BILL ANALYSIS                                                                                                                                                                                                    Ó






           SENATE TRANSPORTATION & HOUSING COMMITTEE       BILL NO: sb 789
          SENATOR MARK DESAULNIER, CHAIRMAN              AUTHOR:  price
                                                         VERSION: 2/22/13
          Analysis by:  Carrie Cornwell                  FISCAL:  no
          Hearing date:  May 7, 2013


          SUBJECT:

          Special interest license plates:  Arts Plate

          DESCRIPTION:

          This bill allows the California Arts Council to use specified  
          revenues from the sale of the arts special interest license  
          plate for administrative expenses.

          ANALYSIS:

          The California Arts Council is a state agency, and state law  
          charges it with:

           Encouraging artistic awareness, participation, and expression.
           Helping independent local groups develop their own art  
            programs.
           Promoting the employment of artists and those skilled in  
            crafts in both the public and private sector.
           Providing for the exhibition of artworks in public buildings  
            throughout California.

          The Arts Council receives about $5.2 million annually in funding  
          with about $1.1 million coming from the state's General Fund,  
          $1.1 million from federal funds, and $3 million from the Arts  
          Plate.

          AB 3632 (Polanco), Chapter 1282, Statutes of 1993 directed the  
          California Arts Council to participate in what was then the  
          state's special interest license plate program, which that bill  
          also created.  The court has since enjoined the state from  
          issuing new special interest license plates under this program.   
          (See comment #4 below.)  

          The special interest license plate program law applies to all  
          ten of the special interest license plates issued prior to the  
          court order in 2004.  It specifies that before the Department of  
          Motor Vehicles (DMV) could issue a special interest license  




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          plate, the Legislature had to enact a bill to authorize the  
          specific plate, and the sponsoring organization had to qualify  
          for tax-exempt status, submit a financial plan describing how it  
          would use the resulting revenues, and collect 7,500 paid  
          applications for the plate.  The general special interest  
          license plate law also restricts the sponsoring organization to  
          using no more than 25 percent of the resulting revenues annually  
          on administrative costs, marketing, or other activities  
          associated with ensuring application for, or renewal of, its  
          special license plates.

          Specific to the Arts Plate, AB 3632 set the additional fees for  
          that plate at $20 for issuance and $10 for renewal.  A vehicle  
          owner pays these fees in addition to the regular fees to  
          register the vehicle.  That bill specified that the Art Council  
          use the revenues generated for arts education and local arts  
          programming.
          Later legislation increased those additional fees for the Arts  
          Plate.  Most recently that occurred when SB 1213 (Scott),  
          Chapter 393, Statues of 2004, increased the additional fees from  
          $30 to $50 for issuance of an arts plate and from $15 to $40 for  
          renewal.  Of the $3 million the Arts Plate generates today,  
          about $2 million results from these fee increases.  SB 1213 also  
          prohibited the California Arts Council from using the revenue  
          generated from its fee increases for the Arts Council's general  
          administrative costs.

           This bill  repeals that prohibition, thus allowing the Arts  
          Council to use the portion of its license plate revenues  
          attributable to SB 1213's fee increases to cover the council's  
          administrative costs.
          
          COMMENTS:

           1.Purpose  .  The author introduced this bill at the request of  
            the California Arts Council to address issues raised in a  
            Department of Finance review of the Council's use of its Arts  
            Plate revenue.  The Department of Finance asserts in its  
            review that the Arts Council may expend no more than 25  
            percent of that revenue on general administrative costs.   
            Historically DMV, committee staff, and others have read that  
            25 percent restriction to be on administrative costs  
            associated with the license plate program itself.  The Arts  
            Council reports that it spends less than five percent of its  
            plate revenues on these costs.  





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            SB 1213 of 2004, which increased additional fees for the Arts  
            Plate, clearly prohibits the Arts Council from using the  
            revenues its fee increases generated for any administrative  
            purposes.  Finance is claiming that the Council may spend only  
            25 percent of the pre-SB 1213 Arts Plates revenues on its  
            administrative expenses and that the council actually spends  
            more like 60 percent.  The Arts Council is pursuing this bill  
            in order to access up to 25 percent of  all  revenues derived  
            from the Arts Plate to pay administrative expenses of the  
            agency.  By expanding the revenues against which Finance  
            calculates the 25 percent, the Arts Council would address the  
            Department of Finance's concern about its spending Arts Plate  
            revenues on administrative expenses.

           2.Department of Finance review  .  Last year after concerns arose  
            in press stories about the use of revenues derived from  
            special interest license plates, the Governor's Office  
            directed the Department of Finance to review all ten special  
            interest license plates programs.  In 
            August 6, 2012, Finance issued its review of the Arts Plate  
            fund (officially known as the Graphic Design License Plate  
            Account).  Finance found in that review that "the Council has  
            ensured (SB 1213 fee increase) revenues are used exclusively  
            for arts education and programming."  It also found that the  
            Council exceeded the 25 percent cap on administrative expenses  
            from the fees for the Arts Plate that existed before SB 1213,  
            attributing over 60 percent of charges as administrative.  

           3.Non-plate administrative costs  .  State law governing the  
            special interest license plates states that an organization  
            participating in the program "shall not expend more than 25  
            percent of those funds on administrative costs, marketing, or  
            other promotional activities associated with encouraging  
            application for, or renewal of, the special license plates."   
            In no place does the special interest license plate statute  
            restrict the expenditure of the funds on other administrative  
            costs.  It is unclear, therefore, why the Department of  
            Finance is asserting that there is a 25 percent cap on using  
            the revenues to support general administration of an agency.   
            In the case of the Arts Plate, its specific authorizing  
            statute says that the revenues from the Arts Plate shall be  
            used for "arts education and local arts programming." 
            It would appear that much of the administrative work of the  
            Arts Council directly supports arts education and local  
            programming and is therefore eligible to be paid for with Arts  
            Plate revenues outside of the 25 percent cap, with the  




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            exception of those revenues stemming from the SB 1213 fee  
            increases.  This bill would most likely be unnecessary absent  
            the Department of Finance's interpretation of how broadly the  
            25 percent administrative costs cap applies.
             
          4.Court ends special interest license plate program  .  In 2004, a  
            federal court decision, Women's Resource Network v. Gourley,  
            E.D., Cal 2004, F.Supp.2d, 2004 U.S. Dist., invalidated the  
            provisions of the Vehicle Code allowing an organization to  
            sponsor a special interest license plate provided it had met  
            certain conditions, including the passage of legislation  
            authorizing the specific plate.  In the Gourley decision, the  
            court declared California's special interest license plate  
            statutes unconstitutional because they violated the First  
            Amendment right to freedom of speech.  The court specifically  
            objected to the Legislature "picking and choosing" special  
            license plates that private organizations propose, in essence  
            promoting the message of some organizations while denying this  
            right to others.  

            The court did allow the ten special interest license plates  
            existing at the time of its decision -- including the Arts  
            Plate -- to remain in use and available to new applicants, as  
            they are today.
           
          5.Buying the plate to support a state agency  .   In response to  
            the court decision, AB 84 (Leslie), Chapter 454, Statutes of  
            2006, established the current specialized license plate  
            program to provide a forum for  government speech  that promotes  
            California's state policies.  AB 84 excludes private  
            organizations from seeking specialized license plates as a  
            forum for private speech, and thus addresses the court's  
            objection.  Plates now created and the revenue they generate  
            must publicize or promote a state agency, or the official  
            policy, mission, or work of a state agency.  Under AB 84, the  
            California Arts Council, a state agency, could sponsor a new  
            license plate and use the proceeds for "projects and programs  
            that promote the state agency's official policy, mission, or  
            work."  It seems as though general administration would fit  
            within this restriction.  As the Arts Council is a state  
            agency, but for the timing of its creation, this plate could  
            have been created pursuant to AB 84 and used to pay for  
            general administration.

           6.Double-referral  .  The Rules Committee referred this bill to  
            both the Transportation and Housing Committee and to the  




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            Appropriations Committee.  Therefore, if this bill passes this  
            committee, it will be referred to the Committee on  
            Appropriations even though it is designated nonfiscal.
          
          POSITIONS:  (Communicated to the committee before noon on  
          Wednesday,                                             May 1,  
          2013.)

               SUPPORT:  California Arts Council (sponsor)
                         Californians for the Arts
                         San Diego Youth Symphony and Conservatory
                         Theatre Bay Area

               OPPOSED:  None received.