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