The title of the California State Auditor’s report (pdf) in March 2002 came right to the point: “Departments Have Circumvented the Abolishment of Vacant Positions, and the State Needs to Continue Its Efforts to Control Vacancies.”

Apparently the state was continuing those efforts just about as effectively 12 years later, according to data gathered by the Sacramento Bee. The newspaper used a Public Records Act request to get information on 17,500 jobs in 110 departments and found the rampant use of the shell game described by the auditor in 2002 to preserve millions of dollars in already-budgeted money.

This is how it works.

A department loses money budgeted for a position if it has an unfilled vacancy for six months. To avoid losing the money, the department performs a lateral internal transfer of an employee to fill the vacancy, resetting the six-month clock to make another hire.

The state tightened up a 1983 law in 2000 to prevent unfilled vacancies from laying fallow for up to 12 months by shortening the length of down time from nine months to six and not allowing a clock reset at the end of a fiscal year. Within two years, departments, some pressed for time in filling the jobs, were gaming the system with new vigor. 

The auditor’s analysis of 50 departments found a 53% increase in the use of legitimate internal transfers that are allowed on a limited basis. The conclusion was, “the departments increased their efforts to preserve vacant positions.”

The Bee gave the numbers some faces. Lindsay Rains, an environmental scientist in the California Department of Food and Agriculture (CDFA), transferred 14 times through nine different positions on fiscal year 2012-13. Ricardo G. Martinez, branch chief for Policy, Training and Customer Services in the state’s Department of General Services (DGS), was transferred 11 times between three positions over the course of 18 months. Daniel Kieselhorst, a printing press operator in the Department of State Hospitals (DSH), bounced between the same two positions 15 times in three years.     

The Bee tried to put a dollar value on the cost of these seemingly legal, but illegitimately looking, transfers but couldn’t come up with one. The best it could do was calculate the total annual pay of those positions subject to three or more transfers was $80 million. Money not spent on a vacant position can be used for other operational expenses.

In tight budgetary times, which is most of the time this past decade, those dollars are critical.

A study (pdf) in 2008 by the independent state Legislative Analyst’s Office (LAO) found that the vacancy rate had held study at 14% over the years, “considerably greater than assumed during the budget process.” But it listed so-called “ghost transfers” as just one reason among many for the high rate.

The office called the vacant-position law ineffective and recommended repealing it. The LAO said the Legislature should simply make departments accountable for their vacancies and suggested a number of ways to do that, which would take “considerable time and energy to implement.”

They did not do that.

The Bee showed its data to Mike Genest, former Republican Governor Arnold Schwarzenegger’s finance director, who said the newspaper’s data looking like “smoking gun” stuff to him. He mused, “If you think about it, people had to scheme to do this.”

Genest didn’t really have to think about it much himself because, he told the Bee reporter, he had approved the same shenanigans when he was a deputy director back in the 1990s at a couple of state health and social service departments.

–Ken Broder

To Learn More:

California State Departments Play Personnel Shell Game (by Jon Ortiz and Jim Miller, Sacramento Bee)

California Lawmakers: State-Employee Transfer Scam a "Serious Issue," Deserves Legislative Action (by Jon Ortiz, Sacramento Bee)

State Is Taking Advantage of Ghost Jobs on Payroll, Audit Finds (by Julie Tamaki, Los Angeles Times)

Departments Have Circumvented the Abolishment of Vacant Positions, and the State Needs to Continue Its Efforts to Control Vacancies (California Bureau of State Audits) (pdf)