State Auditor Rips Caltrans' "Support" Costs
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The state auditor recently released a lengthy, highly critical report on Caltrans’ spending on project "support" costs, which is primarily spending on Caltrans’ own employees. This spending is important. When "support" spending is too high, that takes money away from actually constructing new projects and creating new jobs.
Here are some findings along with comments:
- Caltrans exceeded its own budgets for project support on 62 percent of its projects.
- The Legislature's annual arbitrary imposition of a 10 percent cap on the use of outside consultants actually ends up reducing Caltrans' flexibility. [Note: That may be why Caltrans has hired an excessive number of full-time, long-term employees — and thereby taken on the huge liability of their long-term pension costs. The 49 other state departments of transportation know well how inflexible and expensive the Caltrans model is, and so they regularly use consultants for 50 to 60 percent of their workload.]
- Caltrans' time-reporting system lacks strong internal controls — and consequently no one really knows to what extent Caltrans’ employees are correctly charging their time to projects.
- Caltrans also failed — in each of the last three fiscal years — to meet its own goal: a maximum of 32 percent in the ratio of support costs to total project costs. That is a strong sign that Caltrans is overstaffed. [Note: Last year the Legislative Analyst’s Office (LAO) found that Caltrans was overstaffed by at least 1,500 personnel years (PYs), the equivalent of approximately $300 million/year.]
- Another problem with support costs is that Caltrans may be comparing apples to oranges. The state auditor found that from year-to-year Caltrans fails to use a consistent method to calculate the ratio of support to total costs.
- The state auditor made a series of recommendations to address these findings, including that Caltrans should not hire permanent staff beyond its long-term need for such staff.
- The report further states that the Legislature should give Caltrans the leeway to hire consultants to meet its temporary workload increases — a recommendation with which Caltrans to its credit agrees. Now it is up to the California Legislature to act on it.
The report also recommends that the state commission an independent study of the costs and benefits of using consultants. Although Caltrans was not thrilled with that idea, Caltrans does note that "consultants pay for and bring their own tools, equipment and office space to the job — all of which are cost items for the taxpayer to support staff positions. Outside consultants also take care of their own health care costs and pension obligations; both "big ticket" items and something the report reminds us are also not included in Caltrans’ staff cost estimates.
To download a copy of the state auditor's report, which was released on April 28, click here.