BILL ANALYSIS
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|Hearing Date:April 19, 2010 |Bill No:SB |
| |980 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Gloria Negrete McLeod, Chair
Bill No: SB 980Author:Huff
As Amended:March 23, 2010Fiscal: Yes
SUBJECT: Business licensing: Business Master License Center.
SUMMARY: Creates under the State and Consumer Services Agency the
Business Master License Center that will develop and administer a
"one-stop" master license system and serve as a clearinghouse for
information on businesses throughout this state.
Existing law:
1) Establishes the State and Consumer Services Agency (SCSA)
responsible for Civil Rights enforcement, consumer protection and
the licensing of 2.4 million persons in more than 255 different
professions. Also specifies that SCSA is responsible for the
procurement of goods and services for the State of California, the
management and development of state real estate, oversight of two
state employee pension funds, collecting state taxes, hiring of
state employees, providing information technology services,
adopting state building standards, providing recommendations to
reduce earthquake losses, and the administration of two state
museums.
2) Requires businesses to obtain various licenses from appropriate
regulatory agencies.
3) Creates the Office of Small Business Advocate within the Office of
Planning and Research, imposes various duties and requires the
Governor to appoint the director of the Office of Small Business
Advocate.
4) Requires state agencies to take specified actions, including, but
not limited to, designating a small business liaison to assist
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small businesses to comply with statutory and regulatory
requirements.
This bill:
1) Provides that the Legislature finds and declares that:
a) The number of state licenses required for new businesses and
renewal of existing licenses places an undue burden on
businesses.
b) The state can reduce its costs by coordinating and
consolidating application forms, information, and licenses.
c) By creating the Master Business License Center (Center), the
Legislature intends to provide a convenient, accessible, and
timely one-stop system for the business community to acquire and
maintain the necessary state licenses to conduct business.
2) Defines the following terms:
a) "License" means the whole or part of any agency permit,
license, certificate, approval, registration, charter, or any
form or permission required by law, including agency regulation,
to engage in any business activity.
b) "Master application" means a document incorporating
pertinent data from existing applications for licenses covered
under this part.
c) "Master license" means the single document designated for
public display issued by the Center which certifies state agency
license approval and which incorporates the endorsements for
individual licenses included in the master license system, which
the state requires for any person subject to this part.
d) "Person" means any individual, sole proprietorship,
partnership, association, cooperative, corporation, nonprofit
organization, state or local government agency, and any other
organization required to register with the state to do business
in the state and to obtain one or more licenses from the state
or any of its agencies.
e) "Regulatory agency" means any state agency, board,
commission, or division which regulates one or more professions,
occupations, industries, businesses, or activities.
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f) "Renewal application" means a document used to collect
pertinent data for renewal of licenses covered under this
chapter.
g) "System" means the mechanism by which master licenses are
issued and renewed, license and regulatory information is
disseminated, and account data is exchanged by the agencies.
3) Creates the Center located within the structure of and under the
administrative control of the SCSA and specifies that it is
required to fulfill all of the following duties:
a) Develop and administer a computerized one-stop master
license system capable of storing, retrieving, and exchanging
license information, as well as issuing and renewing master
licenses, as specified.
b) Develop and administer, as part of the master license
system, a uniform business identification number for each
participating business that shall be recognized by each
participating agency.
c) Provide a license information service detailing requirements
to establish or engage in business in this state.
d) Provide for staggered master license renewal.
e) Identify types of licenses appropriate for inclusion in the
master license system.
f) Recommend in reports to the Governor and the Legislature the
elimination, consolidation, or other modification of
duplicative, ineffective, or inefficient licensing or inspection
requirements.
g) Incorporate licenses into the master license system.
4) Allows the Secretary of SCSA to adopt necessary regulations.
5) Requires the Center to compile information regarding the regulatory
programs associated with each of the licenses obtainable under the
master license system and to provide this information to anyone
requesting it.
a) Requires the following state agencies to fully participate
in the implementation of the Center's Master License System:
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i) California Environmental Protection Agency.
ii) Department of Alcoholic Beverage Control.
iii) Department of Consumer Affairs.
iv) Department of Corporations.
v) Department of Fair Employment and Housing.
vi) Department of Fish and Game.
vii) Department of Food and Agriculture.
viii) Department of Industrial Relations.
ix) Department of Motor Vehicles.
x) Department of Parks and Recreation.
xi) Department of Pesticide Regulation.
xii) Department of Toxic Substances Control.
xiii) Department of Transportation.
xiv) Employment Development Department.
xv) Franchise Tax Board.
xvi) Secretary of State.
xvii) State Board of Equalization.
xviii) State Department of Health Care Services.
xix) Any other agency that the Secretary of SCSA determines
has licensing authority that is consistent with the purposes
of this part.
6) Requires a person who needs a license that has been incorporated
into the system to apply to the Center for required license(s) with
the sum of all necessary fees and deposits.
7) Requires that the authority for approving issuance or renewal of
licenses to remain with that regulatory agency, but allows the
Center to issue those licenses that do not require pre-licensing or
renewal approval action by the regulatory agency once the Center
receives proper fee payment and a completed application form.
8) Requires the Center to immediately notify the appropriate
regulatory agency of the receipt of application and proper fee
payment for any license for which issuance is subject to regulatory
action.
9) Requires the Center to issue a master license endorsed for all the
approved licenses to the applicant and advise the applicant of the
status of other requested licenses.
10)Clarifies that the applicant is responsible for contesting a
decision regarding conditions imposed or licenses denied through
the normal process established by statute or by the agency with the
authority for approving issuance of a license.
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11)Requires regulatory agencies to receive information from the master
application for their licensing and regulatory functions.
12)Creates the Business Master License Fund (Fund) in the State
Treasury.
13)Charges license applicants, in addition to any other fees or
deposits required to obtain a particular license, a master license
administrative fee of $15 on each master application, and a fee of
$9.00 on each master renewal application, to be deposited into the
Fund.
14)Requires that the moneys in the Fund, upon appropriation by the
Legislature, be used only to administer the Center.
15)Requires the Center to assign an expiration date for each master
license.
16)Requires all renewable licenses endorsed on a master license to be
renewed by the Center under conditions originally imposed unless a
regulatory agency advises the Center of conditions or denials to be
imposed before the endorsement is renewed.
17)Prohibits the center to issue or renew a master license to a person
if any of the following occurs:
a) The person does not have a valid tax registration, if
required.
b) The person is a corporation delinquent in fees or penalties
owing to the Secretary of State.
c) The person is not validly registered under any statute
giving corporate or business licensing responsibilities to the
Secretary of State.
d) The person has not submitted the sum of all fees and
deposits required for the requested individual license
endorsements and the master license administrative fee.
18)Allows the Governor to appoint a 3rd party facilitator from the
business community, who is required to report directly to the
Governor, and must provide oversight over the creation of the
center and the development of its master license system.
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FISCAL EFFECT: Unknown. This bill is keyed "fiscal" by Legislative
Counsel.
COMMENTS:
1. Purpose. This bill is sponsored by the Author in order to create
an accessible and timely "one-stop shop" for business licenses
accessible by telephone and the internet, as well as serving as a
clearing house of information to assist individuals in establishing
businesses in California. This one-stop business license center
would provide a single point of contact to streamline permitting
processes, resulting in better customer service for business owners
while increasing regulatory compliance and revenue.
2. Background. California has not had a comprehensive, streamlined
effort to coordinate and promote economic development since the
disbanding of the Technology, Trade and Commerce Agency in 2003.
This agency was created in 1992 and served as the primary economic
development entity for promoting the establishment, retention, and
expansion of business, employment, infrastructure, and
international trade in California. Instead of a centralized
entity, currently all of California's efforts and programs related
to economic development are dispersed in more than 10 advisory
panels, boards, commissions, allocation committees and financing
authorities which are all housed under various agencies or offices.
Currently, California has a fragmented approach to economic
development which some argue hinders the state's ability to
facilitate economic growth in the most effective manner.
3. Governor's Performance Review. On August 3, 2004, the California
Performance Review (CPR) delivered their recommendations to the
Governor on how to reform California state government. Governor
Schwarzenegger formed the CPR Commission, an independent and
bi-partisan group consisting of volunteers from the public,
private, and non-profit sectors, as part of his process to decide
what recommendations to pursue in reforming state government. The
ultimate goal of the CPR was to restructure, reorganize and reform
state government to make it more responsive to the needs of its
citizens and business community. The Commission was also charged
to gather opinions from across the state and solicit ideas to
supplement and refine the CPR's initial recommendations. During
the course of eight public hearings, the Commission heard testimony
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from subject matter experts in a variety of fields. In addition,
the Commission received oral and written comments from the public
at large.
The Commission report titled, The Public Perspective , made numerous
recommendations to reform state government, including
recommendations regarding "General Government and Statewide
Operations." General Government recommendation 22 (GG22)
specifically focused on improving California's business climate.
According to GG22, people who want to start a business in
California do not know where to begin. Even established business
owners find it difficult to navigate the state bureaucracy. GG22
further asserts that people who want to do business in California
must interact with the state in multiple ways in order to establish
and maintain their businesses. They must obtain necessary permits
and licenses, register their businesses, report information and pay
taxes. For instance, a business in California is required to
register with the state for purposes of reporting sales taxes,
income taxes, employee wages and insurance. In addition, business
owners are required to obtain a variety of licenses and permits to
carry out certain activities, such as selling alcohol or collecting
debts. These are just a few of the requirements. A business owner
could be required to contact nine or more state departments and
agencies for a single business.
GG22 also asserts that from a business owner's perspective, state
government is not a collection of independent agencies, but rather
one "state government." As a result, business owners expect
seamless services from the State. Findings also showed that
business owners desire online services from the State, equivalent
to those offered in the private sector. They want a
customer-centered approach that provides timely, useful and
accurate information.
Ultimately, the report recommended to the Governor to direct SCSA,
or its successor, to create a master licenses' services similar to
that of the state of Washington.
The GG22 also discussed current consolidation efforts of licenses
in California. Some consolidation of California state license
information systems is already underway. DCA processes the bulk of
California's professional licenses and is working to combine all of
its independent information systems into one centralized
information system. According to DCA, additional enhancements to
accommodate a master application for licenses and permits issued by
the department could be built into the new system with little or no
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additional cost. The new system is expected to be fully
implemented in about three years and might be further developed as
a central component of the Center's licensing information intranet
system.
4. Recent Little Hoover Commission Report and the Creation of a
Governor's Office of Economic Development. On February 25, 2010,
the Little Hoover Commission (Little Hoover) released a report
titled, Making Up for Lost Ground: Creating a Governor's Office of
Economic Development , which catalyzed the recent creation of the
Governor's Office of Economic Development (Office) earlier this
month. The report asserts that after the dismantling of the
Technology, Trade and Commerce Agency in 2003, many economic
development programs were moved to either two distinct agencies,
Business, Transportation and Housing (BTH) and Labor and Workforce
Development (LWD), while the rest were housed in less obvious
locations.
There have been previous attempts to bring the leaders of some of
these state agencies together to forge a unified economic
development strategy, but many of these efforts have had trouble
gaining traction and generating stable leadership. For instance,
in 2005 Governor Schwarzenegger established the California Economic
Development Partnership as an interagency cabinet team to
coordinate economic development efforts across departments. This
partnership lacked authority and resources and was ultimately
criticized for potentially adding on another layer to a fragmented
structure.
What still stands now are two main agencies, BTH and LWD, that
oftentimes overlap in their economic development duties yet still
lack the authority and funding to lead policy implementation
related to economic development. While the Governor designated BTH
in charge of economic development, the Legislature deems LWD
through its Economic Strategy Panel (Panel), as the appropriate
nexus for the state's strategic planning, coordination and
evaluation of economic development activities. What's more, the
Panel has been the subject of repeated legislation in recent years
to undertake a new strategic planning effort. For example in 2008,
Governor Schwarzenegger vetoed AB 1606 which would have centralized
the state's economic development programs under the Panel. The
Governor's veto message stated that AB 1606 represented a piecemeal
approach when a more comprehensive solution was needed.
At the same time, the report contends that many government and
non-government stakeholders are not demanding a new state agency
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that centralizes state economic development efforts, and Little
Hoover as well does not advocate building a new agency at this
time. Little Hoover asserts that the state has an urgent need to
define a strategy for the economic growth and then build the
appropriate government structure to meet that vision.
Little Hoover stresses that instead of a traditional, top-down
bureaucracy, the state needs a more agile entity placed within the
Governor's Office that can function as a convener and coordinator,
rather than a provider of economic development services. The
Office would serve as the visible national and international point
of contact for existing businesses as well as for local, state, and
federal economic development leaders. According to the report, the
essential functions should include:
Developing a vision for economic growth and a strategic
plan that leverages the state's economic development programs
with local, regional, federal and private efforts.
Designating a visible, point of contact and liaison for
information about business growth opportunities, economic
development assistance, and navigating permitting issues and
regulations.
Marketing the state's economic development programs and
business opportunities.
The Office would no longer need BTH or LWD to each contend as the
lead economic development entity of the state, and as the Office
would move forward, it would deem certain economic development
entities unnecessary. By its actions, the Office would establish
that it is not an additional bureaucratic layer or hollow gesture,
but instead it must be a credible networking operation with an
appropriate professional staff. Specifically, the Office would
pull core functions for the California Business Investment Services
(CalBIS) and the Panel, as well as partner with and bolster
TeamCalfornia's efforts to market California abroad. In addition,
the Office would include a statewide strategic planning effort with
the full force of the governor behind it in order to engage
stakeholders to implement the plan. The Office would also define
measures of success to evaluate programs, but the Legislature would
take part in evaluation and continually review programs to asses
overlap.
The report concludes that in the short term, the state must improve
its economic development operations to harness and match
California's existing strengths with a long-term economic
development strategy.
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1. Small Business Regulatory Reform Act of 2000. California has
previously implemented programs to improve state services to small
businesses. One recent program was created by the Small Business
Regulatory Reform Act of 2000. It established a Small Business
Advocate in the Governor's Office of Planning and Research (OPR)
and required each state agency to designate at least one person to
serve as a small business liaison. The GG22 report says that
creating the Small Business Advocate was a good idea, but it did
not go far enough.
2. Washington's Master License Service (MLS). This bill seeks to
create a program that is almost identical to what is being done in
Washington State. In an effort to improve services to small
businesses and create a consolidated state business license and
permit process, in 1980, Washington created their MLS. The MLS'
aim was to provide a convenient, accessible and timely one-stop
system for business licenses and permits. The MLS developed one
master application for the most commonly acquired business licenses
and permits. The Washington MLS estimates that its master
application is used to issue all required licenses and permits for
about 80 to 85 percent of businesses in the state.
Washington's MLS is comprised of an intake unit, a call center and
a business liaison section. The intake unit processes initial
applications and renewals, maintains records and collects
associated fees. The call center handles all telephone, email and
Internet inquiries and disseminates forms, informational booklets
and brochures. The business liaison section provides technical
assistance and is responsible for tracking changes in licensing and
permit laws at the state and local level, as well as any changes in
fees.
The Washington MLS enables state agencies to electronically store,
retrieve and exchange license information in one location. The
system is accessible to the public 24 hours a day and business
owners can use it to obtain or update their information
electronically. An additional benefit to the MLS is that it allows
the state to use a single business identification number for each
business. The business identification number is recognized by all
state licensing and regulatory agencies.
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The system also allows the state to issue one "master license" to
each business. The master license lists the individual licenses
and permits approved for the business through the master
application. In addition, when licenses and permits are issued,
the MLS electronically registers the business with appropriate
regulatory agencies such as the state's central tax collection and
employment departments. The electronic registration has reduced
paperwork and increased compliance with business regulations,
ultimately resulting in additional revenue to the state.
The MLS also helped to identify and eliminate the state's obsolete
and duplicative licensing requirements. Finally, the MLS allows
the state to consolidate all license and permit fees in one place
so business owners can issue a single payment covering multiple
fees.
In order to facilitate a smooth transition to an MLS, Washington's
Governor appointed a third-party facilitator or "business advocate"
who reported directly to the Governor and provided oversight for
the project. The business advocate worked with the affected
agencies and was a critical component of the project.
The data system Washington uses for its MLS is a licensing
information intranet system. The system contains information
relevant to eleven state agencies responsible for regulating
businesses. Information from the master application is entered
into the MLS licensing information intranet system. The majority
of information collected is used for license and permit purposes.
About 100 state licenses can be obtained by using the master
application.
A licensing information intranet system could also be used to
electronically transfer information on small businesses to other
databases purposes other than licensing. For instance, relevant
information from the MLS system could be transferred to a database
of businesses certified as small businesses in the state. Numerous
state agencies, departments, business organizations and other
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entities could use the database as a referral source for conducting
state business with small businesses. Other entities could use the
database as a resource to promote small businesses throughout the
state.
According to Washington's experience, MLS requires relatively few
resources. It has 39 employees and a budget supported by
application and renewal fees. The one-time fee for filing a master
application in Washington is $15 and about 10 percent of licenses
and permits are renewed annually for a $9.00 renewal fee. Fee
amounts were established based on a study the state conducted to
determine appropriate application fees. Although the master
application and renewal fees are in addition to fees previously
charged for individual licenses and permits, they are reasonable in
light of the resulting streamlined state processes and improved
customer service. The Washington MLS took approximately two years
to implement.
3. Related Legislation this Session. AB 2659 (Tran, 2010) would also
create a Business Master License Center and contains language
similar to SB 980. This bill is presently in the Assembly Business
& Professions Committee and is set for hearing on April 20, 2010.
SB 1259 (DeSaulnier, 2010) would create the Economic Development
and Job Creation Agency and require the appointed Secretary of the
Agency to develop a reorganization plan, propose a structure for
the agency, and perform specified duties relating to economic
development and job creation. The bill was heard on April 13, 2010
in Governmental Organization Committee and passed 8-0.
AB 1558 (Perez, 2009/2010) would reorganize the state's economic
development efforts by eliminating the duties of the Secretary of
Business, Transportation and Housing and transfer modified duties
to a Director and Executive Director of a renamed Economic and
Employment Development Department, which would succeed to some of
the duties of the existing Employment Development Department. This
bill is presently in the Business, Professions and Economic
Development Committee with no hearing date at present.
4. Policy Issue : Are the fees sufficient to operate the Center? The
fee amounts proposed in this bill may not be appropriate for the
creation of the Center. Would the number of California state
agencies and its licenses impact the amount of the fees needed to
sustain the Center? The Author may wish to consider whether
California needs to conduct a study on its own licensing systems to
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determine the appropriate fee amount to be charged by the Center
and justify that fee amount.
5. Policy Issue : Does this measure address the needs of the business
community? This bill may be perceived as another gradual approach
related to economic development that does not fully meet the needs
of the state and the business community. The Author may wish to
consider partnering with the Office or other comprehensive
initiatives that seek to address the entire issue of a strategic
economic development plan for California.
SUPPORT AND OPPOSITION:
Support: None received as of April 12, 2010
Opposition: None received as of April 12, 2010
Consultant:Antoinnae Comeaux