If we can prevent the government from wasting the labors of the people under the pretense of taking care of them, they must become happy. — Thomas Jefferson

The California Victim Compensation Program is bankrupt after spending its reserve fund of $96.7 million over the past four years. It now faces a deficit of $80 million by June 2004. Program officials claim they are victims of their own success. In reality, crime victims are now victims of the program’s financial mismanagement.

Created in 1965, the program was designed to provide financial assistance to victims of crime and members of their families for expenses ranging from mental health treatment to funeral services. It is funded by state and federal fines imposed on convicted criminals.

According to the California Victim Compensation and Government Claims Board, the agency that runs the program, between fiscal year (FY) 1999–2000 and 2001–02, applications increased 50 percent, from 42,257 to 63,225. Payments increased 45 percent, from $86 million to $124 million.

Program officials attribute these sharp increases to their success in simplifying the application process and to the passage of state legislation in 2000 increasing the maximum award per victim to $70,000 from $46,000.

Annual program revenues, however, did not keep pace with payments, having increased only 8 percent since FY 1999–2000, from $102 million to $110 million. Although the board hails the rise in victim applications and payments as “remarkable,” it fails to take responsibility for the financial missteps that created today’s deficit.

The board boasts that it reduced the backlog of claims over the past four years, but it did this by not verifying claims properly. According to a local program manager, board officials in Sacramento issued a “directive” that “processing and verification rules” be “suspended” to clear the backlog. As a result, this manager said, the program paid “junk claims” to undeserving applicants.

The program also gave money to lawyers who provided minimal services, authorized more mental health treatments at higher benefit limits than other states, and gave money to victims’ family members who were ineligible under the governing statute.

The program could have saved millions of dollars to help genuine victims if it had put in place sooner the policies that the board now recommends.

In its January 10 report titled Budget Paper for Board Discussion and Action, the board recommends limiting awards to $70,000 per crime, not just per victim, which would have saved $400,000 in 2001 alone.

The board also notes, “While other states pay an average of 6 percent of their total payments for mental health services, California pays 40 percent of its total payments for mental health treatment.” If mental health benefits were in line with other states, current- and budget-year savings would be $1 million and $18 million, respectively. Also, allegations have surfaced that therapists billed the program for services never rendered.

The board confirms that attorneys were rewarded generously “irrespective of the level or amount of legal services provided to the victim. In many instances, attorneys are awarded 10 percent for filing an application with no other legal services rendered.” If attorneys’ compensation were tied to services rendered, annual savings could total $696,000.

The board recommends that “a copy of a formal lease agreement or statement from the landlord” be presented before a victim can receive relocation assistance, whereas before it was not required. Current- and budget-year savings would be $300,000 and $500,000, respectively.

The program paid excessive awards, compensated non-victims such as therapists and attorneys too generously, and failed to verify claims. This irresponsible spending, often at victims’ expense, occurred while revenues were strained.

In July 2002, when the shortfall became apparent, the board created a “revenue recovery project team” to collect money from state and federal sources owed to the program. Why wasn’t this money being collected all along?

The California Victim Compensation Program is not, as it claims, a victim of its own success. Rather, it has become a pork barrel for government workers, therapists, and lawyers.

Through bad management and reckless spending, program officials have allowed innocents to be victimized twice over, yet no board member or program officer has been dismissed. Victims deserve better. These irresponsible practices earned the program Pacific Research Institute’s California Golden Fleece Award.

Andrew M. Gloger is a public policy fellow and Lawrence J. McQuillan is director of Business and Economic Studies at the California-based Pacific Research Institute.

This article was adapted from their op-ed titled “Bureaucratic Bungling Hurts Victims of Crime,” Los Angeles Times (February 13, 2003).