BILL ANALYSIS Bill No: SB 1079 SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION Senator Roderick D. Wright, Chair 2009-2010 Regular Session Staff Analysis SB 1079 Author: Walters As Amended: April 5, 2010 Hearing Date: April 13, 2010 Consultant: Chris Lindstrom SUBJECT State agencies: advertising agreements. DESCRIPTION SB 1079 clarifies the law relative to the placement of paid advertisements in state agency publications to reflect current practice. Specifically, the bill clarifies that the Office of State Publishing (OSP) within the Department of General Services (DGS) may authorize paid advertisements in materials printed or published by OSP, a state agency, or a vendor, except that OSP shall not print, publish or authorize paid political advertising. EXISTING LAW Existing law authorizes the Office of State Publishing to accept paid advertisements in materials printed or published by the state except for paid political advertising. Existing law requires any state agency that was not authorized to accept paid advertising in its publications before January 1, 2006 to use OSP for all paid advertising SB 1079 (Walters) continued Page 2 in its publications. BACKGROUND Purpose of the bill . According to the author's office, "The law is not clear as to how one may go about securing advertising space, nor does it cite how one might go about securing appropriations language. Government Code Section 14851 states, "The Office of State Publishing may accept paid advertisements in materials printed or published by the state, except that the department shall not print or publish paid political advertising." "When speaking with some of agencies (Controllers Office, DMV, Franchise Tax Board & State Board of Equalization) they believe that there is a need for language that explicitly authorizes them to use third party advertisers on the outside of their mail." Background . OSP's Advertising Program was first approved in July of 1996 as part of a budget trailer bill. The Advertising Program was intended to allow state agencies to offset their printing costs through the incorporation of paid advertising in state publications. In September 2005, SB 828 (Chapter 381, Statutes of 2005) was enacted to authorize OSP to accept paid advertisements in state publications. SB 828 also requires any state agency that was not authorized to accept paid advertising in its publications before January 1, 2006 to use OSP for all paid advertising in its publications. Under SB 828, any material that contains advertising must either be printed at OSP or come through OSP. Agencies cannot print ads in publications using other vendors unless the job is vended out through OSP's Print Procurement Department. Three methods to solicit ads : Currently, there are three methods for state agencies to solicit ads, as follows: 1)State agencies may contract with OSP. OSP has a contract with a publishing representative who can produce a state agency's publication. OSP works with the state agency, and after OSP understands the agency's goals, forwards samples of the agency's publication, circulation and SB 1079 (Walters) continued Page 3 demographic information to the publishing representative for generating sales and revenue projections. The state agency approves all ad copy prior to it being printed in the agency's publication. OSP invoices all advertisers, pays all commissions, and deducts the balance from the agency's printing bill. 2)State agencies may contract with a commercial advertising firm. State agencies must contact OSP for delegation to contract with an outside ad agency. All procurement, contracting, and Small Business and Disabled Veterans Business Enterprise laws must be observed. State agencies must pay the advertising firm directly without OSP involvement. Collection of ad revenues is the responsibility of the state agency or the advertising firm. After the ads are sold and approved by the agency, the completed artwork is submitted to OSP with a printing requisition. OSP bills the agency the full amount for the printing. 3)State agencies can solicit their own ads. State agencies can request delegation from OSP to solicit the ads. Agencies develop their own mailing lists and media kits to solicit ads. Agencies submit approved artwork to OSP with their printing requisition. OSP bills the agency the full amount for the printing. Staff comments . Arguably, the advertising program is underutilized and underperforming. The Department of Motor Vehicles is OSP's primary customer in the advertising program, placing paid ads in approximately 10 publications. This generates roughly between $500,000 - $1 million a year, which in turn, is used to discount the printing costs of the department's driver handbooks. The greatest hindrance to the Advertising Program is that there is no incentive for agencies to use the program. Agencies are reluctant to get involved in the program because they can't accept the money directly. Further, any positive money flow (money in excess of the costs of producing a print job) is not retained by the agency. The original version of the bill created an incentive for agencies to utilize the Advertising Program by allowing the funds derived for the paid advertising to be available to SB 1079 (Walters) continued Page 4 the agency, upon appropriation by the Legislature, to fund agency operations. In addition, it may be possible for an agency to realize more money from a paid advertisement contract than it costs to produce the printed material. There is no provision in law that specifies how any positive money flow is to be directed. The author may wish to consider adding language to the bill to allow funds derived for paid advertising to be available to the agency, upon appropriation by the Legislature, to fund agency operations . PRIOR/RELATED LEGISLATION AB 1139 (Emmerson), Chapter 407, Statutes of 2007 . Authorizes the Department of Motor Vehicles to enter into a contract with a private vendor for the purpose of acquiring and utilizing message display systems that may be used on the Department's mailings or other department property. Allows the contract vendor to utilize a portion of the available time and space for the purpose of advertising products or services. SB 828 (Maldonado), Chapter 381, Statutes of 2005 . Strikes the sunset on the Advertising Pilot Project which allows state agencies to include advertisements in its publications as a means of reducing printing costs. AB 2315 (Chu), Chapter 220, Statutes of 2002 . Allows the Office of State Printing, until January 1, 2006, to accept paid advertisements in materials printed or published by the state. SB 1393 (Thompson), Chapter 162, Statutes of 1996 . The Budget Act of 1996 provided, "[n]otwithstanding Section 14851 of the Government Code, the Office of State Printing may accept paid advertisements in state publications or in publications promoting an Office of State Printing-supported project or program from any vendor that is participating as a partner in that project or program, except that the Office of State Printing may not accept or publish any paid political advertising." SUPPORT: As of April 9, 2010. SB 1079 (Walters) continued Page 5 Cross Commerce Media (Sponsor) OPPOSE: None on file as of April 9, 2010. FISCAL COMMITTEE: Senate Appropriations Committee **********