TO: Members of the Long Beach Ethics Task Force

FROM: Ed Barwick, Doug Haubert, Felton Williams

DATE: June 18, 2002

RE: Dissent Regarding "Discretionary Funds" Recommendation

This memorandum is a dissent to the Task Force’s Final Report as it relates to Discretionary Funds. Specifically, we believe the Discretionary Funds process is an "ethical issue" and not just a "policy issue" better left to elected councilmembers. We believe the Task Force should have adopted the strongly worded position taken by its Campaign Activity Committee toward Discretionary Funds: Regulate Them or End Them.

We also note that this ultimatum is very similar to an ultimatum expected from other Task Force members whose position toward Discretionary Funds could be described as: Fold Them Into the Budget Process or End Them. Although we have not seen that other expected dissenting opinion, we based this characterization based on statements made at Task Force meetings.


When the issue of Discretionary Funds was first submitted to the Ethics Task Force by City Councilmembers Dennis Carroll and Frank Colonna, the Task Force referred the matter to its Campaign Activity Subcommittee. The referral was made to this Subcommittee in large part because of the belief held by some that incumbent councilmembers could use Discretionary Funds for political advantage over non-incumbents. The Subcommittee had already discussed potential Discretionary Fund abuses in connection with a larger problem - the use of staff and/or public resources for political or personal gain. (See Task Force Recommendation Number 6.) The Campaign Activity Subcommittee spent a great deal of time discussing all aspects of Discretionary Funds. The Subcommittee members were shocked to learn that there were no restrictions on how the money could be spent, what projects qualified for funds, how requests were received and reviewed, and what criteria were used to decide who received funds. Also, after funds were disbursed, there was no way to ensure the funds were spent for the purpose intended.

Need for Change

After reviewing the current process by which Discretionary Funds were disbursed, the Subcommittee members unanimously agreed on one thing: the current process must end. The current process has no rules and no safeguards. Criticism of the Discretionary Funds process (or lack thereof) by the local press and others is more than justifiable.

The Subcommittee submitted to the Task Force as its first recommendation that the Council should be challenged with an ultimatum - to either end Discretionary Funds or adopt 11 strict safeguards to the Discretionary Funds process to prevent potential abuses. One safeguard was the requirement that City voters be allowed to decide the fate of Discretionary Funds within one year of acceptance of the Final Report. The Subcommittee’s report made it clear that the status quo was no longer acceptable. Some members of the Ethics Task Force suggested that the budgeting and disbursement of City funds represent only "policy decisions." The Ethics Task Force, they argued, was established to make ethics-related recommendations. Those Task Force members found a distinction between "policy" issues and "ethical" issues, and determined that Discretionary Funds qualified as the former. The result is that the Final Report of the Task Force, while stating that the Council "should" adopt the 11 regulations, does not go far enough to condemn the current Discretionary Funds process. Also, by deciding Discretionary Funds are a "policy" rather than "ethical" issue, the Task Force fails to send a clear message on the issue at all.

We think a clear message is needed.

The Process for Disbursing City Funds IS Subject to Ethical Considerations

We feel compelled to explain why the Discretionary Funds process raises "ethical" issues. The City Council is ultimately responsible for passing the City budget, so to some extent, all City funds are subject to the discretion of the City Council. For example, if the Council decides that fire protection is a greater funding priority than parks and recreation programs, it allocates funds accordingly. Those decisions regarding funding priorities are solely "policy" decisions to be made by the Council, the legislative body are elected to make such decisions. But how those policy decisions are made do involve ethical considerations. For example, the Council is required to publish written agendas so the public knows what decisions are to be made at an upcoming meeting. Meetings are required to be open to the public so the media other citizens may witness the decisions as they are being made. Also, councilmembers are required to cast their votes publicly so their constituents may hold them accountable. These are examples of procedural laws that contribute to a more ethical and democratic environment. These are commonly referred to as "sunshine laws" because they are intended to expose the workings of government to the public light; the more exposure on government decisions, the less chance for corruption and mischief.

The strict regulation of Discretionary Funds, as proposed by the Campaign Activity Subcommittee, would similarly be procedural in nature. Such regulation, however, could contribute to a more open, more honest and more ethical environment. If the Council is unwilling to legitimize Discretionary Funds through a vote of the people, and regulate them through an open and critical process, then Discretionary Funds should and must be ended.

The Problem with "Just End Them"

The Ethics Task Force held a vote on whether to merely recommend to the Council a complete abolishment of Discretionary Funds. While such a recommendation would have been simple, and in many ways the "easy way out" for the Task Force, it was not adopted by the majority of Task Force members. The recommendation to give the Council just one option - to end Discretionary Funds - has at least four flaws.

The first flaw is obvious. Since the Council makes all budgeting decisions, all funds are "discretionary funds." Some of those who wish to abolish Discretionary Funds have stated that such funds should be allocated in the City’s annual budget. The City’s 2002 Fiscal Year Budget was $357.6 million. It would not be difficult for a Councilmember to include projects totally $150,000 (the amount of Discretionary Funds allocated per council district) for his or her district into such a large budget. The difference is that there would likely be less scrutiny of allocations since they would be overshadowed by larger budgetary issues. We see little merit in sweeping Discretionary Funds under the annual budget carpet.

The second flaw is that prohibiting post-budget allocations (which is essentially all that Discretionary Funds are) means that the City would lose all of the apparent benefits that Discretionary Funds could provide. For example, sophisticated tax-exempt organizations can compete for funding through the City’s budget process, but neighborhood organizations run by volunteers cannot. Those neighborhood groups who were left out of the budget process can seek funds without having to wait a year for the next budget cycle. Also, councilmembers may prefer to make decisions about small expenditures when they are not subject to the overwhelming annual budget process. The truth is that some worthwhile projects get left out of the budget process - and those who wish to abolish Discretionary Funds neglect to answer how such projects should get funded.

The third flaw is that those who want to end discretionary funds have nothing but praise for the projects funded by Discretionary Funds. Even the harshest critics of Discretionary Funds note that the groups that have received the funds are commendable and the projects funded are laudable. By showing support for where the money is going, the critics of Discretionary Funds essentially admit it is the Discretionary Funds process to which they object. To illustrate this point, one Task Force member who advocated abolishing Discretionary Funds described how he personally obtained Discretionary Funds to keep an at-risk youth program from going bankrupt. By telling his story, he made his case for keeping Discretionary Funds, not eliminating them.

The fourth flaw in the abolishment argument is that it dismisses a process of strictly regulated Discretionary Funds when such regulation has never been tried. The cornerstone regulation - that the voters should decide whether Discretionary Funds are continued - is opposed by some who say the practice should be ended without a vote. If the voters choose to continue Discretionary Funds, why would some Task Force members still oppose the practice? Do they believe Long Beach voters are not intelligent enough to make this decision? How can this be construed as anything other than contrary to the principles of democracy?

Our Recommendation

Discretionary Funds, as they currently exist, must be ended. While it may seem harsh to challenge the Council with the ultimatum of strictly regulating Discretionary Funds or ending them, we believe such clear and forceful language should be adopted by the Task Force. We respect the opinions of all Task Force members. We acknowledge that reasonable people may reach different conclusions. In fact, on the issue of Discretionary Funds it may be most accurate to say that there were 12 different opinions (one for each Task Force member) on how they should be handled. In the totality, we support the 11 regulations included in the Task Force’s Final Report, plus an additional recommendation to limit the amount of Discretionary Funds allocated per council district (e.g., $50,000) was not adopted by the Task Force. However, we are more supportive of such regulations in the context of a clear and strong ultimatum to the Council, that if such recommendations are not followed, the practice of Discretionary Funds must be ended.