisla-
tion to expedite the availability of all these printed materials
relative to legislative activity on the part of the Legislature to
public officials like yourself so you can have them in your hands
as quickly as is possible. You can be assured that the committee
will look into this matter and explore the feasibility of recommend-
ing legislation.
COLLIER: Relative to the subscription to all the journals
and bills, you get all of those, don't you? All the journals, his-
tories and bills ?
SHARP: Yes.
COLLIER: When a bill is passed by the Legislature up there,
by both houses, how soon do you get that bill ? Is that in the mail
to you the next day? What kind of service are we rendering up
there? Now, right there may be the step that maybe you are sub-
scribing and that subscription should pay for the cost of this.
Maybe there is a lag in time from the time that the bill passes
until they put it in the mail to you.
CHAIRMAN ELLIOTT : I think there is a problem there, Mr.
Collier. I think we need to go into this and perhaps have somebody
who could appear before the committee later on at a future session
from the bill room explain their procedure to us so we could
examine it.
SHARP : There very definitely is a problem and I think that
is a good suggestion, Mr. Chairman. It might be explored. I know
that many times I have been asked for bills that I don't have and
I've called Wakefield in Sacramento or tried to get something out
of the bill room mailed down to me. Even in normal distribution,
we just don't get it. Of course, if I know what bill I am interested
in that is one thing. But normally we are looking at 5,000 bills
during a session. We are glancing over all of them, and then these
bills are sent to our division chiefs if it affects criminal, or juvenile,
46 ASSEMBLY INTERIM COMMITTEE
or psycho, or the probate — it goes to these men for analysis
and back to the man I have in charge of it and I presume other
men who work have the same difficulty getting their bills. But these
things are routed around routinely. Our main delay that we are
thinking about is the chaptered laws when at the end you wind up
with 2,000 bills that are finally signed, so we can prepare a digest
and help all the counties in the state and the county clerks, for
uniformity.
Having the definite bill in front of us, we know exactly what the
law reads. We have stubbed our toes several times this last session
just by not having the exact wording as it finally came out right
in our hands. If we had been interested in just two or three of the
300-and-some bills that do affect us, then we might have made a
specific effort.
Then you have to kick this around and have a meeting and send
this to the other county clerks to see their problems, go back to
the counsels and back to the Attorney General for an opinion, and
then even that leads to other questions. The lag that we have
experienced, and I think that I am accurately stating it, has been
a little serious to us but perhaps not to the extent where you may
want to extend the time. If we have the proper distribution, I
think we might have it solved.
CHAIRMAN ELLIOTT : Mr. Sharp, if you did receive the final
printed copy of the chaptered bill within 30 days of the end of the
90-day referendum period, would that be sufficient ?
SHARP : That would give us 60 days ?
CHAIRMAN ELLIOTT : It would only give you 30 days. In
other words, when you receive this under the present time schedule
around the latter part of August, the bill would go into effect
under the present time schedule around the last part of September.
SHARP: I think that we could work within that if we had
everything in our hands. I know Mr. Hite, the deputy, feels that
way. Some of the county clerks feel that perhaps you think we are
not doing our job — we're laying down here on this thing and
asking for too much mercy on it. Mr. Hite, I know, feels, on these
election laws, that he could work within the present system. And
I know there are some county clerks that are very concerned about
it, and I think that if we had it within the 30 days we could live
with it very nicely.
MR. ROBERT L. HAMM: I guess I'm responsible for AC A 21
being introduced, having asked Assemblyman Henson to introduce
the legislation. I think I can only add to what has already been
said here. There are two problems, gentlemen. One of them is
getting information which has been very elaborately touched upon ;
the other one is implementing the legislation after we get the
information.
Now, I hope you appreciate that when the Legislature is in
session and you are going on about your business introducing and
passing legislation that, after you adopt it all, we have to imple-
ment this. I represent one of the smaller counties, allegedly the
fastest growing county in the state, and we do not have the com-
CONSTITUTIONAL AMENDMENTS 47
plete staff of the larger counties like Los Angeles, San Diego,
Alameda, and various others.
Our business goes on day after day regardless of whether the
Legislature meets and adopts legislation or not and the problem
comes in implementing the legislation that you gentlemen adopt.
We have to change our training once we get the information ; this
is a problem, and Mr. Sharp touched upon this very fully. After
we get the information, we have to notify members of the bar ; we
also have to contact the recorder; we have to contact title and
escrow companies, realtors, and the problem is implementing the
legislation once you adopt it. It has been my experience that 90
days after the Legislature adjourns for bills to become effective
is just not sufficient.
"We also have training and procedural manuals that have to be
updated and we have to get the information to our staff. If my
research is correct, the last time the Constitution was changed
making legislation effective was in 1911. In 1911, there were some
836 chapters enacted. Of the 836, approximately 600 amended one
code, the Political Code. Now this year we had, as you well know,
2,070 bills enacted. There are more people to contact; there are
more attorneys; there are more people to deal with; you have
larger staffs; you have your sophisticated area of administration
that we have today and you have to have procedural manuals.
There just is not sufficient time to implement the legislation once
you get it.
CHAIRMAN ELLIOTT: Mr. Hamm, I think I'll ask Mr. Le-
mucchi to respond to this question.
Mr. Lemucchi, doesn't your research show that the 90-day
provision was placed in the Constitution in 1912 ; that is, recom-
mended by the Legislature in 1911 and passed in 1912? Is that
your recollection ? The point I am getting at is that this provision
was placed in the Constitution to permit the members of the public
to referendum an act by the Legislature and it did not relate to
the matter of effective dates of statutes. Doesn't your research
show that a statute became effective immediately upon passage
prior to that time unless otherwise provided?
COMMITTEE CONSULTANT LEMUCCHI: That is correct.
CHAIRMAN ELLIOTT : So actually prior to the referendum
provision being placed into the Constitution, as far as I know —
maybe our research will show that this isn't quite the case — but
actually the statutes went into effect immediately and there was
more of a problem timewise with regard to implementing the legis-
lation unless another effective date was placed in the statute.
HAMM : I have no quarrel with the referendum procedure what-
soever, and I imagine it would have to be amended to give us
additional time.
CHAIRMAN ELLIOTT : All I am trying to point out is that
the 90-day period did not relate actually, only indirectly, to the
effective date of the statute.
HAMM: That is correct.
CHAIRMAN ELLIOTT : It was for the purpose of permitting
the people the opportunity to referendum and there was no con-
48 ASSEMBLY INTERIM COMMITTEE
sideration apparently prior to this with this implementation prob-
lem.
HAMM: Yes, when this was first looked at, and when I called
Assemblyman Henson in Ventura County, your colleague, we
thought that all we would have to do was amend a section of the
Government Code, and then research found that we had to amend
the Constitution to make the effective date of legislation.
CHAIRMAN ELLIOTT: However, we can provide in the
statute itself for an effective date in advance.
HAMM: This is fine, if you will do so. Now, on the amend-
ments to the Code of Civil Procedure on the new divorce record-
ings, you allowed us until the first of the year there and we have
met many times. I have met with the same committee and on the
committee is Mr. Sharp, meeting with the Bureau of Vital Sta-
tistics. I think we have worked out a reasonable and practical
solution to implement the legislation whether it be good, bad, or
indifferent. We have it and I think we can make work what we
have. The real problem, gentlemen, there is just not enough time.
Now, you know what happened two years ago. There were ex-
traordinary and special sessions following the regular session. This
clogs the legislative bill room and the printing machinery and this
holds us from getting the information.
I can't afford a set of "West codes in my office. I have Deering
because I don't want to buy a complete set of West. We buy
whatever we want of Deering, and I don't have 50 percent of the
pocket parts for Deering 's codes yet. Now, I do have West's,
through the kindness of the Secretary of State. He received a few
copies from the publisher and passed them out, I guess, to his
friends, and I have a copy of the West Legislative Service with
all the chapters, and without this I just couldn't operate.
Now, one answer to get quicker distribution may be that the
Legislature adopt and enact legislation that assigns a distribution
that is automatic and when a bill is introduced the various offices
of state, county, and city governments that are affected would be
put on there at the time the bill is introduced. When it goes
through the legislative process there would be automatic distribu-
tion to cities, county clerks, welfare directors, recorders, judges of
the courts, probation officers, and such as this. This might be your
answer and we might get quicker distribution. In this way, we
would not have to read some 5,000 bills that are introduced. We
do get the daily history and the journal. I do not subscribe to the
legislative bill service, and I hope you appreciate that not all of
us have the financial as well as staff facilities to work with like
large counties such as Los Angeles, San Diego and San Francisco.
CHAIRMAN ELLIOTT : It appears to me your suggestion that
we have some sort of date in the law or rules of the Legislature
providing copies by statute actually, and that there be prompt
delivery to the affected public offices of copies of legislation after
it has been enacted into law, might be an answer to this problem.
Do you think if you had a 30-day period just before the effective
date of the statute, that would be sufficient to provide for the
implementation ?
CONSTITUTIONAL AMENDMENTS 49
HAMM: No, definitely not. We have a 90-day period now and
this is not sufficient.
CHAIRMAN ELLIOTT: You don't actually have the 90-day
period always. You do if you have a copy of the bill prior to
then you might at the present time have much less time.
HAMM: We have superior court forms that are changed by
legislation. I don't know how many attorneys there are on the
committee, but, as you know, we now have State Bar-approved and
Judicial Council-approved superior court forms. We have one form,
I can't recall the title of it now, that came down approved by the
Judicial Council, I think four days after September 17th. Now,
from this form we have to go out and make copies of this and
make distribution of this form. I think we got it on the 20th or
21st, something like this, and we are still 30 to 45 days from going
through the channels of getting a purchase order and getting
copies and then getting distribution. It's not that we are crying
that we can't do our job, and I hope this is not the inference that
is taken. We just want to do a better job with implementing the
legislation that has been enacted. That's all.
CHAIRMAN ELLIOTT: And you feel that this is a matter of
receiving copies of bills sooner?
HAMM : I think this is part of it, yes.
FENTON : What assurance would you have with extra time that
Judicial Council would get it to you in time anyhow?
HAMM: I think they would be able, with more time, to get
approved forms to us. Our business goes on day in and day out.
I mean the fact that the Legislature met doesn't mean that we
have less business. We have to do our daily routine work as well as
take care of and implement the new legislation, and I think you
gentlemen appreciate that those of us on the operating level who
are administrators have a problem in implementing the legislation
that the Legislature enacts. And we can't say, "Now just hold off
all the business that's coming in for six months until we get this
worked out and get it in a nice and orderly fashion. ' ' Our business
goes on every day whether the Legislature meets or not.
CHAIRMAN ELLIOTT: You realize, of course, that there is
some legislation passed by the Legislature which does not come
within the scope of urgency legislation so it cannot be placed into
immediate effect. It needs to go into effect as soon as possible after
the signing period and that an additional 90 days would be too
long. For example, increase in benefits for recipients of public
assistance and this sort of thing.
HAMM: I have no quarrel with that type of legislation that
has an urgency measure at all.
CHAIRMAN ELLIOTT : This would not be urgency legisla-
tion, it would not be legislation that could be enacted as urgency
legislation but still needs to go into effect within the 90-day period
or as soon as possible after it is signed. If the period were auto-
matically extended another 90 days then it would have the effect of
delaying the effective date of these statutes that need to go into
effect earlier.
50 ASSEMBLY INTERIM COMMITTEE
HAMM : Yes, this is true. However, I think the Legislature has
the power to make an effective date on any legislation if it so de-
sires based upon the knowledge of the Legislature and the needs of
the legislation.
CHAIRMAN ELLIOTT : No, we don't have that power unless
it is an urgency measure.
HAMM: That's right.
CHAIRMAN ELLIOTT: There are certain prohibitions
against passing an urgency measure. There are certain measures
that wouldn't be proper to pass as urgency measures even if we
might technically get by and pass them as urgency measures.
HAMM : Oh, you can put an effective date in the bill.
CHAIRMAN ELLIOTT: After the 90-day period. We could
not make it effective prior to that, unless it was an urgency meas-
ure.
COLLIER: Mr. Chairman, this is just an administrative prob-
lem in carrying out the functions up there of getting it in the mail
and that is a simple thing because if the counties would supply a
self -addressed envelope and you had a mailing, like the sergeant at
arms gets the bills and puts them on our desks, this thing could be
resolved so simply. It is just a case of manpower right now, as I
see it, or maybe we have the manpower and it is not being used. So
I think this is a simple thing. If it passes today and you had it in
the mail by day after tomorrow, your problem would be solved,
would it not?
HAMM : Yes ; I hope you appreciate, Mr. Collier, that we don 't
get the same kind of service that you get in Sacramento.
COLLIER : I 'm saying now, provided we had that service to
you that you would get it day after tomorrow.
HAMM : It would be a big help, and I think that perhaps the
idea of an automatic distribution might be the thing.
COLLIER: That is what I am talking about.
HAMM : Where it is automatically distributed to those respon-
sible for implementing the legislation.
COLLIER: Right. I see nothing wrong with that and if it
takes legislation for us to do it, I would certainly cooperate with
you to give them that kind of legislation.
HAMM : If there were an automatic distribution this would be
real helpful. I take the legislative histories home at night ; there
isn't time during the day, and read them over and check them off
and then I ask my secretary to send for the bills. You can 't always
tell from the synopsis of the bill that has been introduced whether
it affects you or not. There are many times when you read the brief
synopsis of the bill and it still doesn't tell you. So she sends to
Sacramento, through either Assemblyman Henson or Senator La-
gomarsino ; we get them back and it is just an automatic back and
forth. If we had an automatic distribution then we are not going
to have to read 5,000 bills to cull out the 500 that we are interested
in and are affected by.
CHAIRMAN ELLIOTT : It is very important that you get the
bills as introduced, as amended, and then as passed. I assume you
want to follow the bill.
CONSTITUTIONAL AMENDMENTS 51
HAMM: Yes, very definitely.
CHAIRMAN ELLIOTT : Then, if there is action on the bill
you would want to obtain the final form of the bill.
HAMM : Yes.
In the delineation of this problem through this testimony, corrective
measures are suggested. Changes in Article IV contained in the first
phase constitutional revision approved by the voters on November 8,
1966, also render the proposed change embodied in ACA 21 less certain
of achieving its objective. The committee does deduce from testimony
given at its hearings and other information it received that there is a
problem and that consideration should be given to amending the Joint
Rules of the Legislature so as to facilitate information to public agen-
cies regarding legislation that would affect them.
APPENDICES
CALIFORNIA LEGISLATURE— 1965 REGULAR (GENERAL) SESSION
Assembly Constitutional Amendment No. 3
Introduced by Assemblyman Winton
January 4, 1965
REFERRED TO COMMITTEE ON RULES
Assembly Constitutional Amendment No. 3 — A resolution to
propose to the people of the State of California an amend-
ment to the Constitution of the state, by amending the first,
second, and sixth paragraphs of Section 1, and amending
Section lb of Article IV, thereof, relating to the initiative.
Resolved by the Assembly, the Senate concurring, That the
Legislature of the State of California at its 1965 Regular Ses-
sion commencing on the 4th day of January 1965, two-thirds
of the members elected to each of the two houses of the Legis-
lature voting therefor, hereby proposes to the people of the
State of California that the Constitution of the state be
amended as follows :
First — That the first paragraph of Section 1 of Article IV
be amended to read :
Section 1. The legislative power of this state shall be
vested in a Senate and Assembly which shall be designated
"The Legislature of the State of California," but the people
reserve to themselves the power to propose laws and amend
mcnts to the Constitution , and to adopt or reject the same,
at the polls independent of the Legislature, and also reserve
the power, at their own option, to so adopt or reject any act,
or section or part of any act, passed by the Legislature. The
enacting clause of every law shall be ' ' The people of the State
of California do enact as follows : ' \
LEGISLATIVE COUNSEL'S DIGEST
AC A 3, as introduced, Winton (Rls.). Initiatives.
Amends Sees. 1 and lb, Art. IV, Cal. Const.
Limits initiative petitions to the proposing of statutes, thus restricting the pro-
posing of constitutional amendments to the Legislature.
Authorizes Legislature, by a two-thirds vote, to repeal or amend an initiative
statute without a vote of the electorate.
Requires initiative proposals to receive a majority vote of those voting at the
election at which the measure is submitted, rather than only a majority of those
voting on the particular proposition.
(55)
56 ASSEMBLY INTERIM COMMITTEE
Second — That the second paragraph of Section 1 of Article
IV be amended to read :
The first power reserved to the people shall be known as the
initiative. Upon the presentation to the Secretary of State of
a petition certified as herein provided to have been signed by
qualified electors, equal in number to 8 percent of all the
votes cast for all candidates for Governor at the last preceding
general election, at which a Governor was elected, proposing
a law of amendment to the Constitution , set forth in full in
said petition, the Secretary of State shall submit the said
proposed law of amendment to tho Constitution to the electors
at the next succeeding general election occurring subsequent
to 130 days after the presentation aforesaid of said petition,
or at any special election called by the Governor in his dis-
cretion prior to such general election. All such initiative peti-
tions shall have printed across the top thereof in 12-point
blackface type the following: "Initiative measure to be sub-
mitted directly to the electors. ' '
Third — That the sixth paragraph of Section 1 of Article
IV be amended to read :
Any act 7 or law of amendment to the Constitution submitted
to the people by cither initiative of referendum petition and
approved by a majority of the votes cast thereon, at any elec-
tion, and any act or law submitted to the people by initiative
petition and approved by a vote equal in number to a ma-
jority of the voters voting at the particular election at which
the act or law is voted upon, shall take effect ^\e days after
the date of the official declaration of the vote by the Secretary
of State. No act7 or law of amendment to the Constitution,
initiated or adopted by the people 7 shall be subject to the
veto power of the Governor, and no act 7 or law of amendment
to the Constitution, adopted by the people at the polls under
the initiative provisions of this section, shall be amended or
repealed except by a vote of the electors, or by a two-thirds
vote of the members elected to each house, unless otherwise
provided in said initiative measure ; but acts and laws adopted
by the people under the referendum provisions of this section
may be amended by the Legislature at any subsequent session
thereof. If any provision or provisions of two or more measures,
approved by the electors at the same election, conflict, the
provision or provisions of the measure receiving the highest
affirmative vote shall prevail. Until otherwise provided by
law, all measures submitted to a vote of the electors, under the
provisions of this section, shall be printed, and together with
arguments for and against each such measure by those in favor
of, and those opposed to, it shall be mailed to each elector in
the same manner as now provided by law as to amendments
to the Constitution, proposed by the Legislature ; and the per-
sons to prepare and present such arguments shall, until other-
wise provided by law, be selected by the presiding officer of
the Senate.
CONSTITUTIONAL AMENDMENTS 57
Fourth — That Section lb of Article IV be amended to read :
Sec. lb. Laws may be enacted by the Legislature to amend
or repeal any act adopted by vote of the people under the
initiative, to become effective only when submitted to and ap-
proved by the electors unless the initiative act affected per-
mits the amendment or the repeal without such approval. The
Legislature shall by law prescribe the method and manner
of submitting such a proposal to the electors. A law may be
enacted by the Legislature to amend or repeal any act adopted
by vote of the people under the initiative, without submitting
such law to the electors, if the law is passed by a two-thirds
vote of all the members elected to each house.
58 ASSEMBLY INTERIM COMMITTEE
CALIFORNIA LEGISLATURE— 1965 REGULAR (GENERAL) SESSION
Assembly Constitutional Amendment No. 7
Introduced by Assemblyman Gonsalves
January 6, 1965
REFERRED TO COMMITTEE ON RULES
Assembly Constitutional Amendment No. 7 — A resolution to
propose to the people of the State of California an amend-
ment to the Constitution of the state, by adding to Article
IV thereof a new section to be numbered le, relating to
initiative measures.
Resolved by the Assembly of the State of California, the
Senate concurring, That the Legislature of the State of Cali-
fornia, at its 1965 Regular Session commencing on the 4th
day of January, 1965, two-thirds of the members elected to
each of the two houses of the Legislature voting therefor,
hereby proposes to the people of the State of California that
the Constitution of the State be amended by adding Section le
to Article IV thereof, to read:
Sec. le. An initiative measure proposing to prohibit a
specified activity or terminate an existing right or privilege
shall be submitted to the people in such form that they may
vote in the affirmative if they favor the right to engage in
the activity or the continuance of the right or privilege.
At the time the Attorney General prepares a title and sum-
mary of the chief purpose and points of any such initiative
measure, he shall also prepare the question to be submitted to
the people, which question shall be so framed that the people
will be enabled to vote in the affirmative if they favor the
right to engage in the activity proposed to be prohibited or
the continuance of the right or privilege proposed to be ter-
minated. The question shall be printed on the ballots imme-
diately to the right of the ballot title of the measure.
LEGISLATIVE COUNSEL'S DIGEST
ACA 7, as introduced, Gonsalves (Rls.). Initiatives.
Adds Sec. le, Art. IV, Const.
Provides that if initiative measure proposes to prohibit a specified activity or to
terminate an existing right or privilege, the measure shall be submitted to the voters
in such form that they may vote in the affirmative if they favor the right to engage
in the activity or the continuance of the right or privilege.
Requires the Attorney General to frame the question to be submitted to the people
with respect to any such measure.
CONSTITUTIONAL AMENDMENTS 59
CALIFORNIA LEGISLATURE— 1965 REGULAR (GENERAL) SESSION
Assembly Constitutional Amendment No. 21
Introduced by Assemblyman Henson
(Senator Lagomarsino, coauthor)
February 4, 1965
REFERRED TO COMMITTEE ON CONSTITUTIONAL AMENDMENTS
Assembly Constitutional Amendment No. 21 — A resolution
to propose to the people of the State of California an
amendment to the Constitution of the state, by amending
the fourth paragraph of Section 1 of Article TV thereof,
relating to the effective dates of statutes.
Resolved by the Assembly, the Senate concurring, That the
Legislature of the State of California at its 1965 Regular
Session commencing on the 4th day of January, 1965, two-
thirds of the members elected to each of the two houses of the
Legislature voting therefor, hereby proposes to the people of
the State of California that the Constitution of the state be
amended by amending the fourth paragraph of Section 1 of
Article IV, to read:
The second power reserved to the people shall be known as
the referendum. No act passed by the Legislature at a budget
session or an extraordinary session shall go into effect until 90
days after the final adjournment of the session of the Legis-
lature which passed such act, except acts calling elections, acts
providing for tax levies or appropriations for the usual cur-
rent expenses of the state, and urgency measures necessary for
the immediate preservation of the public peace, health or
safety, passed by a two-thirds vote of all the members elected
to each house. Acts passed by the Legislature at any general
session shall go into effect on the 1st day of January after final
LEGISLATIVE COUNSEL'S DIGEST
ACA 21, as introduced, Henson (C.A.). Statutes: effective dates.
Amends par. 4, Sec. 1, Art. IV, Cal. Const.
Changes effective date of statutes passed at general sessions to January 1, after
final adjournment, except that Legislature may by majority vote specify in any
statute an effective date between the 90th day after final adjournment and the fol-
lowing January 1. Retains effective date of 91st day after final adjournment for
statutes passed at budget sessions and extraordinary sessions.
60 ASSEMBLY INTERIM COMMITTEE
adjournment, except acts calling elections, acts providing for
tax levies or appropriations for the usual current expenses of
the state, and urgency measures necessary for the immediate
preservation of the public peace, health or safety, passed by a
two-thirds vote of all the members elected to each house; pro-
vided, however, that the Legislature at any general session by
a majority vote of all the members elected to each house may
specify in any act that it shall go into effect on any date be-
tween the 90th day after final adjournment and the 1st day
of January, after final adjournment. Whenever it is deemed
necessary for the immediate preservation of the public peace,
health or safety that a law shall go into immediate effect, a
statement of the facts constituting such necessity shall be set
forth in one section of the act, which section shall be passed
only upon a yea and nay vote, upon a separate roll call
thereon ; provided, however, that no measure creating or abol-
ishing any office or changing the salary, term or duties of any
officer, or granting any franchise or special privilege, or cre-
ating any vested right or interest, shall be construed to be an
urgency measure. Any law so passed by the Legislature and
declared to be an urgency measure shall go into immediate
effect.
CONSTITUTIONAL AMENDMENTS 61
CALIFORNIA LEGISLATURE— 1965 REGULAR (GENERAL) SESSION
Assembly Constitutional Amendment No. 23
Introduced by Assemblyman Alquist
February 9, 1965
REFERRED TO COMMITTEE ON CONSTITUTIONAL AMENDMENTS
Assembly Constitutional Amendment No. 23 — A resolution to
propose to the people of the State of California an amend-
ment to the Constitution of the state, by amending the
sixth paragraph of Section 1 of Article IV thereof, relating
to initiative measures.
Resolved by the Assembly, the Senate concurring, That the
Legislature of the State of California at its 1965 Kegular Ses-
sion commencing on the 4th day of January, 1965, two-thirds
of the members elected to each of the two houses of the Legis-
lature voting therefor, hereby proposes to the people of the
State of California that the Constitution of the state be
amended by amending the sixth paragraph of Section 1 of
Article IV thereof to read :
An initiative measure which proposes an act or law shall be
adopted if approved by a majority of the electors voting there-
on. An initiative measure which proposes an amendment to the
Constitution shall be adopted if approved by two-thirds of the
electors voting thereon. Any act, law or amendment to the Con-
stitution submitted to the people by either initiative or referen-
dum petition an4 approved fey a majority of the vetes east
thoroon, at any election, shall take effect five days after the date
of the official declaration of the vote by the Secretary of State.
No act, law or amendment to the Constitution, initiated or
adopted by the people, shall be subject to the veto power of the
Governor, and no act, law or amendment to the Constitution,
adopted by the people at the polls under the initiative provi-
LEGISLATIVE COUNSEL'S DIGEST
ACA 23, as introduced, Alquist (C.A.). Initiative measures.
Amends 6th para., Sec. 1, Art. IV, Const.
Provides that initiative measure proposing constitutional amendment shall not be
dopted unless approved by two-thirds, rather than a majority, of the electors voting
hereon.
62 ASSEMBLY INTERIM COMMITTEE
sions of this section, shall be amended or repealed except by a
vote of the electors, unless otherwise provided in said initiative
measure; but acts and laws adopted by the people under the
referendum provisions of this section may be amended by the
Legislature at any subsequent session thereof. If any provision
or provisions of two or more measures, approved by the electors
at the same election, conflict, the provision or provisions of the
measure receiving the highest affirmative vote shall prevail.
Until otherwise provided by law, all measures submitted to a
vote of the electors, under the provisions of this section, shall be
printed, and together with arguments for and against each such
measure by those in favor of, and those opposed to, it shall be
mailed to each elector in the same manner as now provided by
law as to amendments to the Constitution, proposed by the
Legislature ; and the persons to prepare and present such argu-
ments shall, until otherwise provided by law, be selected by
the presiding officer of the Senate.
CONSTITUTIONAL AMENDMENTS
63
States Having Provision for the Initiative in Their Constitutions
TABLE VI
State and
pear accepted Statutory initiative Constitutional initiative
Alaska Direct; 100 electors, then 10% No constitutional initiative
1959 electors from f election dis-
tricts
Arizona Direct; 10% electors Direct; 15% electors
1911
Arkansas Direct ; 8% electors, £ signa- Direct ; 10% electors, £ signa-
1910 tures from at least 15 coun- tures from at least 15 coun-
ties ties
California Direct and Indirect; 8% elec- Direct; 8% electors
1911 tors for direct, 5% for in-
direct
Colorado Direct ; 8% electors Direct ; 8% electors
1910
Idaho Direct ; as determined by Legis- No constitutional initiative
1912 lature. Stat. Sec. 34-180. 10%
electors
Maine Indirect ; 10% electors No constitutional initiative
1908
Massachusetts Indirect ; 3% electors Indirect ; 25,000 electors
1918
Michigan Indirect; 8% electors None (eliminated in 1962 re-
1913 vised constitution)
Missouri Direct ; 5% electors in each of Direct ; 8% electors in each of
1908 § Congressional districts § Congressional districts
Montana Direct ; 8% electors in at least No constitutional initiative
1911 § of counties
Nebraska Direct; 7% electors, with 5% Direct; 10% electors, with 5%
1912 in each of § counties in each of § counties
Nevada Indirect; 10% electors Direct; same as for statutory
1912 initiative
New Mexico No statutory initiative None (banned from any future
1911 initiative clause added to Con-
stitution)
North Dakota — Direct ; 10,000 electors at large Direct ; 20,000 electors at large
1914
Ohio Indirect; 3% electors, plus 3% Direct and Indirect; 10% elec-
1912 if Legislature fails to act tors
Oklahoma Direct; 8% electors Direct; 15% electors
1907
Oregon Direct; 8% electors Direct; 10% electors
1902
South Dakota— Indirect ; 5% electors No constitutional initiative
1898
Utah Direct and Indirect; as deter- No constitutional initiative
1900 mined by Legislature, Stats.
Sec. 20-11; 10% electors for
direct, 5% for indirect from
majority of counties
Washington Direct and Indirect; 8% elec- No constitutional initiative
1912 tors
NOTE : In most states percentage of signatures on petitions is based on total vote for
Governor in preceding general election. In Colorado the basis is total vote for
Secretary of State ; in Oklahoma the basis is highest total vote cast for any state
office ; in Oregon the basis is total vote for Supreme Court Justice.
SOURCE : "Initiative and Referendum in Wisconsin and Other States," Wisconsin
Legislative Reference Bureau, Informational Bulletin 65-4, July 1965.
64 ASSEMBLY INTERIM COMMITTEE
Statutory Provisions Pertaining to Paid Signatures on Initiative
and Referendum Provisions
Colorado
1 ' There shall also be attached to each such petition a further affidavit
of each person circulating such petition, that he has neither received
nor entered into any contract whereby in the future he will receive
any money or other thing of value in consideration of or as an induce-
ment to the circulating of such petition by him, and that he has not
directly or indirectly paid and has not entered into any contract
whereby he will in the future pay any money or other thing of value
to any qualified elector for the purpose of inducing or causing such
elector to affix his signature to such petition. " {I960 Perm. Supp. Colo-
rado Revised Stats., sec. 70-1-6.)
"Any person, corporation, or association of persons who shall directly
or indirectly pay to or receive from, or agree to pay to or receive from
any other person, corporation or association or persons, any moneys
or other thing of value in consideration of or as an inducement to the
circulation of any initiative or referendum petition, or consideration
of or as an inducement to the signing of any such petition, shall be
guilty of a felony ..." (Rev. Stats., 1963, sec. 70-1-10.)
Idaho
"It shall be a felony for any person to offer, propose or threaten
to do any act mentioned in this section of or concerning any petition
mentioned in sections 34-1801-34-1822, for any pecuniary reward or
consideration: (a) To offer, propose, threaten or attempt to sell, hinder
or delay any petition or any part thereof or of any signatures thereon
mentioned in sections 34-1801-34-1822; (b) To offer, propose, or
threaten to desist, for a valuable consideration from beginning, promot-
ing or circulating any petition mentioned in sections 34-1801-34-1822,
or soliciting signatures to any such petition; (c) To offer, propose, at-
tempt or threaten in any manner or form to use any petition or power
of promotion or opposition in any manner or form for extortion, black-
mail or secret or private intimidation of any person or business inter-
est." (Rev. Code, 1963, sec. 34-1821.)
"Any person, either as principal or agent violating any of the pro-
visions of sections 34-1801-34-1822 shall be punished upon conviction
by imprisonment in the penitentiary or in the county jail not exceeding
two (2) years, or by a fine not exceeding $5,000.00, or by both, except-
ing that imprisonment in the penitentiary and punishment by a fine
shall be the only penalty for violation of any provision of section 34-
1821." (Rev. Code, 1963, sec. 34-1822.)
Ohio
"Immediately above the heading of the place for signatures on each
part of the petition the following notice shall be printed in red :
NOTICE
Whoever knowingly signs this petition more than once, signs a
name other than his own, or signs when not a qualified voter, is liable
to prosecution.
CONSTITUTIONAL AMENDMENTS 65
In consideration of his services in soliciting signatures to this peti-
tion the solicitor has received or expects to receive
from
(Whose address is)
Before any elector signs the part-petition, the solicitor shall com-
pletely fill in the above blanks if the solicitor has received or will receive
any consideration and if the solicitor has not received and will not re-
ceive any consideration he shall insert 'nothing'." (Rev. Code, 1953,
sec. 3519.05.)
Washington
''Every person shall be guilty of a gross misdemeanor who: (1) For
any consideration or gratuity or promise thereof, signs or declines to
sign any initiative or referendum petition; or (2) Advertises in any
manner that for or without consideration, he will solicit or procure
signatures upon or influence or attempt to influence persons to sign
or not to sign, to vote or not to vote upon an initiative or referendum
petition or to vote for or against any initiative or referendum; or
(3) For any consideration or gratuity or promise thereof solicits or
procures signatures upon an initiative or referendum petition; or
(4) Gives or offers any consideration or gratuity to any person to
induce him to sign or not to sign, or to solicit or procure signatures
upon an initiative or referendum petition or to vote for or against
any initiative or referendum measure; or (5) Interferes with the right
of any voter to sign or not to sign an initiative or referendum petition
or with the right to vote for or against an initiative or referendum
measure by threats, intimidation or any other corrupt means or prac-
tice; or (6) Receives, handles, distributes, pays out or gives away,
directly or indirectly money or anything of value contributed by or
received from any person, firm, association, or corporation whose resi-
dence as principal office is, or the majority of whose members or stock-
holders have their residence outside, the state of Washington, for any
service rendered for the purpose of aiding in procuring signatures
upon any initiative or referendum petition or for the purpose of aiding
in the adoption or rejection of any initiative or referendum measure."
(Rev. Code, 1964, sec. 29.79.490.)
Constitutional Provisions Pertaining to Paid Signatures on Initiative
and Referendum Petitions lf 2
Arkansas
"No law shall be passed to prohibit any person or persons from
giving or receiving compensation for circulating petitions, nor to pro-
hibit the circulation of petitions, nor in any manner interfering with
the freedom of the people in procuring petitions, but laws shall be
enacted prohibiting and penalizing perjury, forgery, and all other
felonies or other fraudulent practices in the securing of signatures or
filing of petitions." (Const. Art. V, sec. 1, Am. 7.)
1 Legislative Drafting Research Fund of Columbia University, Constitutions of the
United States — National and State (2d ed. ; New York: Oceana Press, Inc., 1958).
2 Legislative Drafting Research Fund of Columbia University, Index Digest of State
Constitutions — Cumulative Supplement, September 1, 1958, to December 31, 1962
(2d ed. ; New York: Oceana Press, Inc., 1961).
66 ASSEMBLY INTERIM COMMITTEE
Massachusetts
"Provision shall be made by law for the proper identification and
certification of signatures to the petitions hereinbefore referred to, and
for penalties for signing any such petition, or refusing to sign it, for
money or other valuable consideration, and for the forgery of signa-
tures thereto . . . The general court may provide by law that no
co-partnership or corporation shall undertake for hire or reward to
circulate petitions, may require individuals who circulate petitions for
hire or reward to be licensed, and may make other reasonable regula-
tions to prevent abuses arising from the circulation of petitions for
hire or reward/' (Const. Articles of Amendment, Art. XL VIII,
General Provision 1)
North Dakota
"Nor shall any law be enacted prohibiting any person from giving or
receiving compensation for circulating the petitions, nor in any manner
interfering with the freedom in securing signatures to petitions."
(Const. Art. 25, Am. 26)
CONSTITUTIONAL AMENDMENTS
67
Initiative Constitutional Amendments
1912-1964
1912.. _
1914. __
1916.
1918.
1920.
1922. __
1924.
1926.
1930.
1932.
To permit San Francisco to annex across county lines
To permit county and city home rule in taxation
Prohibition
To abolish poll tax
To limit suffrage at bond elections to property owners _ _
To make requirements for security for public deposits less
stringent
To permit San Francisco to annex territory on the peninsula
To suspend prohibition amendment until February 15,
1915, if adopted
To prohibit prohibition elections for eight years
Prohibition
To close saloons
Single tax
Ineligibility of legislators to hold any state office or em-
ployment
Single tax
To raise judicial salaries
To limit use of initiative
Prohibiting compulsory vaccination
To make highway bonds salable by increasing interest rate
To levy mill tax for university support
To increase state aid to schools
Single tax
Validating veterans bond issue
To tax publicly owned utilities
To regulate public owned utilities
State executive budget
State water and power system
Weakening initiative
Single tax
To give Railroad Commission power to grant indetermi-
nate franchises to transportation utilities
To tax highway transportation companies 4 percent of
gross receipts in lieu of other tax
State water and power system
Highway finance plan of Automobile Club of Southern
California
To permit Bible in schools
State water and power system
Reapportionment of Legislature according to population-
Federal plan of apportionment
To give Fish and Game Commission extensive ordinance
power
State liquor control
Income tax and sales tax for schools
Tideland grant to Huntington Beach
174
280
169
243
355
524
405
374
312
337
236
324
248
318
448
226
355
435
436
538
461
505
260
576
414
230
118
360
232
538
298
421
359
468
435
311
380
384
506
268
196
563
562
226
258
429
232
415
451
183
243
597
258
378
124
515
136
499
457
541
320
751
337
611
439
571
253
671
319
492
437
363
440
650
1,308
730
552
1,144
709
1,079
68
ASSEMBLY INTERIM COMMITTEE
Initiative Constitutional Amendments—Continued
Year
of election
Vote
(in thousands)
Yes
1934. _
1936_
1938...
1939.
1942.
1944.
1946.
1948.
1949.
1950.
1952___
1954. ..
1958___
1960. _ _
1962__.
1964...
Regulating sale of liquor
Selection of judges
Increase power of Attorney General
Permitting comment on evidence and on failure of defend-
ant to testify
Permitting felony defendants to plead guilty before ex-
amining magistrate
Strengthening state merit system
Providing for elective State Board of Education
Permitting local option on liquor
Repealing personal income tax
Creating Alcohol Beverage Commission
Making merit system compulsory for county and munici-
pal civil service
Permitting local option on liquor
Preventing diversion of gasoline tax
Regulating instructor's tenure in public schools
Create Highway and Traffic Safety Commission
Single tax
Retirement life payments
Retirement life payments
Repeal state income tax
Increase elementary school support
Retirement payments ; repeal sales tax
Declares right to employment
Increase state school support
Extend liquor regulation responsibilities
Increase aged and blind aid ; change welfare administration
Require local approval for state liquor license
Reapportion of State Senate
Create state housing authority
Repeal of aged and blind amendment
Personal property taxation
Legalizing and licensing gambling
Public housing projects
Public school funds
Public funds, certain expenditures prohibited
Aid to needy aged
Taxation of school property
Right to work
Senate reapportionment
Senate reapportionment
Subversive activities
Sales and rental of residential property
Lottery
1,262
810
1,063
1,087
1,173
1,216
577
497
737
748
670
719
829
438
904
372
1,143
993
763
1,753
1,017
1,304
1,771
1,122
1,837
1,085
1,069
1,042
1,560
310
406
788
2,603
747
1,300
1,686
2,080
715
2,074
1,862
4,526
2,064
CONSTITUTIONAL AMENDMENTS
G9
Statutory Initiatives
7972-7964
Year
of election
Failed
1912. _
1914..
1918..-
1920...
1922...
1924...
1926...
1928...
1930...
1932...
1934...
193G__.
1938...
1939.
1940.
1942.
1946...
To license horseracing and permit wagering
Eight-hour law
Regulating the sale of securities
University of California building bonds
Absent voting
To prohibit prizefights
To amend unworkable Torrens Title Law
Los Angeles state building bonds
One day rest in seven
To license drugless physicians
Liquor control, permitting wines and beer
Usury law
Limiting tax increases
To ease dental licensure requirements
"Bone dry" prohibition
To strengthen alien land law
To create board of chiropractic examiners
Antivivisection act
To create board of chiropractic examiners
To create board of osteopathic examiners
Antivivisection act
To permit boxing and wrestling for purses
To create Klamath Fish and Game District
Highway finance plan of California State Automobile
Association
Licensing horseracing and legalizing betting
To repeal state prohibition act
To repeal act of 1924 permitting prizefights
To prohibit rodeos, bulldogging, etc
To adopt daylight saving time
To weaken usury law
To adopt permanent registration
To close barbershops on Sunday
To repeal state prohibition act
To require mortgage foreclosures through courts
To license racing and wagering
To amend chiropractic act
To license ' ' naturopaths' '
To prohibit tideland oil drilling
To regulate picketing and boycotting
To regulate pounds and disposal of animals
To prohibit operation of fishing boats that supply ferti-
lizer reduction plants
To amend chiropractic act
To adopt daylight saving time
To alter the powers of the state building and loan com-
missioner
To provide a single licensing board to license practitioners
of the basic sciences
To establish board to license betting on greyhound racing.
To declare state fair employment practices policy
Passed
Passed
Passed
Passed
Passed
Passed
Passed
Passed
Passed
Passed
Passed
Passed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
Failed
70
ASSEMBLY INTERIM COMMITTEE
Statutory Initiatives— Continued
Year
of election
Passed
Failed
1948..
1949_ .
1952_.
1956__
1958. _
1964..
To amend full train crew law of 1911
To regulate commercial fishing in San Francisco Bay area
To prohibit the use of nets in fishing in one coastal area.
To adopt daylight saving time
Prohibiting crossfiling
Aid to the aged
Oil and gas conservation
State sales, use and income tax rates
Prohibits pay television
Railroad train crews
Passed
Passed
Passed
Passed
Failed
Failed
Failed
Failed
Failed
Failed
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