June 25, 1998
	The Honorable Pete Wilson Governor of California
	The Honorable John Burton President Pro Tempore of the Senate     and Members of the Senate		The Honorable Ross Johnson Senate Republican Leader
	The Honorable Antonio Villaraigosa Speaker of the Assembly     and Members of the Assembly		The Honorable Bill Leonard Assembly Republican Leader

Dear Governor and Members of the Legislature: The Little Hoover Commission rejected Governor's Reorganization Plan No. 1 of 1998 by a vote of 5 to 4 at a meeting on June 25, 1998. In discussing the merits of the plan, individual Commissioners raised a number of issues: Some Commissioners were concerned that the plan does not consolidate the State's oversight of health plans into the new department. Some Commissioners were concerned about placing the new department within the Business, Transportation and Housing Agency, rather than within the State and Consumer Services Agency or the Health and Welfare Agency. Other Commissioners believed the new entity should be an agency unto itself or should be governed by a board. The concerns raised by individual Commissioners appear in the transcript of the Commission's deliberations, which will be made available as soon as possible.

	Sincerely, Richard R. Terzian Chairman