Untapped cash amid the cuts?

California may have had hundreds of millions of dollars more on hand than the governor and lawmakers knew about as they struggled to close the budget deficit this year, a Times analysis shows.

Officials are scrambling to explain discrepancies in about two dozen state funds identified in a comparison of balance sheets from the controller’s office and the administration of Gov. Jerry Brown.

One case involved $113 million sitting unnoticed in a bottle recycling program. The money could have helped stave off cuts in welfare, healthcare or parks, but lawmakers were told the program was broke and dipped into other funds to keep it afloat.

In some instances, state officials said, there was an appearance of extra cash due to differences in bookkeeping methods between the Brown administration, which plans the budget, and the controller’s office, which manages California’s cash, essentially functioning as its banker.


The accounting irregularities highlight the tenuous grasp California’s government has on its finances even after years of lingering budget crises. Officials have reshuffled policy priorities in their efforts to balance the budget, cutting deeply into state services, and Brown is pushing voters for tax hikes, saying that otherwise the government can’t pay its bills and public schools will suffer.

“When a state’s revenues have been hammered as hard as California’s have during the last few years, the reasonable expectation would be that state officials are finding every last dollar before going after services with a meat cleaver,” said Nicholas Johnson, vice president for state and fiscal policy for the Center on Budget and Policy Priorities, a Washington think tank.

Administration officials concede they don’t routinely compare the two sets of ledgers for the more than 500 “special” funds. They said they would soon release their own review of the accounts, which are separate from the state’s general fund and are often created to pay for specific programs. The money comes from user fees and from some taxes and is managed directly by state agencies.

The audit was triggered by the recent discovery that the parks department had $54 million in unreported funds even as it threatened to close 70 facilities and was soliciting private donations to keep many of them open. Brown has called for an investigation.


Mike Genest, who was former Gov. Arnold Schwarzenegger’s finance director, said the intricacies of California’s finances make it difficult to pinpoint every dollar.

“It is more complicated than anybody’s personal checkbook,” he said.

Spending from special funds is expected to hit $39.4 billion in the current fiscal year, almost 28% of the state’s total $142.4 billion budget.

The accounts are critical to California’s finances: Lawmakers routinely borrow from them to help pay the bills.

California’s recycling program has been in financial turmoil for years, its bottom line changing radically every time a new set of eyes looks at its books.

CalRecycle reported a $180-million surplus in 2007; two years later, lawmakers extracted a $100-million loan from it to bail out the ailing general fund. Weeks after that, the agency said it was broke, and officials agreed to repay that loan and others, while cutting spending on social services.

In December, officials at the recycling program reported to the controller that it had about $113 million more than what it reported to lawmakers. In March, the agency revised its bottom line again, saying it had $234 million more than previously thought.

“If I were Gov. Brown’s finance director, I’d be outraged,” said Mark Murray, director of Californians Against Waste, which advocates for recycling.


Administration officials declined to comment.

One of the widest gaps is in the Mental Health Services Fund. The Department of Finance said the fund had $793 million in June 2011, while the controller’s office pegged the balance at almost $1.4 billion.

Department of Finance spokesman H.D. Palmer offered an explanation. When counting the contents of the fund, he said, administration officials deducted money they knew would be spent later in the year, and the controller’s office did not subtract it.

Jacob Roper, a spokesman for the controller’s office, said officials there deducted all of the pending expenditures they had been told about.

There are other signs that the state’s accountants aren’t paying careful attention to all the funds. The Mexican American Veterans Memorial Beautification and Enhancement Fund was supposed to be abolished in 2002, with the remaining money transferred to the general fund. Nine years later, the fund still contained $21,000.



Times staff writer Christine Mai-Duc contributed to this report.



Unreported money

The state controller’s records show that about two dozen funds have more money than state agencies reported to lawmakers:

FundUnreported amount (in millions)

Fiscal Recovery Fund: $679.6

Beverage Container Recycling Fund: 112.9

Employment Development Contingent Fund: 44.5

Energy Resources Surcharge Fund: 35.4

Off-Highway Vehicle Trust Fund: 33.5

Children’s Health and Human Services Special Fund: 30.1

Restitution Fund: 28.8

Parks and Recreation Fund, State: 20.4

Underground Storage Tank Cleanup Fund: 12.5

Corrections Training Fund: 6.4

Collins-Dugan California Conservation Corps

Reimbursement: 4.7

Dentally Underserved Account: 4.6

State School Fund: 4.6

Energy Conservation Assistance: 4.5

Driver Training Penalty Assessment Fund: 4.0

PET Processing Fee Account: 3.5

Habitat Conservation Fund: 3.4

Educational Telecommunication Fund: 3.2

Fish and Game Preservation Fund: 3.2

State Corporations Fund: 3.0

Water Rights Fund: 1.7

State Dental Hygiene Fund: 1.2

Public Interest Research, Development and Demonstration Fund: 0.94

Deficit Recovery Bond Retirement Sinking Fund: 0.93


Sources: California controller’s office, state agency reports, Times reporting