BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 789
                                                                  Page  1

          Date of Hearing:   August 13, 2013


           ASSEMBLY COMMITTEE ON ARTS, ENTERTAINMENT, SPORTS, TOURISM, AND  
                                   INTERNET MEDIA
                               Ian C. Calderon, Chair

                      SB 789 (Liu) - As Amended:  June 24, 2013

           SENATE VOTE  :   39-0
           
          SUBJECT  :   Special interest license plates:  California Arts  
          Council Plate

           SUMMARY  :   This bill would allow the California Arts Council  
          (CAC) to use specified revenues from the sale of the arts  
          special interest license plate for administrative expenses.  

           EXISTING LAW  :

          1)Establishes the CAC as a state agency.  Its mission is to  
            advance California through the arts and creativity by  
            encouraging artistic awareness, participation, and expression.  
             (Government Code Section 8751.)

          2)Authorizes vehicle owners to obtain from the Department of  
            Motor Vehicles (DMV), license plates that include a full-plate  
            graphic design approved by DMV in consultation with CAC,  
            depicting a significant feature or quality of the State of  
            California.  Requires the payment of additional fees for the  
            issuance, renewal, and transfer of those plates.  Requires  
            funds raised by those fees to be used by CAC, upon  
            appropriation by the Legislature, for arts education and local  
            arts programming.  (Vehicle Code Section 5074.)

          3)Prohibits CAC from using additional revenue for its  
            administrative costs accruing from an increase in the fees for  
            the CAC's special interest license plates.  Requires CAC to  
            use the revenue derived from these fee increases exclusively  
            for arts education and local arts programming.  [Vehicle Code  
            Section 5074(c).]

          4)Limits to 25% the amount of the revenues from the special  
            interest license plate fund that an organization may expend on  
            administrative costs, marketing, or other promotional  








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            activities associated with encouraging application for, or  
            renewal of, the special license plates.  (Vehicle Code Section  
            5159.)

           FISCAL EFFECT  :   According to the Senate Appropriations  
          Committee, "No new state costs to the Graphic Design License  
          Plate Fund.  This bill would clarify that license plate revenues  
          derived from a fee increase in 2004 may be used as part of CAC  
          's overall administrative costs.  This would provide parity for  
          CAC 's license plate with other special interest license plate  
          programs."  




           
          COMMENTS  :   

           1)Stated Need for Legislation  :

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

            SB 1213 (Scott), Chapter 393, Statutes of 2004, which  
            increased additional fees for the Arts Plate, clearly  
            prohibits CAC from using the revenues its fee increases  
            generated for any administrative purposes.  Finance is  
            claiming that CAC may spend only 25% of the 
            pre-SB 1213 Arts Plates revenues on its administrative  
            expenses and that CAC actually spends more like 60% (see  
            Comment below for Legislative history of CAC Arts Plate).  CAC  
            is pursuing this bill in order to access up to 25% 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%, CAC would address Finance's  
            concern about its spending Arts Plate revenues on  
            administrative expenses.









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            According to CAC, "SB 789 brings the use of funds and  
            reporting of the Arts Plate in parity with other specialty  
            plates, by amending Vehicle Code Section 5074, striking, 'the  
            council shall not use that revenue for its administrative  
            costs'." 

           2)Background  :  

             a)   California Arts Funding and Program Levels  :  

                The CAC was created in 1975 under then Governor Jerry Brown  
               to increase access to the arts for all Californians.  The  
               CAC budget had grown from its first full year of funding in  
               fiscal year 1976-77 at $1,917,000 to $32,224,000 in fiscal  
               year 2001-02, when 1,590 grants were awarded to non-profit  
               arts organizations.  In 2003, appropriations to the CAC  
               were cut by 97%, and GF appropriation from the Legislature  
               has remained essentially flat at $1,000,000 over the past  
               decade.  Since 2003, California has ranked last or next to  
               last among the states in terms of per capita investment in  
               the arts.  
                
                Current funding levels for CAC in the fiscal year 2011-12  
               were just over $5,000,000 broken down by source as follows:

                 General Fund                        $1,027,202.70 
                 Graphic Design License Plate Account           
               $2,794,355.96 
                 National Endowment for the Arts (NEA)          
               $1,158,493.86
                 Reimbursements                      $     26,500.00 
                 Special Deposit: Donations                               
               $   125,710.00                 
                 Total                               $5,132,262.52  

             According to their annual report for 2011, the CAC, "Provided  
            $3.4 million in grants and initiatives to the non-profit arts  
            sector, putting artists in schools and underserved  
            communities, providing support for local arts councils in 50  
            counties and two major cities, providing support for statewide  
            arts service and multicultural networks, organized Poetry Out  
            Loud recitation contest for over 40,000 students statewide,  
            providing arts programs for kids and communities in every  
            county in the state, and supporting over 2,795 California  
            jobs.








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          b)    Specialized License Plates - The Major Source for CAC  
          Funding  :

            Pursuant to AB 3632 (Polanco), Chapter 1282, Statutes of 1992,  
            CAC 's special interest license plate program was created  
            along with others such as the Yosemite Foundation plate, the  
            Kids plate, the Veterans Services plate, and the State  
            Heritage Network plate.  Initially, fees for the issuance of  
            the original plate were set at $20, while annual renewal fees  
            were $10.  These fees were later increased to $30 for issuance  
            and $15 for renewal.  The fee revenues are deposited into the  
            Graphic Design License Plate Account for support of arts  
            education and local arts programs administered by CAC.   
            Furthermore, the special interest license program law allows a  
            sponsoring state agency to use no more than 25% of license  
            plate fee revenues on administrative costs, marketing, or  
            other activities associated with ensuring application for, or  
            renewal of, its special interest license plates.  

            Subsequently, SB 1213 increased the original fees for the Arts  
            Plate from $30 to $50 for issuance and from $15 to $40 for  
            renewal, but specifically prohibited CAC from using the  
            revenues derived from the increase for administrative costs.   
            Of the $3 million the arts special interest plates generates  
            today, about $2 million results from the SB 1213 fee  
            increases.  

            This bill repeals SB 1213's prohibition on CAC 's use of the  
            revenues for administrative purposes , thus allowing CAC to  
            use the portion of its license plate revenues attributable to  
            SB 1213's fee increases to cover its administrative costs.   
            This provides parity for CAC 's license plate program with  
            other special interest license plate programs that cap  
            administrative costs at 25%.  

           1)Department of Finances' Narrow Reading of Arts Council Plate  
            Administration Language  :  
           
            As mentioned above, CAC 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.

            Last year after concerns arose in press stories about the use  








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            of revenues derived from special interest license plates, the  
            Governor's Office directed 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 CAC exceeded the 
            25% cap on administrative expenses from the fees for the Arts  
            Plate that existed before 
            SB 1213, attributing over 60% of charges as administrative.  

            According to the Senate Transportation Committee analysis of  
            this bill, "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% 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'."

           2)Prior Related Legislation  :

            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.  

            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.  

            AB 3632 (Polanco), Chapter 1282, Statutes of 1993 directed CAC  
            to participate in what was then the state's special interest  
            license plate program, which that bill also created.  Specific  
            to the Arts Plate, AB 3632 set the additional fees for that  
            plate at $20 for issuance and $10 for renewal.  

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
          
          California Arts Council (Sponsor)








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          Arts Orange County
           
            Opposition 
           
          None on file


           Analysis Prepared by  :    Dana Mitchell / A.,E.,S.,T. & I.M. /  
          (916) 319-3450