Dept. of Corrections v. State Personnel Board CA3

Filed 8/5/13 Dept. of Corrections v. State Personnel Board CA3

NOT TO BE PUBLISHED

California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for

publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication

or ordered published for purposes of rule 8.1115.

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

THIRD APPELLATE DISTRICT

(Sacramento)

----

DEPARTMENT OF CORRECTIONS AND C068744

REHABILITATION,

(Super. Ct. No.

Plaintiff and Respondent, 34201080000722CUWMGDS)

v.

STATE PERSONNEL BOARD,

Defendant and Respondent;

AMERICAN FEDERATION OF STATE,

COUNTY, AND MUNICIPAL EMPLOYEES

LOCAL 2620, AFL-CIO,

Real Party in Interest and Appellant.

This appeal involves the use of private contractors to perform state functions. The

Department of Corrections and Rehabilitation (CDCR) entered into contracts with private

contractors to provide mental health services to parolees pursuant to Penal Code

1

section 3073.1 On behalf of the CDCR employees it represents, the American Federation

of State, County, and Municipal Employees Local 2620, AFL-CIO (AFSCME) sought

administrative review by the State Personnel Board (the Board), which concluded the

contracts were invalid under civil service laws prohibiting state agencies from contracting

with private entities to perform services customarily or historically performed by state

employees. (Cal. Const., art. VII.)2 CDCR filed a petition for writ of administrative

mandamus. (Code Civ. Proc., § 1094.5.) The trial court granted the petition, ruling that

the personal services contracts were valid under the “new state function” exception to the

civil service mandate in Government Code section 19130, subdivision (b)(2).3 AFSCME

1 Penal Code section 3073 provides: “[CDCR] is hereby authorized to obtain day

treatment, and to contract for crisis care services, for parolees with mental health

problems. Day treatment and crisis care services should be designed to reduce parolee

recidivism and the chances that a parolee will return to prison. The department shall

work with counties to obtain day treatment and crisis care services for parolees with the

goal of extending the services upon completion of the offender‟s period of parole, if

needed.” (Italics added.) (Stats. 2007, ch. 7, § 12 (sometimes referred to herein as AB

900).)

2 California Constitution, article VII, section 1 provides: “(a) The civil service includes

every officer and employee of the State except as otherwise provided in this Constitution.

[¶] (b) In the civil service permanent appointment and promotion shall be made under a

general system based on merit ascertained by competitive examination.” The State

Personnel Board is a constitutional agency charged with enforcing the civil service

statutes. (Cal. Const., art. VII, § 3.)

3 Undesignated statutory references are to the Government Code.

Section 19130 provides in part: “The purpose of this article is to establish standards for

the use of personal services contracts. [¶] (a) Personal services contracting is

permissible to achieve cost savings [under specified conditions]. [¶] (b) Personal

services contracting also shall be permissible when any of the following conditions can

be met: . . . [¶] (2) The contract is for a new state function and the Legislature has

specifically mandated or authorized the performance of the work by independent

contractors. [¶] (3) The services contracted are not available within civil service, cannot

be performed satisfactorily by civil service employees, or are of such a highly specialized

2

appeals, arguing the trial court erred in reweighing the evidence before the Board, and the

evidence supported the Board‟s determination that the services did not comprise a new

state function.

We affirm the judgment.

FACTUAL AND PROCEDURAL BACKGROUND

In 1954, CDCR established the Parole Outpatient Clinic (POC) program to reduce

recidivism by helping parolees with mental health problems successfully reintegrate into

the community. In 1999, CDCR implemented the Mental Health Services Continuum

Program (MHSCP), consisting of (1) a Transitional Case Management Program for the

Mentally Ill (TCMP-MI), which provides prerelease assessments of inmates identified as

part of the prison‟s mental health services delivery system, and (2) POC, which provides

mental health assessments and treatment during parole. Treatment consists of medication

management, group therapy, and individual therapy to parolees at high risk of criminal

behavior due to mental illness. POC staff conduct evaluations and provide outpatient

services and medication management in CDCR parole offices located throughout the

state. POC does not provide housing or inpatient care. POC staffing includes clinical

social workers and psychologists.

In 2007, the Legislature enacted Penal Code section 3073, (fn. 1, ante) directing

CDCR to work with counties in providing day treatment programming and mental health

crisis intervention for parolees with mental health problems. The statute expressly

or technical nature that the necessary expert knowledge, experience, and ability are not

available through the civil service system. [¶] . . . [¶] (8) The contractor will provide

equipment, materials, facilities, or support services that could not feasibly be provided by

the state in the location where the services are to be performed.” (Italics added.)

A personal services contract is any contract under which labor or personal services is a

significant, separately identifiable element; the party performing these services must be

an independent contractor that does not have status as a State employee. (Cal. Code

Regs., tit. 2, § 547.59(a).)

3

authorizes CDCR to contract for those services.4 The statute was part of the Public

Safety and Offender Rehabilitation Services Act of 2007, which was enacted in response

to federal court cases regarding California prison overcrowding. (Sen. Rules Com., Off.

of Sen. Floor Analyses, 3d reading analysis of AB 900 (2007-2008 Reg. Sess.) as

amended April 26, 2007, pp. 6-8.) Among the purposes of the legislation was to

“require[] CDCR to implement and significantly enhance anti-recidivism programming

including substance abuse treatment, mental health care, and academic and vocational

education.” (Office of Assem. Floor Analysis, 3d reading analysis of AB 900 (2007-

2008 Reg. Sess.) as amended April 26, 2007, p. 1.)

In response to the enactment of Penal Code section 3073, CDCR developed a

program called Integrated Services for Mentally Ill Parolees (ISMIP) to fill a gap in

services between POC‟s outpatient role and a 72-hour hold for parolees who were a

danger to themselves or others or gravely disabled under Welfare and Institutions Code

section 5150 (5150 hold).5 ISMIP is a comprehensive model that provides for varied

levels of care, supportive/transitional housing resources, and an array of mental health

rehabilitative services that assist with the development of independent living for mentally

ill parolees in the least restrictive environment possible.

4 AFSCME‟s appellate brief expressly states that AFSCME does not dispute that the

contracts were “authorized” within the meaning of Government Code section 19130,

subdivision (b)(2) (fn. 3, ante) by Penal Code section 3073 (fn. 1, ante), which authorizes

CDCR to contract for crisis care services.

5 Welfare and Institutions Code section 5150, subdivision (a) provides: “When any

person, as a result of mental disorder, is a danger to others, or to himself or herself, or

gravely disabled, a peace officer, member of the attending staff, as defined by regulation,

of an evaluation facility designated by the county, or other professional person designated

by the county may, upon probable cause, take, or cause to be taken, the person into

custody and place him or her in a facility designated by the county and approved by

the State Department of Health Care Services as a facility for 72-hour treatment and

evaluation.”

4

As attested to by ISMIP manager Robert Storms, the resources, facilities and

services for the ISMIP program could not be adequately provided by POC, and therefore

CDCR tried to contract with counties for these services under Penal Code section 3073.

However, CDCR was able to contract with only two county providers -- San Francisco

and Santa Clara. Other counties contracted for these services privately. Accordingly,

CDCR sought private contractors to meet the benchmark required by Penal Code former

section 7021, subdivision (a)(8), that “At least 300 parolees are being served in day

treatment or crisis care services, pursuant to Section 3073.”

CDCR issued a Request for Proposal (RFP) No. 6000000037.6 (Gov. Code,

§ 19132;7 Cal. Code Regs., tit. 2, § 547.59 et seq.) The project introduction of the

RFP references CDCR‟s authority pursuant to Penal Code section 3073 to contract for

“Mental Health Crisis intervention . . . services.” (Italics added.) The RFP described

the responsibilities of ISMIP case managers8 as including a complete assessment of the

parolee‟s needs and goals, development of a personal services plan, linkage with all

appropriate community services, housing referrals, monitoring the quality and follow

through of services, providing necessary advocacy to ensure receipt of services, and

providing individualized coaching to achieve the parolee‟s goals. The RFP said each

individual personal services plan was to contain objectives, which could include but

were not limited to, provision for housing and employment, application for entitlements

6 AFSCME filed a challenge to an earlier RFP, but CDCR withdrew the earlier RFP.

7 Section 19132 provides: “The . . . Board, at the request of an employee organization

that represents state employees, shall review the adequacy of any proposed or executed

contract which is of a type enumerated in subdivision (b) of Section 19130. . . .”

8 “Case manager” is described in the RFP: “Each parolee-client shall have a clearly

designated mental health personal services coordinator (Case Manager) who, as a part

of a multidisciplinary treatment team, is responsible for providing or assuring needed

services.”

5

(Social Security, Medi-Cal, Veterans benefits), coordination and access to mental health

services such as medications, psychiatric and psychological services, substance abuse

services, family support and consultation services, and access to academic education or

skills training.

In 2009, CDCR contracted with private companies to provide the personal

services of mental health personal services coordinator to parolees, with the intent

of “promot[ing] self-sufficiency in reducing recidivism for mentally ill parolee-

clients. This appeal involves six9 contracts -- four with Telecare Corporation, one

with Turning Point of Central California, Inc., and one with Quality Group Homes,

Incorporated.

Each Agreement Summary contained the following general statement of purpose

or Agreement Outline: “Contract is necessary in order for the [CDCR], Division of

Adult Parole Operations, to provide rehabilitation, reduce homelessness, and reduce

recidivism among the mentally ill parolee population.” Each Agreement Summary

stated as Justification for Contracting Out that, under Government Code section 19130,

subdivision (b)(3), “The services contracted are not available within civil service.

Contract is for the care/placement of mentally ill inmates/parolees requiring job

training and life skills. The CDCR currently does not own or operate this type of

facility.”10

9 A seventh contract between CDCR and the San Francisco Department of Public Health

is not at issue in this appeal.

10 As will be seen, the Board rejected the applicability of section 19130, subdivision

(b)(3), the nature of the services exception. CDCR does not argue its applicability in this

appeal.

6

In November 2009, AFSCME filed with the Board an administrative challenge to

the six private contracts. (Pub. Contract Code, § 10337.)11 AFSCME sought disapproval

of the contracts on the ground they called for private contractors to perform the same

work as civil service employees.

CDCR sought dismissal of the challenge, because the contracted services were for

ISMIP and were not services provided by CDCR employees.

The Board directed CDCR to provide copies of the contracts, which it did, and

invited AFSCME to file a supplemental brief, which it did not.

In March 2010, Board Executive Officer Suzanne M. Ambrose issued a decision

(Pub. Contract Code, § 10337, subd. (c); see fn. 11, ante), concluding CDCR failed to

establish that the contracts were permitted under Government Code section 19130,

subdivision (b) (see fn. 3, ante). She concluded civil service clinical social workers

could provide the same services as the contractors and stated she did not need to address

psychologists. She said AFSCME asserted the private contractors performed work

similar to civil service employees in the same settings and under the same conditions,

11 Public Contract Code section 10337, subdivision (c), provides: “A contract proposed

or executed pursuant to subdivision (b) of Section 19130 of the Government Code shall

be reviewed by the State Personnel Board if the board receives a request to conduct such

a review from an employee organization representing state employees. Any such review

shall be restricted to the question as to whether the contract complies with [Government

Code section 19130, subdivision (b)]. The board shall delegate the review of such a

contract to the executive officer of the board. If the employee organization requests it,

the executive officer shall grant the employee organization the opportunity to present its

case against the contract and the reasons why the contract should be referred to the board

for a hearing. Upon a showing of good cause by the employee organization, the

executive officer shall schedule the disputed contract for a hearing before the board for

the purpose of receiving evidence and hearing arguments concerning the propriety of the

disputed contract. The executive officer shall approve or disapprove the contract or refer

it to the board for a hearing within 30 days of its receipt. The reasons for the decision by

the executive officer, or the board, approving or disapproving the contract shall be stated

in writing.”

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but “AFSCME offered no evidence to show that the work „settings‟ and „conditions‟

of the employees represented by AFSCME are similar to those of the contractors.

Nonetheless, it is necessary to examine” whether the asserted similarity had factual

support. She said the purpose of the contracts was to provide individuals in the ISMIP

project a safe, clean, drug-free environment to facilitate rehabilitation and reduce

homelessness and recidivism among mentally ill parolees. The contracts required the

contractors to assess parolees‟ needs/goals, develop parolee-driven personal service

plans (Plans), link parolees with all appropriate community services, make housing

referrals, monitor the quality and follow-through of services, provide necessary advocacy

to ensure that parolees receive the services in their Plans, and provide individualized

coaching. Under the contracts, the Plans had to help parolees find the most independent

and least restrictive and immediate, transitional or permanent housing feasible in the

local community; help them get jobs or productive activity; secure benefits from Social

Security, Medi-Cal, and Veterans Affairs; help parolees self-manage serious mental

illness; coordinate access to mental health services such as medications, psychiatric and

psychological services; provide parolee-directed services for psychosocial rehabilitation

and recovery; provide substance abuse services; help secure parenting and family support

and provide consultation, peer group support, or self-help group support; create and

maintain a support system of friends and family and facilitate participation in community

activities; help parolees access academic education or career-specific trade or skill

training; and help in transition upon discharge from parole.

The Board Executive Officer said these services appeared to be within the

customary duties of civil service clinical social workers. According to the Board‟s

job specifications, clinical social workers are required to conduct assessments and

summarize case information for use in diagnosis, treatment, and dispositional release

of disabled inmates; diagnose and/or collaborate in the formulation of a diagnosis;

develop, monitor and modify treatment plans in collaboration with the interdisciplinary

8

treatment team; identify and recommend appropriate services based on assessments;

provide individual and group therapy as delineated in the treatment plan; provide suicide

and crisis risk assessment and intervention; participate in risk assessment, evaluation, and

recommendation for alternative level of care placement, release to the community, or

other case disposition; coordinate discharge planning activities and act as a resource on

accessing appropriate community support and services upon release; respond to requests

from clients, family members, courts and community agencies; consult with colleagues;

prepare social work reports; and participate in training and research. CDCR has the

prerogative to assign clinical social workers specific duties such as assessing disabled

parolees‟ needs, devising detailed and individualized planning, assisting parolees in

obtaining appropriate community services, education, housing, eligible benefits, and

trade/occupation, coordinating access to health care, facilitating their efforts to achieve or

maintain a productive life, and providing general advocacy for disabled parolees. The

Executive Officer stated, “It is not difficult to see that these duties are the very tasks

required under the Contracts.”

The Executive Officer‟s comparison did not take into consideration work days or

work hours. Nevertheless, the Executive Officer concluded CDCR had failed to establish

that the contracts were permitted under any exception in section 19130, subdivision (b).

In April 2010, CDCR appealed the Executive Officer‟s decision to the Board.

(Cal. Code Regs., tit. 2, § 547.66.)12 CDCR submitted a declaration from ISMIP

12 California Code of Regulations, title 2, section 547.66 states: “Any party may appeal

the executive officer‟s decision to the board by filing a written request with the board

within 30 days after issuance of the executive officer‟s decision. (See § 547.64(b).)

Upon receipt of a timely appeal, the executive officer shall schedule the matter for

briefing and oral arguments before the board. The board will decide the appeal upon the

factual information, documentary evidence, and declarations submitted to the executive

officer before he or she issued his or her decision. Upon the objection of a party, the

board will not accept additional factual information, documentary evidence, or

9

manager Robert Storms, that “Services provided by the contractors include[] 24/7 crisis

care, including in[]patient services for enrolled parolee-clients; vocational training;

housing referrals and linkage; parolee transportation; and administrative support, office

space and necessary equipment.”13 (Italics added.) He attested the services “cannot be

performed satisfactorily by civil service employees within the counties in which these

services were contracted.”

On August 3, 2010, the Board conducted a hearing at which it heard testimony in

the form of oral statements.14 AFSCME representative Cliff Tillman stated that services

under the contacts were not “new” and were being performed and could be performed by

existing CDCR social workers or psychologists.

Sean Carey, a CDCR clinician at the Victorville POC, acknowledged some of the

contract services “are the things that we don‟t do.” He said “day treatment” was

regularly performed, but mostly with “enhanced outpatient” clients (EOPs) who require

such services the most. He said, “we would very much like to do more, if given the

opportunity, but we are doing this and we are capable of it. [¶] As far as monthly and

every few weeks, . . . it was alluded to that our services are haphazard. The only reason

why these would be haphazard would be due to scheduling conflict, not that we can‟t

do this. We would love to do this. And in many areas, it isn‟t that we‟re not doing it.

declarations that were not previously filed with the executive officer if the board finds

that the submission of this additional factual information, documentary evidence, or

declarations would be unduly prejudicial to the objecting party.”

13 We disregard AFSCME‟s unsupported disparagement of the declaration as a “lawyer-

prepared declaration” of “dubious credibility.”

14 The Board may accept “additional factual information” at the hearing. (Cal.

Code Regs., tit. 2, § 547.66; see fn. 12, ante.) The hearing transcript, which begins

midsentence, does not reflect that anyone was sworn in before speaking to the Board,

but no one raises an issue about it, and the Board referred to the oral statements as

“testimony.”

10

For the most critical of clients, we do.” The only individuals Carey sees on a regular

basis, i.e., once or twice a week, are sex offenders. POC can arrange transport via agents

or ambulance for suicidal or homicidal parolees. POC can arrange housing for sex

offenders. Carey claimed private contractors are not aware of the locations of schools,

parks, and “temporary daycares,” to ensure that housing for sex offenders is a sufficient

distance to comply with Jessica‟s Law. Carey said “[t]he contract is almost a job

description of what we do.”

Amy Kim, a CDCR licensed clinical social worker out of POC‟s in the Los

Angeles area and a chair of a POC steward‟s council, stated, “we‟ve always wanted to

be able to do more.” She stated CDCR clinicians, psychiatrists, social workers and

psychologists were unhappy that AB 900 money was going to private contractors

instead of to “existing rehab people to beef up the services we want to do and can do.”

Debra Webb, a CDCR psychologist at a Los Angeles POC, stated that POC

clinicians travel to clients‟ homes and “[w]e‟d like to be able to do more of that.”

She said CDCR provides housing and has contracts for some of the EOP‟s. She sees

some of her clients more than once a week. Clients who have crisis issues “know

how to call crisis lines,” and they can call their parole agent, go to a hospital, call a

hospital, or call 911. She agreed mentally ill clients need additional services.

A Board member asked, “What specifically can private contractors provide that

our state civil service professionals cannot? Bottom line, what is it?” Storms responded

“24-hour access, seven days a week, 365 days a year inpatient care, structured mental

health board and care, facilitated care. Things that we do not have; they do not exist.”

Dr. Webb said, “. . . Actually, that‟s not really what‟s happening; they aren‟t

really providing those services out there. What they do is the same kinds of things

[sic] that we do, is hookups with board and care, help them get access to hospitals on

a 5150 basis when they need to. And, by the way, you have to be a peace officer to

do that, so our agents help with that. We do give them resources for the 24-hour care.”

11

Dr. Webb said the private contractors “are providing lists of community services for

individuals who . . . need medical treatment. We do the same thing: We give them

lists of services; we will make phone calls for them for clients that aren‟t able to do

that; we help them find the housing; we help them find the SOR housing in downtown

L.A.; we do applications for disabled bus passes. . . . [¶] We help them with a whole

array of wraparound services. It does not appear that the outside provider is really

doing anything that we don‟t.” Dr. Webb did not say POC provides any of these

services on a 24/7 basis.

Carey stated: “. . . Nowhere in the contract does it say that these individuals have

to maintain a -- a 24-hour inpatient service. And what they do is they‟re going to refer to

county. And that‟s the same thing that we do. And it is 24 hours, because they have 24-

hour access to the parole agent who, if they are suicidal or homicidal -- which the

contracts can deal with -- if they are suicidal or homicidal, they will take them into

county, no different than we would.”

Storms said, “The contract does require that they have 24-hour response to the --

they provide a hotline; each contractor has to provide 24-hour, seven-day[]-a-week

access. [¶] Peace officers do not certify 5150‟s. It‟s mental health staff that certifies

5150‟s, and our staff cannot. Peace officers present individuals for 5150‟s. Our peace

officers are not necessarily available 24 hours a day.”

On September 7, 2010, the Board issued a resolution adopting the Executive

Officer‟s decision and disapproving the contracts. The Board found:

1. CDCR failed to demonstrate the services are a “new state function” under

section 19130, subdivision (b)(2), because it did not prove, in addition to legislative

authorization, that the service truly comprised a new governmental activity and not

merely expansion of an existing function. The Board cited its decision in a previous

12

matter -- In the Matter of the Appeal by California Department of Forestry and Fire

Protection (2001) PSC No. 01-04 (CDF).15

2. CDCR failed to demonstrate that the contracted services cannot be

performed satisfactorily by civil service employees under section 19130,

subdivision (b)(3), the “nature of the services” exception, because AFSCME adequately

showed that state employees in their current positions perform the same services that are

provided under the contracts.

3. CDCR failed to demonstrate that the contracted services are justified under

section 19130, subdivision (b)(8), because CDCR did not provide credible evidence to

show what specific “equipment, materials, facilities, or support services” the contractor

will provide at specific locations that could not feasibly be provided by the state.

Since the contracts had already been executed, the Board gave CDCR six months

to transition from private contractors to civil service employees.

On November 29, 2010, CDCR filed the operative pleading -- a first amended

petition for writ of administrative mandate and first amended complaint for declaratory

relief, naming the Board and AFSCME as defendants and AFSCME as real party in

interest. The pleading alleged the Board failed to perform an act required by law and

15 The parties appear to believe CDF was a precedential Board decision under

section 19582.5, which states the Board “may designate certain of its decisions as

precedents. . . . All decisions designated as precedents shall be published in a manner

determined by the Board.” However, CDF is not a published precedential decision;

rather, it is a posted personal services contract decision which, according to the Board

website, is “not designated precedential but [is] posted here for informational purposes

only”; it is “not binding on the Board in future cases but may be cited by parties for their

persuasive value.” (See http://spb.ca.gov/board/contract_decisions.cfm. [as of August 5,

2013].) In any event, even Board precedential decisions are not binding on this court.

(California Dept. of Corrections v. State Personnel Bd. (2004) 121 Cal.App.4th 1601,

1618.)

13

made findings unsupported by the evidence. The hearing on the petition and complaint

took place on April 8, 2011.

On May 25, 2011, the trial court entered judgment in favor of CDCR. The

judgment incorporated the court‟s ruling under submission. The trial court said

the Executive Officer improperly focused on the “nature of the services” test of

section 19130, subdivision (b)(3) -- i.e., “whether the tasks and skills required by

the contracts can be adequately, competently, and satisfactorily performed by civil

service employees” -- and ignored the “new state function” test of section 19130,

subdivision (b)(2). The court noted that the “Executive Officer did not make any

factual findings relating to the „new state function‟ test, i.e., whether the contracted

services displace existing state civil service functions or, instead, embrace new

functions not previously undertaken by the state or covered by an existing agency.”

The court also noted that the Board concluded CDCR failed to prove new state

function, but that the Board made no express factual findings to support this conclusion.

The court said the Board‟s decision necessarily implied a finding that the contracted

services duplicate or displace existing civil service functions, but no substantial

evidence supported this implied finding. To the contrary, undisputed evidence

showed the contracted services represented a new government program intended to

“fill a gap” in service for mentally ill parolees between POC and 5150 holds. The court

said the Board and AFSCME took “too literal an approach” in maintaining that the

contracted services were an expansion of an existing state function. POC workers can

and do provide mental health services, but “they do not provide 24/7 crisis care in an

in[]patient setting,” and “[t]his is the novelty of the contracted services which renders

them a new state function.” The court concluded CDCR had the right to enter into

the contracts because the contracted services were a “new state function” under

section 19130, subdivision (b)(2), and the Board abused its discretion in concluding

otherwise. The trial court directed issuance of a peremptory writ of mandate

14

commanding the Board to set aside its decision and issue a new decision concluding the

contracts were valid.

DISCUSSION

I. Standard of Review

On appeal, we review the Board‟s decision, applying the same standard as the trial

court. We ask whether the Board‟s findings are supported by substantial evidence.

(Pan v. State Personnel Bd. (1986) 180 Cal.App.3d 351, 357.) We uphold the Board‟s

factual determinations if they are supported by substantial evidence in light of the whole

record (Code Civ. Proc., § 1094.5, subd. (c)), and all reasonable and legitimate inferences

must be drawn in support of those findings (Pan, supra, at p. 357).

“Substantial evidence” is relevant evidence that is reasonable, credible, and of

solid value that a reasonable mind might accept as adequate to support a conclusion.

(California Youth Authority v. State Personnel Bd. (2002) 104 Cal.App.4th 575, 584-585

(California Youth Authority).) Different from the substantial evidence test in other

contexts, the substantial evidence standard in State Personnel Board cases requires that

reviewing courts consider all evidence, including that which fairly detracts from the

evidence supporting the Board‟s decision. (Id. at p. 586.) However, we do not reweigh

the evidence and must indulge all presumptions and resolve all conflicts in favor of the

Board‟s decision. (Camarena v. State Personnel Bd. (1997) 54 Cal.App.4th 698, 701

(Camarena).)

The Board‟s legal conclusions, however, are reviewed de novo. (Yamaha Corp.

of America v. State Bd. of Equalization (1998) 19 Cal.4th 1, 7.) We give deference to

an agency‟s interpretation of statutes affecting issues within its administrative

sphere. (Camarena, supra, 54 Cal.App.4th at p. 701.) But “an agency‟s interpretation

of a statute or regulation is contextual: Its power to persuade is both circumstantial

and dependent on the presence or absence of factors that support the merit of the

interpretation.” (Yamaha Corp., supra, 19 Cal.4th at p. 7, italics omitted.)

15

“ „The ultimate interpretation of a statute is an exercise of the judicial power . . .

conferred upon the courts by the Constitution and, in the absence of a constitutional

provision, cannot be exercised by any other body.‟ ” (Ibid.) Thus, it is our duty to

construe statutes. (Ibid.)

II. “New State Function” Test

AFSCME argues the trial court‟s judgment must be reversed because the trial

court applied an improper legal standard for the “new state function” test which would

invalidate a private contract only if it literally displaced civil service employees by firing

them or laying them off. We disagree with AFSCME‟s contention that the trial court

misapplied the law.

The purposes of the constitutional civil service provision (fn. 2, ante) are “ „(1) to

encourage efficiency and economy in state government, and (2) to eliminate the “spoils

system” of political patronage by ensuring that demonstrated fitness--rather than political

considerations--spurs all appointments to public service.‟ ” (California Correctional

Peace Officers Assn. v. Schwarzenegger (2008) 163 Cal.App.4th 802, 821; see id. at

pp. 820-821 [private contracts with out-of-state private prisons to house California

inmates during declared emergency of prison overcrowding did not violate civil service

mandate].) Courts have interpreted the civil service mandate as forbidding private

contracting for services that are of a kind that persons selected through civil service could

perform adequately and competently. (California Correctional Peace Officers Assn.,

supra, at p. 821.) Exceptions to this rule are set forth in section 19130. (Ibid.)

Here, as the trial court observed, the Board‟s reliance on its prior decision, CDF,

was misplaced, because that decision confused the “nature of the services” test of

section 19130, subdivision (b)(3), with the “new state function” test of subdivision (b)(2)

(fn. 3, ante).

Under the “nature of the services” test, the question is whether the services at issue

could be performed by civil service employees, regardless of whether they in fact are

16

being so performed. (Professional Engineers in California Government v. Kempton

(2007) 40 Cal.4th 1016, 1033 (Kempton); Professional Engineers v. Department of

Transportation (California Transportation Ventures) (1993) 13 Cal.App.4th 585, 593

(California Transportation Ventures); State Compensation Ins. Fund v. Riley (1937)

9 Cal.2d 126, 135.) If the services could be performed by civil service employees,

contracts to private contractors cannot be justified under the “nature of the services” test.

(Ibid.)

In contrast, the “new state function” test allows private contracts “ „if the state

seeks to contract for private assistance to perform new functions not previously

undertaken by the state or covered by an existing department or agency.‟ ” (Kempton,

supra, 40 Cal.4th at p. 1033, original italics; California State Employees‟ Assn. v.

Williams (1970) 7 Cal.App.3d 390, 397-400 [permitting state to hire private insurance

carriers to administer state Medi-Cal program].) “ „[I]f the services . . . do not duplicate

functions of an existing agency, the contract is permissible.‟ ” (Professional Engineers v.

Dept. of Transportation (1997) 15 Cal.4th 543, 549 (Dept. of Transportation), original

italics.) As our high court has noted, the “nature of the services” test is inapplicable if the

state seeks to contract for the performance of new functions not previously undertaken by

the state. (Id. at p. 549, citing Williams, supra, 7 Cal.App.3d at pp. 397-400; Kennedy v.

Ross (1946) 28 Cal.2d 569, 571-574; San Francisco v. Boyd (1941) 17 Cal.2d 606, 618-

620.)

The “new state function” test calls for a function not performed by any existing

agency of state government. Under this test, courts ask whether contracted services

“displace existing state civil service functions or, instead, embrace a new state activity or

function.” (California Transportation Ventures, supra, 13 Cal.App.4th at p. 593.) “The

key in such cases is whether a contract displaces the civil service.” (Savient

Pharmaceuticals, Inc. v.Department of Health Services (2007) 146 Cal.App.4th 1457,

1467, italics omitted.) The reason for this inquiry is that “the civil service mandate is

17

aimed at protecting „the existing civil service structure,‟ and does not compel the state „to

fulfill every new state function through its own agency.‟ ” (Dept. of Transportation,

supra, 15 Cal.4th at p. 549.) Section 19130, subdivision (a) is “carefully crafted to

permit personal service contracts to achieve cost savings only when they will have no

detrimental effect on the integrity of the civil service system.” (California State

Employees‟ Assn. v. State of California (1988) 199 Cal.App.3d 840, 846; see id. at p. 844

[rejected facial challenge to constitutionality of section 19130, subd. (a)].) “The statute

combines considerations of efficiency and economy with other interests, including those

of state employees.” (California State Employees‟ Assn. v. State of California, supra, at

p. 846.) In Department of Transportation v. Chavez (1992) 7 Cal.App.4th 407 (Chavez),

this court held that where personal service contracts for maintenance of highway rest

stops were executed 20 years after the authorizing statute was enacted, and a designated

state agency used state employees for most of that work during those intervening years,

the Board could properly decide that the work eventually contracted out did not relate to

or stem from a new state function within the meaning of section 19130. (Chavez, supra,

at pp. 409-411, 416.)

Thus, whether services are a “new state function” depends not on whether, in

theory or in fact, they could be performed by civil service employees, but rather whether

they are, at the time of the contracts, already being performed by civil service employees.

Moreover, the “new state function” test should not be interpreted too narrowly. In

California Transportation Ventures, the court addressed whether contracting out

construction of state toll roads was permissible as a “new state function.” (California

Transportation Ventures, supra, 13 Cal.App.4th at pp. 592-593.) The program gave

private developers exclusive leases during which the developers would operate the

facilities and apply collected tolls to payment of their capital outlay, costs, and a

reasonable rate of return on investment. After the lease term, the facility would revert to

the state. (Id. at p. 590.) Although the court agreed with the state employees that the

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“design and construction of roads” was not a new state function as a general matter, the

court cautioned that the state employees took “too literal an approach” in asserting the

demonstration projects were not a new state function. (Id. at p. 593.) The court

concluded the “novelty” of the projects lay in the privatization of not only their financing

(no state funds would be used to defray construction costs), but also their design,

construction, and operation. (Ibid.) The bar on private contracting of state work should

not be interpreted so as to “discourage [such] experimentation,” because “[t]he

constitutional policy of a merit employment system „does not prohibit legislative

experimentation in new forms to fit new functions.” (Ibid.)

In contrast, a “ „ “new technique‟ ‟ ” for performing an existing state function does

not constitute a “ „ “new state function.” ‟ ” (Dept. of Transportation, supra, 15 Cal.4th

at p. 571.) In Dept. of Transportation, the Supreme Court held that legislation

authorizing Caltrans to use private contractors on state highway projects to ensure timely

retrofitting for seismic safety and ensure timely project delivery did not involve a “new

state function.” (Id. at pp. 552, 569, 571.) Caltrans had always been responsible for

project development of state highway projects; the new legislation did not change that but

simply expanded Caltrans‟s power to contract with private entities to perform that work.

(Id. at p. 571.) The Supreme Court rejected Caltrans‟s argument that an “ „ “enriched” ‟ ”

blend of private contracting to meet responsibilities historically discharged by Caltrans

employees created a “ „ “new state function.” ‟ ” (Ibid.) In discussing the decisional law,

the Supreme Court said of California Transportation Ventures that the legislation there

authorized Caltrans to contract with private development firms to construct and operate

tollways under state lease, on an experimental basis, to secure needed transportation

unobtainable through public financing arrangements. (Dept. of Transportation, supra,

15 Cal.4th at p. 550.) Although the design and construction of roads were neither new

functions nor ones that state workers could not satisfactorily perform, the privatization

program in the California Transportation Ventures case was an experimental one, and no

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state funds would be used to defray construction costs, and under these circumstances,

considerations of efficiency and economy permitted an exception to the private

contracting restriction. (Dept. of Transportation, supra, 15 Cal.4th at p. 550.)

In CDF, the prior Board decision relied upon by the Board in this case, the Board

disallowed contracts CDF entered into with private medical providers to perform initial

and periodic medical examinations of firefighters who sometimes must wear respirators

while working. (CDF, supra, PSC No. 01-04 at p. 1.) CDF argued the medical

examinations were a new state function because they were being conducted in accordance

with new regulations promulgated by California‟s Division of Occupational Safety and

Health (Cal-OHSA); CDF had not previously performed medical evaluations on all its

respirator users; CDF nurse practitioners had never performed this type of medical

evaluation for respirator users; before the regulations, CDF employees could be

employed for years without medical evaluation; and the nature and frequency of the

newly mandated medical evaluations constituted a significant change in philosophy and

practice compared to CDF‟s past procedures. (CDF, supra, at pp. 4-5.) The Board‟s

entire analysis of “new state function” stated: “The documents submitted by both CDF

and CSEA [employees‟ association] indicate, however, that CDF has historically

performed medical evaluations of employees when they are first appointed as limited

term fire apparatus engineers, when they turn 40, and when they turn 55. In addition, the

duties listed in the class specification for Nurse Practitioners call for them to conduct

physical examinations. Thus, from the information CDF has provided, it appears that,

under the new Cal-OSHA regulations, CDF was not required to perform a new state

function, but, instead, was compelled to expand upon an existing state function. The

expansion of an already existing state function does not constitute a new state function

under the first condition of . . . § 19130(b)(2).” (CDF, supra, at p. 5.) The Board cited

Dept. of Transportation, supra, 15 Cal.4th at page 571. (CDF, supra, at p. 5, fn. 5.)

20

In CDF, the Board‟s analysis of the “new state function” test was vague, and a fair

reading suggests the Board made its determination because the nurse practitioners were

capable of performing the so-called “expanded” services, not that they were actually

performing those functions. We agree with the trial court that the CDF analysis, at heart,

applied the “nature of the services” test rather than the “new state function” test.

Therefore, CDF does not support the Board‟s decision in this case.

AFSCME argues the trial court, in attempting to distinguish CDF, stated

two inconsistent principles: (1) that a contract may embrace a new state function even

if the tasks are or can be performed by existing civil service employees, and (2) that

expansion of an existing state function is not a new state function. AFSCME argues the

“gap” in services identified by the court is merely an expansion of existing services

outside of normal business hours, and merely adding services after business hours

does not constitute a “new state function.” AFSCME argues that focusing only on a

chronological gap in services for the “new state function” test, without regard to the

“nature of the services” provided by civil service employees, precludes the possibility

that the gap can -- and must, under the civil service mandate -- be an expansion of the

agency‟s existing functions. Presumably, AFSCME would have the State hire more

civil service employees, or pay overtime to existing civil service employees, to staff an

after-hours POC.

However, no supporting authority is cited. AFSCME cites Dept. of

Transportation. As indicated, ante, the Supreme Court there held that using private

contractors on state highway projects to ensure timely retrofitting for seismic safety and

ensure timely project delivery did not involve a “new state function,” because Caltrans

had always been responsible for project development of state highway projects, and the

new legislation did not change that but simply expanded Caltrans‟s power to contract

with private entities to perform that work. (Id. at pp. 552, 569, 571.) However, the work

in that case was work already being done by civil service employees, and no facts

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supported a finding that civil service staff would be unable adequately and completely to

perform the work. (Ibid.) Here, in contrast, the evidence showed POC staff do not and

would not perform any work after business hours.

AFSCME suggests affirmance of the trial court‟s judgment would constitute a

ruling that “displacement” of civil service for purposes of the “new state function” test

occurs only where state workers are actually fired or laid off. We disagree. Indeed, this

court concluded the “new state function” test did not apply in Chavez, where the existing

employees who had maintained the highway rest stops had not been laid off, but had been

reassigned to other work. (Chavez, supra, 7 Cal.App.4th at pp. 410-411, 416.)

Here, as in Williams, “the state civil service suffers no displacement and the

underlying constitutional policy is not offended when a new state activity is conducted by

contract with a separate public or private entity.” (Williams, supra, 7 Cal.App.3d at

p. 399.) We reject AFSCME‟s contention that the trial court applied an improper legal

standard for “new state function.”

III. Substantial Evidence

AFSCME argues substantial evidence supports the Board‟s finding that the

contracted services did not comprise a new state function, and the trial court improperly

reweighed the evidence before the Board. We disagree.

As indicated, the substantial evidence standard in State Personnel Board cases

requires that all evidence be considered, including that which fairly detracts from the

evidence supporting the Board‟s decision. (California Youth Authority, supra,

104 Cal.App.4th at pp. 584-586.) AFSCME‟s reliance on cases that employ a substantial

evidence test in other contexts is misplaced.

The evidence showed that the private contractors provide services that fill a “gap”

in services performed by civil service employees in the counties covered by the private

22

contracts. They provide 24/7 crisis16 care, including inpatient services; vocational

training; housing referrals; parolee transportation; and administrative support, office

space, and necessary equipment. Without the contracted services, there is a gap in

service between POC outpatient services and a 5150 hold. Before the contracts, the

counties had to look to local community agencies to try to put together -- piecemeal --

inpatient counseling, transitional services, critical care beds, and overnight crisis

counseling/care -- services not provided by POC. Some of the services under the

contracts which fill the gap between POC and a 5150 hold are transitional housing, acute

case management, and daily meetings with a counselor if necessary. POC workers are

tied to the business hours of the parole units, Monday through Friday, excluding nights,

weekends and holidays. POC workers do not provide a 24-hour call center or 24/7 access

to a mental health professional, housing or the other listed services, as do the private

contractors. POC has no specific funding for housing; parole agents merely have “cash

assistance” available to assist with transitional housing.

We have considered all the evidence, including the evidence indicating an overlap

of services during POC‟s regular business hours. However, even indulging presumptions

in favor of the Board‟s decision, there is no substantial evidence that civil services

employees perform the services that constitute the identified “gap.”

AFSCME argues there is such evidence, in that parolees have 24-hour access to

their parole agent and parolees know how to call other crisis hotlines or go to a hospital.

16 It is hard to imagine that the Legislature had anything other than 24/7 care in mind

when it used the word “crisis” in Penal Code section 3073, given the plain meaning of the

word “crisis,” which includes “an emotionally significant event or radical change of

status in a person‟s life,” “an unstable or crucial time or state of affairs in which a

decisive change is impending; esp : one with the distinct possibility of a highly

undesirable outcome,” and “a situation that has reached a critical phase.” (Merriam-

Webster‟s Collegiate Dict. (11th ed. 2006) p. 296, col. 2.) The occurrence of such events

is not limited to the regular workweek during business hours.

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AFSCME argues Telecare‟s 24/7 crisis care is, according to its proposal, just an on-call

staff person with a cell phone, to ensure evening and weekend coverage. However, even

that is something not done by POC staff. Although AFSCME questions whether the

person who carries the phone has adequate training, Telecare also promised to have an

administrator and program psychiatrist available for after-hours consultation on an as-

needed basis. AFSCME argues “the only feature arguably distinguishing” the private

contractors‟ activities from POC‟s is that the private contractors “have assumed the role

of an after-hours crisis hotline (for parolees who already have 24-hour access to a parole

agent and other crisis hotlines).” Thus, AFSCME acknowledges that the private

contractors provide something not provided by POC social workers or psychologists.

AFSCME argues there is no evidence of what “in[]patient” care is being provided

by the private contractors. AFSCME says it “does not dispute that Telecare or other

private contractors may be capable of providing in[]patient services to parolees,” but this

does not establish that their inpatient services, whether provided directly or by

subcontract, is distinct from POC‟s activities. AFSCME argues the private contractors

may merely be subcontracting for inpatient services in a manner already performed by

POC staff. AFSCME points to the oral statements of POC staff at the Board hearing, that

the private contractors were doing the same kinds of things POC staff did, “hookups with

board and care,” etc. However, at most, this merely indicates a potential overlap during

POC business hours. It says nothing about the gap filled by the private contractors for

services not performed by POC staff.

AFSCME says the POC and private contractors work with the same population of

parolees. However, the cited evidence is an oral statement by POC psychologist Debra

Webb at the Board hearing. She said some parolees were unhappy with one of the

private contractors and wanted to come back to POC. However, the Board chair agreed

24

with CDCR counsel that quality of care by the private contractor was not at issue in the

administrative appeal.17 We agree as well.

We conclude the evidence is insufficient to support the Board‟s decision.

IV. Remand

AFSCME argues that, if the trial court was correct that the Board failed to apply

the correct legal standard and make findings for the “new state function” test, then we

should remand to the Board to correct those defects. We disagree.

Code of Civil Procedure section 1094.5 implicitly requires that administrative

agencies set forth findings “to bridge the analytic gap between the raw evidence and

ultimate decision or order.” (Topanga Assn. for a Scenic Community v. County of Los

Angeles (1974) 11 Cal.3d 506, 515.) When an administrative agency‟s findings are not

adequate in that regard, remand is an appropriate remedy so that the agency may make

the proper findings. (Glendale Memorial Hospital & Health Center v. State Dept. of

Mental Health (2001) 91 Cal.App.4th 129, 140.)

However, administrative agency findings need not be stated with the formality

and precision required in judicial proceedings, and remand is not appropriate if the court

determines that necessary findings reasonably may be implied. (North Gualala Water

Co. v. State Water Resources Control Bd. (2006) 139 Cal.App.4th 1577, 1603.)

Here, we conclude (as did the trial court) that remand is not required, because

the Board‟s ultimate decision -- that CDCR failed to prove a “new state function” --

necessarily implied the underlying finding that the contracted services duplicate and

displace existing state functions.

17 The administrative appeal is restricted to the question whether the contract complies

with section 19130. (Pub. Contract Code, § 10337; Cal. Code Regs., tit. 2, § 547.66.)

25

DISPOSITION

The judgment is affirmed. CDCR shall recover its costs on appeal. (Cal. Rules of

Court, rule 8.278(a).)

MURRAY , J.

We concur:

BLEASE , Acting P. J.

NICHOLSON , J.

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