BILL ANALYSIS Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair 258 (Oropeza) Hearing Date: 5/11/2009 Amended: 4/21/2009 Consultant: Bob Franzoia Policy Vote: B,P&ED 7-3 _________________________________________________________________ ____ BILL SUMMARY: SB 258 would, after January 1, 2012, prohibit a contractor from performing work as a contractor or subcontractor on a public work contracted for the state or a local agency unless he or she has obtained a public works certification from a state certifying agency to be determined by the Legislature. This bill would require the certifying agency to establish and validate standards of competency through a prequalification certification system by January 1, 2011. The certifying agency would also be authorized to deny or revoke a public works certification. This bill would require the agency to charge each applicant a fee in an amount sufficient to pay for the costs of administering prequalification and certification, not to exceed certain amounts. This bill would create the continuously appropriated Public Works Certification Fund in which fee moneys would be deposited and used only for these purposes. Because this bill would create a continuously appropriated fund, this bill would make an appropriation. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2009-10 2010-11 2011-12 Fund New certification for public works contractors - licensing $389 $688 $377 Special* $115 ongoing - enforcement $0 $161 $321 $321 ongoing - testing $60 Application fee ($825) ($825) ($130) Special* (revenue) ($130) ongoing * Public Works Certification Fund _________________________________________________________________ ____ STAFF COMMENTS: Based on an analysis of Contractors' State License Board (CSLB) license classifications, it is estimated there will be 33,000 public works certification applications initially and 2,600 applications ongoing. This bill indicates that the public works certification shall be obtained from a state certifying agency to be determined by the Legislature. This lack of specificity prevents implementation of the provisions of the bill. A version of this bill from a previous session required the CSLB be responsible for implementing the program. Staff recommends the bill be amended to specify the CSLB be the certifying agency with the understanding that a different and presumably more appropriate, certifying agency may be identified at a later time. Page 2 SB 258 (Oropeza) This bill states the certifying agency may charge a one-time application fee of no more than $65 until December 31, 2014, and no more than $125 beginning January 1, 2015. Assuming an application fee of $50, this bill would generate the following revenue: - 2010-11. $825,000 (33,000 applications/2 x $50) - 2011/12: $825,000 (33,000 applications/2 x $50) - 2012-13: $130,000 (2,600 applications x $50) - Ongoing: $130,000 (2,600 applications x $50) In order to maintain legislative oversight, staff recommends the bill be amended to delete the continuous appropriation. This bill is similar to SB 1698 (Romero) 2008 which was vetoed by the Governor with the following message: I believe that sufficient safeguards are already in place to prevent contractors from bidding on public works projects if they fail to comply with current Labor Code provisions. This bill would create barriers to small business by adding additional requirements to become a qualified bidder on public works projects, while providing little additional value to the public works process. By creating this barrier, competition on public works projects could be reduced, that may result in increased bid and project costs.