Level the Playing Field: Put California's Underground Economy Out of Business

Report #226, March 2015
Level the Playing Field: Put California's Underground Economy Out of Business

Full Report

Executive Summary

Press Release

FOR IMMEDIATE RELEASE 
March 9, 2015

For Additional Information Contact:
Carole D’Elia, Executive Director
(916) 445-2125

Commission Urges Leaders to Wage Stronger Campaign Against Underground Economy to Protect California Businesses and Workers

California businesses are losing ground to unscrupulous competitors who break the rules to gain an unfair advantage, the Little Hoover Commission stated Monday in a report calling on the Governor and Legislature to more effectively fight the state’s underground economy. California workers also suffer when they are not paid a fair wage or are misclassified. All Californians are hurt when cheating goes unchecked.

The state loses an estimated $8.5 billion or more annually in tax revenue, yet efforts to combat the underground economy are disjointed and under-resourced, the Commission found. It reported that the state’s bureaucratic disorganization and neglect provide significant incentives to cheat, making the rewards of participating in the underground economy outweigh the risks.

“In 1985, the Little Hoover Commission sounded the alarm on the growing underground economy. Unfortunately, not enough was done. We’re back again, saying that honest businesses and their employees deserve a fair shake,” stated Little Hoover Commission Chairman Pedro Nava. “Business owners should know the state stands with them against cheating competitors. Workers should know they can stand up to bosses who violate their rights. Taxpayers should expect they will not pay more because some businesses don’t pay at all.”

In its report, Level the Playing Field: Put California’s Underground Economy Out of Business, the Commission makes 15 recommendations to give competitive advantage to compliant businesses:

  • Accountability. The Governor should designate a limited-term leader with authority to coordinate state efforts and eliminate barriers preventing a successful fight.
     
  • Enforcement. The Commission calls for improved enforcement efforts to reduce the scale of the underground economy which has grown and thrived.
     
  • Education. The state should develop new consumer education and outreach programs to reduce demand for underground economy goods and services. It also should better educate public officials on the harm caused by the underground economy and their role in curtailing it.


On Tuesday, March 10, 2015, Carole D’Elia, the Commission’s executive director, will be discussing some of the findings and recommendations from the report as part of a panel on the underground economy task forces at a joint hearing of Assembly Budget Subcommittee #4 and the Assembly Revenue and Taxation Committee at the State Capitol in Room 126.

The Little Hoover Commission is a bipartisan and independent state agency charged with recommending ways to improve the efficiency and effectiveness of state programs. The Commission’s recommendations are submitted to the Governor and the Legislature for their consideration and action. For a copy of the report, visit the Commission’s website: www.lhc.ca.gov.

Fact Sheet

Study Description

For this study, the Commission examined the state’s efforts in addressing the complex and varied challenges in reducing the underground economy. In California, the underground economy stretches into many industries and areas. The harmful effects of improper business practices, such as neglecting to report employment data or income or follow laws pertaining to workers' compensation insurance, impact the safety of employees as well as the economy and state budget.  Estimates indicate the state loses billions annually in tax revenue.These practices also create a business environment that is potentially damaging to those businesses that comply with the state’s laws, at times creating an incentive to violate the rules in order to compete. 

As a part of this study, the Commission sought to identify barriers that prevent effective enforcement of state tax and labor laws and opportunities to improve efforts to combat the underground economy. Within the past two years, the state created two new collaborative bodies, the Labor Enforcement Task Force and the Revenue Recovery and Collaborative Enforcement Team. These bodies joined the efforts of the nearly 20-year-old Joint Enforcement Strike Force as well as multiple state and local government agencies. The Commission sought to understand the ways in which these two new organizations represent a different approach to combating the underground economy, as well as how the many agencies and task forces will work across silos. The Commission also sought to understand the principles used by policymakers and those involved in investigations and enforcement as they set expectations and define metrics for measuring success. Finally, the Commission explored the ways in which unlawful business practices affect California industry, and any new trends in the underground economy that warranted changes to the methods state organizations use.


Previous Studies

Agenda

Overview

In this report, the Commission urges leaders to wage a stronger campaign against the underground economy to protect California businesses and workers.

During its review, the Commssion found the state loses an estimated $8.5 billion or more annually in tax revenue, while efforts to combat the underground economy are disjointed and under-resourced.

The Commission provides 15 recommendations to give competitive advantage to businesses that comply with state licensing and tax laws and pay their workers fairly.

Print 
			Agenda
  • March 23
    2017
    Business Meeting
    9:00 a.m., State Capitol, Room 437, Sacramento, CA
    Business Meeting
    Agenda

    AGENDA

    Business Meeting
    Thursday, March 23, 2017, at 9:00 a.m.
    State Capitol, Room 437
    Sacramento, CA 95814
     

    1. Bruce Wilcox, Assistant Secretary, Salton Sea Policy, California Natural Resources Agency (Written Testimony)
       
    2. Christine Baker, Director, California Department of Industrial Relations (Written Testimony)
       
    3. Marybel Batjer, Secretary, Government Operations Agency (Written Testimony)
       
    4. Business Meeting Minutes from February 13 & 26, 2017
       
    5. Officer Elections
       
    6. Subcommittee Reports and Project Selection
       
    7. Implementation
       
    8. Reports from the California State Auditor’s Office
       

    Comments Submitted by Members of the Public

    Public Notice

    PUBLIC NOTICE

    FOR IMMEDIATE RELEASE
    March 13, 2017

    For Additional Information Contact:
    Carole D’Elia, Executive Director
    (916) 445-2125

    Notice of Meeting

    On Thursday, March 23, 2017, the Little Hoover Commission will hold a business meeting to hear updates on implementation from five Commission reports released in 2014, 2015 and 2016. The meeting will take place at 9 a.m. in Room 437 of the State Capitol.

    These reports include:

    Addressing the Salton Sea study will be Bruce Wilcox, Assistant Secretary for Salton Sea Policy at the California Natural Resources Agency. Discussing the underground economy study, will be Christine Baker, Director of the California Department of Industrial Relations. Regarding the civil services reform and government interactions studies, the Commission will hear from Marybel Batjer, Secretary of the Government Operations Agency. Following these updates, the Commission will conduct other business as detailed on the attached agenda.

    If you need reasonable accommodation due to a disability, please contact Commission Executive Director Carole D’Elia at (916) 445-2125 or littlehoover@lhc.ca.gov by Thursday, March 16, 2017.

    Video
  • September 9
    2014
    California's Underground Economy
    9:30 - 11:30 a.m., 925 L Street, Lower Level Conference Room, Sacra
    Advisory Committee Meeting
    Agenda

    AGENDA

    Advisory Committee Meeting on the Underground Economy
    Tuesday, September 9, 2014, 9:30 - 11:30 a.m.
    925 L Street, Lower Level Conference Room
    Sacramento, CA


    Meeting Goals: To bring together worker advocates to discuss ideas on how to create a safer and fairer working environment while combating California’s underground economy.

    9:30 – 9:40 a.m.

    Welcome and Introduction
    Commission Vice Chair Loren Kaye and Executive Director Carole D’Elia

    9:40 – 11:30 a.m.

    Discussion: Worker advocates will discuss different suggestions that have been presented to the Little Hoover Commission over the course of its underground economy study process. These will include ideas on how to reduce and prevent labor and employment violations. Stakeholders also will discuss antiretaliation protections and enforcement strategies, as well as other ideas shared by participants.

    Public Notice

    PUBLIC NOTICE

    FOR IMMEDIATE RELEASE
    August 26, 2014

    For Additional Information Contact:
    Carole D’Elia, Executive Director
    (916) 445-2125

    Notice of Meeting

    On Tuesday, September 9, 2014, the Little Hoover Commission will convene an advisory committee meeting to discuss the underground economy. The meeting will begin at 9:30 a.m. in the lower level conference room of 925 L Street, Sacramento, CA 95814. The discussion will explore perspectives of worker advocates regarding ways to create a safer and fairer work environment while combating California’s underground economy.

    All public notices for meetings are on the Commission’s website, www.lhc.ca.gov. If you need reasonable accommodation due to a disability, please contact Carole D’Elia at (916) 445-2125 or littlehoover@lhc.ca.gov by Tuesday, September 2, 2014.

  • July 22
    2014
    California's Underground Economy
    1:00 - 3:00 p.m., 925 L Street, Lower Level Conference Room, Sacram
    Advisory Committee Meeting
    Agenda

    AGENDA

    Advisory Committee Meeting on the Underground Economy
    Tuesday, July 22, 2014, 1:00 - 3:00 p.m.
    925 L Street, Lower Level Conference Room
    Sacramento, CA


    Meeting Goals: To bring leaders from the business community together to discuss potential paths toward a level playing field for California’s compliant businesses.

    1:00 – 1:10 p.m.

    Welcome and Introduction
    Subcommittee Chair Pedro Nava and Executive Director Carole D’Elia 

    1:10 – 3:00 p.m.

    Discussion: Stakeholders across the business community continuum will discuss different suggestions that have been presented to the Little Hoover Commission over the course of its underground economy study process. These will include ideas on how to make it easier for businesses to comply with labor- and employment-related rules and regulations and ideas of business leaders on due diligence and liability. Stakeholders also will discuss making the risks of participating in the underground economy outweigh the rewards and increasing the state’s collections capacity, as well as other ideas shared by participants.

    Public Notice

    PUBLIC NOTICE

    FOR IMMEDIATE RELEASE
    July 8, 2014

    For Additional Information Contact:
    Carole D’Elia, Executive Director
    (916) 445-2125

    Notice of Meeting 

    On Tuesday, July 22, 2014, the Little Hoover Commission will convene an advisory committee meeting to discuss the underground economy. The meeting will begin at 1:00 p.m. in the lower level conference room of 925 L Street, Sacramento, CA 95814. The discussion will explore perspectives of the business community regarding potential paths to create a level playing field for California’s compliant businesses.

    All public notices for meetings are on the Commission’s website, www.lhc.ca.gov. If you need reasonable accommodation due to a disability, please contact Carole D’Elia at (916) 445-2125 or littlehoover@lhc.ca.gov by Tuesday, July 15, 2014.

  • April 29
    2014
    California's Underground Economy
    10:30 a.m., Los Angeles Federal Building, Conference Room E, 300 No
    Advisory Committee Meeting
    Agenda

    AGENDA

    Advisory Committee Meeting on Southern California Underground Economy Efforts and Partnerships
    Tuesday, April 29, 2014, at 10:30 a.m.
    Los Angeles Federal Building, Conference Room E
    300 North Los Angeles Street 
    Los Angeles, CA


    Meeting Goals: To learn about the ways in which the underground economy is particularly pertinent to Los Angeles and surrounding areas of Southern California, and how local, state and federal agencies address these problems through targeted programs or collaborative partnerships.

    10:30 – 10:40 a.m.

    Welcome and Introduction 
    Subcommittee Chair Pedro Nava and Executive Director Carole D’Elia

    10:40 – 12:30 p.m.

    Discussion: Stakeholders representing a wide range of perspectives will discuss the ways in which they identify issues associated with the underground economy, investigate and develop cases, and pursue administrative or criminal penalties against violators. They also will discuss the factors that determine a program’s or task force’s effectiveness, and reform ideas that the Commission may be interested in considering as it continues its study.

    Public Notice

    PUBLIC NOTICE

    FOR IMMEDIATE RELEASE
    April 15, 2014

    For Additional Information Contact:
    Carole D’Elia, Executive Director
    (916) 445-2125

    Notice of Meeting 

    On Tuesday, April 29, 2014, the Little Hoover Commission will convene an advisory committee meeting to discuss the underground economy as it pertains to Los Angeles and other areas of Southern California. The meeting will begin at 10:30 a.m. in Conference Room E of the Los Angeles Federal Building, 300 North Los Angeles Street, Los Angeles. The discussion will explore the ways in which the underground economy is particularly pertinent to this region of the state, the programs that local, state and federal agencies in the area have created to address these problems, and the ways in which organizations work in partnerships to target these issues.

    All public notices for meetings are on the Commission’s website, www.lhc.ca.gov. If you need reasonable accommodation due to a disability, please contact Carole D’Elia at (916) 445-2125 or littlehoover@lhc.ca.gov by Tuesday, April 22, 2014.

  • March 27
    2014
    California's Underground Economy
    9:30 a.m., State Capitol, Room 437, Sacramento, CA
    Public Hearing
    Agenda

    AGENDA

    Public Hearing on California's Underground Economy
    Thursday, March 27, 2014, at 9:30 a.m.
    State Capitol, Room 437
    Sacramento, CA


    Opening Remarks

    Underground Activities and Their Effects on the California Economy and Business

    1. Selvi Stanislaus, Executive Officer, Franchise Tax Board (Written Testimony)
       

    The Employment Development Department's Programs and Role in State Task Forces

    1. Michele Ostby, Chief, Field Audit and Compliance Division, Employment Development Department (Written Testimony)
       
    2. Lisa Schmith, Chief, Investigation Division, Employment Development Department (Written Testimony)
       

    Addressing Violations within the Construction Industry

    1. David Fogt, Enforcement Chief, Contractors State License Board (Written Testimony)
       
    2. Bill Pennington, Senior Technical and Program Advisor, California Energy Commission Energy Efficiency Division (Written Testimony)
       

    GO-Biz and its Efforts as a One-Stop Shop

    1. Paul Martin, Deputy Director of Permit Assistance, Governor's Office of Business and Economic Development (Written Testimony)


    The State of Washington's Use of Data in Combating the Underground Economy and What California Can Learn

    1. Carl Hammersburg, Government Fraud Solutions Specialist, SAS Institute Inc.; and former Fraud Prevention and Compliance Manager, Washington State Department of Labor & Industries (Written Testimony)
    Public Notice

    PUBLIC NOTICE

    FOR IMMEDIATE RELEASE
    March 13, 2014

    For Additional Information Contact:
    Carole D’Elia, Executive Director
    (916) 445-2125

    Notice of Meeting

    On Thursday, March 27, 2014, the Little Hoover Commission will conduct a public hearing on the underground economy in California. The hearing will begin at 9:30 a.m. in Room 437 of the State Capitol in Sacramento.

    In this hearing, the Commission will continue its efforts to understand the ways in which the state is addressing the complex challenges presented by the underground economy. Additionally, the Commission will examine state efforts to assist businesses in complying with regulations and will learn about ways in which government agencies use data analytics to combat fraud.

    The Commission will hear from Selvi Stanislaus, executive officer of the California Franchise Tax Board, who will explain the relationship between the underground economy and taxes, outline her organization’s role in the state’s underground economy task forces and discuss how to enhance collaboration, outreach and enforcement. The Commission then will hear from a panel of representatives from the Employment Development Department’s Investigation and Field Audit and Compliance divisions, who will discuss their outreach and enforcement activities and the department’s collaborative partnerships. Next, a representative from the Contractors State License Board will discuss the board’s successes and challenges in enforcing regulations and a pilot program designed to increase the proper installation of heating, ventilation and air conditioning systems. A representative from the California Energy Commission will provide perspective regarding the state’s energy policy and goals. The Commission also will hear from the Governor’s Office of Business and Economic Development about a program it offers to guide businesses in complying with requirements. Finally, an expert will share his experiences using data analytics in identifying fraud in government programs.

    There will be an opportunity for public comment at the end of the hearing. The Commission also encourages written comments.

    All public notices for meetings are on the Commission’s website, www.lhc.ca.gov. If you need reasonable accommodation due to a disability, please contact Commission Executive Director Carole D’Elia at (916) 445-2125 or littlehoover@lhc.ca.gov by Thursday, March 20, 2014.

    Video
  • January 23
    2014
    California's Underground Economy
    9:30 a.m., State Capitol, Room 2040, Sacramento, CA
    Public Hearing
    Agenda

    AGENDA

    Public Hearing on California's Underground Economy
    Thursday, January 23, 2014, at 9:30 a.m.
    State Capitol, Room 2040
    Sacramento, CA


    Opening Remarks

    The Underground Economy: Impact on California and its Workforce

    1. Christine Baker, Director, Department of Industrial Relations (Written Testimony, Attachment)
       

    Revenue Recovery: Criminal Tax Evasion and its Effects on the California Economy

    1. Shellie Hughes, Chief Legal Advisor for Chairman Jerome E. Horton, State Board of Equalization (Written Testimony)
       
    2. Randy Silva, Chief of Investigations & Special Operations, State Board of Equalization (Written Testimony)
       
    3. Peter Williams, Deputy Attorney General, Department of Justice (Written Testimony)
       

    An Uneven Playing Field: Combating Illegal Practices in California Industries

    1. Bruce Wick, Risk Management Director, California Professional Association of Specialty Contractors (Written Testimony)
       
    2. Kris Buckner, Chief Executive Officer, Investigative Consultants (Written Testimony)
       

    Public Comments

    Public Notice

    PUBLIC NOTICE

    FOR IMMEDIATE RELEASE
    January 9, 2014

    For Additional Information Contact:
    Carole D’Elia, Executive Director (A)
    (916) 445-2125

    Notice of Meeting

    On Thursday, January 23, 2014, the Little Hoover Commission will conduct a public hearing on the underground economy in California. The hearing will begin at 9:30 a.m. in Room 2040 of the State Capitol in Sacramento.

    In this hearing, the Commission seeks to identify barriers that prevent effective enforcement of state tax and labor laws and opportunities to improve efforts to combat the underground economy. The Commission aims to understand the ways in which recently created collaborative bodies represent an innovative approach to abating the underground economy, as well as how the agencies and task forces involved will work across silos. It will explore the principles used by policymakers and administrators as they set expectations and define metrics for measuring success. Finally, the Commission will learn about the effects of unlawful business practices on California industry and any trends in the underground economy that may warrant changes to the methods state organizations use to eradicate it.

    The Commission will hear from Christine Baker, director of the Department of Industrial Relations, who will introduce the topic and discuss the work of her department and the state’s task forces that endeavor to join efforts across bureaucratic boundaries. The Commission will then hear from a Board of Equalization chief legal advisor, the board’s chief of investigations and special operations and a deputy attorney general from the Department of Justice. The panel will offer an additional overview of the underground economy in California as well as discuss the state’s work on criminal tax evasion and revenue recovery. Following their testimony, the Commission will hear from a risk management director in the construction industry and the chief executive officer of an intellectual property rights investigative firm on the effects of the underground economy on industry.

    There will be an opportunity for public comment at the end of the hearing. The Commission also encourages written comments.

    All public notices for meetings are on the Commission’s website, www.lhc.ca.gov. If you need reasonable accommodation due to a disability, please contact Commission Acting Executive Director Carole D’Elia at (916) 445-2125 or littlehoover@lhc.ca.gov by Thursday, January 16, 2014.

    Video
Print 
		Agenda
  • March 23
    2017
    Business Meeting
    9:00 a.m., State Capitol, Room 437, Sacramento, CA
    Business Meeting
    Agenda

    AGENDA

    Business Meeting
    Thursday, March 23, 2017, at 9:00 a.m.
    State Capitol, Room 437
    Sacramento, CA 95814
     

    1. Bruce Wilcox, Assistant Secretary, Salton Sea Policy, California Natural Resources Agency (Written Testimony)
       
    2. Christine Baker, Director, California Department of Industrial Relations (Written Testimony)
       
    3. Marybel Batjer, Secretary, Government Operations Agency (Written Testimony)
       
    4. Business Meeting Minutes from February 13 & 26, 2017
       
    5. Officer Elections
       
    6. Subcommittee Reports and Project Selection
       
    7. Implementation
       
    8. Reports from the California State Auditor’s Office
       

    Comments Submitted by Members of the Public

    Public Notice

    PUBLIC NOTICE

    FOR IMMEDIATE RELEASE
    March 13, 2017

    For Additional Information Contact:
    Carole D’Elia, Executive Director
    (916) 445-2125

    Notice of Meeting

    On Thursday, March 23, 2017, the Little Hoover Commission will hold a business meeting to hear updates on implementation from five Commission reports released in 2014, 2015 and 2016. The meeting will take place at 9 a.m. in Room 437 of the State Capitol.

    These reports include:

    Addressing the Salton Sea study will be Bruce Wilcox, Assistant Secretary for Salton Sea Policy at the California Natural Resources Agency. Discussing the underground economy study, will be Christine Baker, Director of the California Department of Industrial Relations. Regarding the civil services reform and government interactions studies, the Commission will hear from Marybel Batjer, Secretary of the Government Operations Agency. Following these updates, the Commission will conduct other business as detailed on the attached agenda.

    If you need reasonable accommodation due to a disability, please contact Commission Executive Director Carole D’Elia at (916) 445-2125 or littlehoover@lhc.ca.gov by Thursday, March 16, 2017.

    Video
  • September 9
    2014
    California's Underground Economy
    9:30 - 11:30 a.m., 925 L Street, Lower Level Conference Room, Sacra
    Advisory Committee Meeting
    Agenda

    AGENDA

    Advisory Committee Meeting on the Underground Economy
    Tuesday, September 9, 2014, 9:30 - 11:30 a.m.
    925 L Street, Lower Level Conference Room
    Sacramento, CA


    Meeting Goals: To bring together worker advocates to discuss ideas on how to create a safer and fairer working environment while combating California’s underground economy.

    9:30 – 9:40 a.m.

    Welcome and Introduction
    Commission Vice Chair Loren Kaye and Executive Director Carole D’Elia

    9:40 – 11:30 a.m.

    Discussion: Worker advocates will discuss different suggestions that have been presented to the Little Hoover Commission over the course of its underground economy study process. These will include ideas on how to reduce and prevent labor and employment violations. Stakeholders also will discuss antiretaliation protections and enforcement strategies, as well as other ideas shared by participants.

    Public Notice

    PUBLIC NOTICE

    FOR IMMEDIATE RELEASE
    August 26, 2014

    For Additional Information Contact:
    Carole D’Elia, Executive Director
    (916) 445-2125

    Notice of Meeting

    On Tuesday, September 9, 2014, the Little Hoover Commission will convene an advisory committee meeting to discuss the underground economy. The meeting will begin at 9:30 a.m. in the lower level conference room of 925 L Street, Sacramento, CA 95814. The discussion will explore perspectives of worker advocates regarding ways to create a safer and fairer work environment while combating California’s underground economy.

    All public notices for meetings are on the Commission’s website, www.lhc.ca.gov. If you need reasonable accommodation due to a disability, please contact Carole D’Elia at (916) 445-2125 or littlehoover@lhc.ca.gov by Tuesday, September 2, 2014.

  • July 22
    2014
    California's Underground Economy
    1:00 - 3:00 p.m., 925 L Street, Lower Level Conference Room, Sacram
    Advisory Committee Meeting
    Agenda

    AGENDA

    Advisory Committee Meeting on the Underground Economy
    Tuesday, July 22, 2014, 1:00 - 3:00 p.m.
    925 L Street, Lower Level Conference Room
    Sacramento, CA


    Meeting Goals: To bring leaders from the business community together to discuss potential paths toward a level playing field for California’s compliant businesses.

    1:00 – 1:10 p.m.

    Welcome and Introduction
    Subcommittee Chair Pedro Nava and Executive Director Carole D’Elia 

    1:10 – 3:00 p.m.

    Discussion: Stakeholders across the business community continuum will discuss different suggestions that have been presented to the Little Hoover Commission over the course of its underground economy study process. These will include ideas on how to make it easier for businesses to comply with labor- and employment-related rules and regulations and ideas of business leaders on due diligence and liability. Stakeholders also will discuss making the risks of participating in the underground economy outweigh the rewards and increasing the state’s collections capacity, as well as other ideas shared by participants.

    Public Notice

    PUBLIC NOTICE

    FOR IMMEDIATE RELEASE
    July 8, 2014

    For Additional Information Contact:
    Carole D’Elia, Executive Director
    (916) 445-2125

    Notice of Meeting 

    On Tuesday, July 22, 2014, the Little Hoover Commission will convene an advisory committee meeting to discuss the underground economy. The meeting will begin at 1:00 p.m. in the lower level conference room of 925 L Street, Sacramento, CA 95814. The discussion will explore perspectives of the business community regarding potential paths to create a level playing field for California’s compliant businesses.

    All public notices for meetings are on the Commission’s website, www.lhc.ca.gov. If you need reasonable accommodation due to a disability, please contact Carole D’Elia at (916) 445-2125 or littlehoover@lhc.ca.gov by Tuesday, July 15, 2014.

  • April 29
    2014
    California's Underground Economy
    10:30 a.m., Los Angeles Federal Building, Conference Room E, 300 No
    Advisory Committee Meeting
    Agenda

    AGENDA

    Advisory Committee Meeting on Southern California Underground Economy Efforts and Partnerships
    Tuesday, April 29, 2014, at 10:30 a.m.
    Los Angeles Federal Building, Conference Room E
    300 North Los Angeles Street 
    Los Angeles, CA


    Meeting Goals: To learn about the ways in which the underground economy is particularly pertinent to Los Angeles and surrounding areas of Southern California, and how local, state and federal agencies address these problems through targeted programs or collaborative partnerships.

    10:30 – 10:40 a.m.

    Welcome and Introduction 
    Subcommittee Chair Pedro Nava and Executive Director Carole D’Elia

    10:40 – 12:30 p.m.

    Discussion: Stakeholders representing a wide range of perspectives will discuss the ways in which they identify issues associated with the underground economy, investigate and develop cases, and pursue administrative or criminal penalties against violators. They also will discuss the factors that determine a program’s or task force’s effectiveness, and reform ideas that the Commission may be interested in considering as it continues its study.

    Public Notice

    PUBLIC NOTICE

    FOR IMMEDIATE RELEASE
    April 15, 2014

    For Additional Information Contact:
    Carole D’Elia, Executive Director
    (916) 445-2125

    Notice of Meeting 

    On Tuesday, April 29, 2014, the Little Hoover Commission will convene an advisory committee meeting to discuss the underground economy as it pertains to Los Angeles and other areas of Southern California. The meeting will begin at 10:30 a.m. in Conference Room E of the Los Angeles Federal Building, 300 North Los Angeles Street, Los Angeles. The discussion will explore the ways in which the underground economy is particularly pertinent to this region of the state, the programs that local, state and federal agencies in the area have created to address these problems, and the ways in which organizations work in partnerships to target these issues.

    All public notices for meetings are on the Commission’s website, www.lhc.ca.gov. If you need reasonable accommodation due to a disability, please contact Carole D’Elia at (916) 445-2125 or littlehoover@lhc.ca.gov by Tuesday, April 22, 2014.

  • March 27
    2014
    California's Underground Economy
    9:30 a.m., State Capitol, Room 437, Sacramento, CA
    Public Hearing
    Agenda

    AGENDA

    Public Hearing on California's Underground Economy
    Thursday, March 27, 2014, at 9:30 a.m.
    State Capitol, Room 437
    Sacramento, CA


    Opening Remarks

    Underground Activities and Their Effects on the California Economy and Business

    1. Selvi Stanislaus, Executive Officer, Franchise Tax Board (Written Testimony)
       

    The Employment Development Department's Programs and Role in State Task Forces

    1. Michele Ostby, Chief, Field Audit and Compliance Division, Employment Development Department (Written Testimony)
       
    2. Lisa Schmith, Chief, Investigation Division, Employment Development Department (Written Testimony)
       

    Addressing Violations within the Construction Industry

    1. David Fogt, Enforcement Chief, Contractors State License Board (Written Testimony)
       
    2. Bill Pennington, Senior Technical and Program Advisor, California Energy Commission Energy Efficiency Division (Written Testimony)
       

    GO-Biz and its Efforts as a One-Stop Shop

    1. Paul Martin, Deputy Director of Permit Assistance, Governor's Office of Business and Economic Development (Written Testimony)


    The State of Washington's Use of Data in Combating the Underground Economy and What California Can Learn

    1. Carl Hammersburg, Government Fraud Solutions Specialist, SAS Institute Inc.; and former Fraud Prevention and Compliance Manager, Washington State Department of Labor & Industries (Written Testimony)
    Public Notice

    PUBLIC NOTICE

    FOR IMMEDIATE RELEASE
    March 13, 2014

    For Additional Information Contact:
    Carole D’Elia, Executive Director
    (916) 445-2125

    Notice of Meeting

    On Thursday, March 27, 2014, the Little Hoover Commission will conduct a public hearing on the underground economy in California. The hearing will begin at 9:30 a.m. in Room 437 of the State Capitol in Sacramento.

    In this hearing, the Commission will continue its efforts to understand the ways in which the state is addressing the complex challenges presented by the underground economy. Additionally, the Commission will examine state efforts to assist businesses in complying with regulations and will learn about ways in which government agencies use data analytics to combat fraud.

    The Commission will hear from Selvi Stanislaus, executive officer of the California Franchise Tax Board, who will explain the relationship between the underground economy and taxes, outline her organization’s role in the state’s underground economy task forces and discuss how to enhance collaboration, outreach and enforcement. The Commission then will hear from a panel of representatives from the Employment Development Department’s Investigation and Field Audit and Compliance divisions, who will discuss their outreach and enforcement activities and the department’s collaborative partnerships. Next, a representative from the Contractors State License Board will discuss the board’s successes and challenges in enforcing regulations and a pilot program designed to increase the proper installation of heating, ventilation and air conditioning systems. A representative from the California Energy Commission will provide perspective regarding the state’s energy policy and goals. The Commission also will hear from the Governor’s Office of Business and Economic Development about a program it offers to guide businesses in complying with requirements. Finally, an expert will share his experiences using data analytics in identifying fraud in government programs.

    There will be an opportunity for public comment at the end of the hearing. The Commission also encourages written comments.

    All public notices for meetings are on the Commission’s website, www.lhc.ca.gov. If you need reasonable accommodation due to a disability, please contact Commission Executive Director Carole D’Elia at (916) 445-2125 or littlehoover@lhc.ca.gov by Thursday, March 20, 2014.

    Video
  • January 23
    2014
    California's Underground Economy
    9:30 a.m., State Capitol, Room 2040, Sacramento, CA
    Public Hearing
    Agenda

    AGENDA

    Public Hearing on California's Underground Economy
    Thursday, January 23, 2014, at 9:30 a.m.
    State Capitol, Room 2040
    Sacramento, CA


    Opening Remarks

    The Underground Economy: Impact on California and its Workforce

    1. Christine Baker, Director, Department of Industrial Relations (Written Testimony, Attachment)
       

    Revenue Recovery: Criminal Tax Evasion and its Effects on the California Economy

    1. Shellie Hughes, Chief Legal Advisor for Chairman Jerome E. Horton, State Board of Equalization (Written Testimony)
       
    2. Randy Silva, Chief of Investigations & Special Operations, State Board of Equalization (Written Testimony)
       
    3. Peter Williams, Deputy Attorney General, Department of Justice (Written Testimony)
       

    An Uneven Playing Field: Combating Illegal Practices in California Industries

    1. Bruce Wick, Risk Management Director, California Professional Association of Specialty Contractors (Written Testimony)
       
    2. Kris Buckner, Chief Executive Officer, Investigative Consultants (Written Testimony)
       

    Public Comments

    Public Notice

    PUBLIC NOTICE

    FOR IMMEDIATE RELEASE
    January 9, 2014

    For Additional Information Contact:
    Carole D’Elia, Executive Director (A)
    (916) 445-2125

    Notice of Meeting

    On Thursday, January 23, 2014, the Little Hoover Commission will conduct a public hearing on the underground economy in California. The hearing will begin at 9:30 a.m. in Room 2040 of the State Capitol in Sacramento.

    In this hearing, the Commission seeks to identify barriers that prevent effective enforcement of state tax and labor laws and opportunities to improve efforts to combat the underground economy. The Commission aims to understand the ways in which recently created collaborative bodies represent an innovative approach to abating the underground economy, as well as how the agencies and task forces involved will work across silos. It will explore the principles used by policymakers and administrators as they set expectations and define metrics for measuring success. Finally, the Commission will learn about the effects of unlawful business practices on California industry and any trends in the underground economy that may warrant changes to the methods state organizations use to eradicate it.

    The Commission will hear from Christine Baker, director of the Department of Industrial Relations, who will introduce the topic and discuss the work of her department and the state’s task forces that endeavor to join efforts across bureaucratic boundaries. The Commission will then hear from a Board of Equalization chief legal advisor, the board’s chief of investigations and special operations and a deputy attorney general from the Department of Justice. The panel will offer an additional overview of the underground economy in California as well as discuss the state’s work on criminal tax evasion and revenue recovery. Following their testimony, the Commission will hear from a risk management director in the construction industry and the chief executive officer of an intellectual property rights investigative firm on the effects of the underground economy on industry.

    There will be an opportunity for public comment at the end of the hearing. The Commission also encourages written comments.

    All public notices for meetings are on the Commission’s website, www.lhc.ca.gov. If you need reasonable accommodation due to a disability, please contact Commission Acting Executive Director Carole D’Elia at (916) 445-2125 or littlehoover@lhc.ca.gov by Thursday, January 16, 2014.

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