BILL ANALYSIS SENATE COMMITTEE ON BANKING, FINANCE, AND INSURANCE Senator Ronald Calderon, Chair AB 2746 (Blakeslee) Hearing Date: June 16, 2010 As Amended: June 15, 2010 Fiscal: Yes Urgency: No VOTES: Asm. Floor(05/06/10)74-0/Pass Asm. Appr. (04/28/10)15-0/Pass Asm. Ins. (04/21/10)12-0/Pass SUMMARY Would authorize the California Earthquake Authority (CEA) to contract for the services of a chief mitigation officer, whose duties shall be established and directed by the CEA board to support and enhance the authority's various mitigation programs, including collaborative efforts with public and private entities, and subject this post to FPPC Form 700 filing. DIGEST Existing law 1. Established in 1996 the California Earthquake authority as a privately financed publicly managed entity regulated as a monoline private earthquake insurer by the Department of Insurance (DOI); 2. Provides for the CEA to be operated as a private monocline insurer, regulated by the DOI, including in the matter of rate approvals, but under the guidance of a governing board that is obligated to comply with California's open meeting laws; 3. Establishes in the CEA an earthquake loss mitigation fund to support programs to retrofit homes to protect against earthquake damage, with funds set aside annually , except insofar as the set aside would impair the actuarial soundness of the CEA; AB 2746 (Blakeslee), Page 2 4. The CEA is authorized to contract for a Chief Executive officer, a Chief Financial Officer, an operations manager and numerous other specialized positions not classified as civil service positions; 5. Requires the members of the CEA Board and the Authority's CEO, CFO and operations manager to file financial disclosure statements with the Fair Political Practices Commission. This bill 1. Would authorize the CEA to contract for the services of a Chief Mitigation Officer (CMO); 2. Would make the CMO's duties subject to establishment and direction of the CEA board; 3. Would state the CMO's duties are to include programs and efforts supporting and enhancing appropriate CEA efforts to create and maintain: a. Programs mitigating seismic risk for the benefit of homeowners, other property owners (including landlords with smaller holdings), and the California public; b. Collaboration with academic institutions, nonprofit entities, and commercial business entities in joint efforts to conduct mitigation-related research and educational activities, and for program activities mitigating seismic risk; c. Programs providing financial assistance in the form of loans, grants, credits, rebates or other financial incentives that further mitigation of seismic risk, including, but not limited to, structural and contents retrofitting of residential structures; d. Collaborations and joint programs with subdivisions and programs of local, state, and federal governments; e. Other programs, support efforts, and activities the board deems appropriate to further the authority's mitigation and mitigation-related goals; AB 2746 (Blakeslee), Page 3 4. Would subject this position to Fair Political Practices Act conflict of interest (form 700) filing. COMMENTS 1. Purpose of the bill To strengthen effectiveness of the CEA's mitigation efforts by establishing a position focused upon that activity under the guidance and direction of the Governing Board. 2. Background According to the author, the Authority's retrofit programs to date have been unsuccessful. However with over $12 millions dollars currently in the CEA's Loss Mitigation Fund, there is a great opportunity to protect California homeowners by establishing a successful retrofit program. 3. In 2001, a California Bureau of State Audits study of the CEA noted that its mitigation program was having limited success. Since the CEA's inception, the mitigation program has slowly grown and the CEA's 2006 strategic plan goals includes one to "Encourage Californians to protect themselves and their property from earthquake damage through preparedness and mitigation". 4. The addition of a Chief Mitigation Officer (CMO) is consistent with sharpening the CEA's focus on mitigation consistent with the 2001 BSA general perspective. 5. Questions None 6. Suggested Amendment None 7. Prior and Related Legislation AB 43 of 2009 proposed to remove a 25 person cap on the number of civil service exempt CEA employees in addition to addition the Chief Mitigation Officer post as proposed by this bill. AB 43 was vetoed by the Governor who objected to removal of the 25 person cap but indicated support for the Chief Mitigation Officer portion. Veto Message: To the Members of the California State Assembly: AB 2746 (Blakeslee), Page 4 I am returning Assembly Bill 43 without my signature. While I am supportive of the California Earthquake Authority (CEA) contracting for the services of a Chief Mitigation Officer to be responsible for the mitigation activities of the CEA, I cannot support the provision in this bill eliminating the limit on the number of civil service employees that can be employed by the CEA. For these reasons, I am unable to sign this bill. Sincerely, Arnold Schwarzenegger POSITIONS Support United Policyholders Oppose None Consultant: Kenneth Cooley (916) 651-4102