BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 789| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- UNFINISHED BUSINESS Bill No: SB 789 Author: Liu (D) Amended: 6/24/13 Vote: 21 SENATE TRANSPORTATION & HOUSING COMMITTEE : 9-0, 5/7/13 AYES: DeSaulnier, Gaines, Beall, Cannella, Galgiani, Hueso, Lara, Pavley, Roth NO VOTE RECORDED: Liu, Wyland SENATE APPROPRIATIONS COMMITTEE : 6-0, 5/20/13 AYES: De León, Walters, Gaines, Hill, Padilla, Steinberg NO VOTE RECORDED: Lara SENATE FLOOR : 39-0, 5/28/13 (Consent) AYES: Anderson, Beall, Berryhill, Block, Calderon, Cannella, Corbett, Correa, De León, DeSaulnier, Emmerson, Evans, Fuller, Gaines, Galgiani, Hancock, Hernandez, Hill, Hueso, Huff, Jackson, Knight, Lara, Leno, Lieu, Liu, Monning, Nielsen, Padilla, Pavley, Price, Roth, Steinberg, Torres, Walters, Wolk, Wright, Wyland, Yee NO VOTE RECORDED: Vacancy ASSEMBLY FLOOR : 75-0, 8/19/13 - See last page for vote SUBJECT : Special interest license plates: Arts Plates SOURCE : California Arts Council DIGEST : This bill allows the California Arts Council CONTINUED SB 789 Page 2 (Council) to use specified revenues from the sale of the arts special interest license plate for administrative expenses. Assembly Amendments change the author from Senator Price to Senator Liu, and make a technical change. ANALYSIS : The Council is a state agency, and state law charges it with: 1. Encouraging artistic awareness, participation, and expression. 2. Helping independent local groups develop their own art programs. 3. Promoting the employment of artists and those skilled in crafts in both the public and private sector. 4. Providing for the exhibition of artworks in public buildings throughout California. The 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 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. 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 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% of the resulting revenues annually on administrative costs, marketing, or other activities associated with ensuring application for, or renewal of, its special CONTINUED SB 789 Page 3 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 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 Council from using the revenue generated from its fee increases for the Council's general administrative costs. This bill repeals that prohibition, thus allowing the 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 The author introduced this bill at the request of the Council to address issues raised in a Department of Finance (DOF) review of the Council's use of its Arts Plate revenue. The DOF asserts in its review that the Council may expend no more than 25% of that revenue on general administrative costs. Historically DMV, committee staff, and others have read that 25% restriction to be on administrative costs associated with the license plate program itself. The Council reports that it spends less than 5% of its plate revenues on these costs. SB 1213 of 2004, which increased additional fees for the Arts Plate, clearly prohibits the Council from using the revenues its fee increases generated for any administrative purposes. DOF is claiming that the Council may spend only 25% of the pre-SB 1213 Arts Plates revenues on its administrative expenses and that the Council actually spends more like 60%. The Council 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 DOF calculates CONTINUED SB 789 Page 4 the 25%, the Council will address the DOF's concern about its spending Arts Plate revenues on administrative expenses. DOF 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 DOF to review all ten special interest license plates programs. In August 6, 2012, DOF issued its review of the Arts Plate fund (officially known as the Graphic Design License Plate Account). DOF 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% cap on administrative expenses from the fees for the Arts Plate that existed before SB 1213, attributing over 60% of charges as administrative. 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% 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 DOF 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." 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. CONTINUED SB 789 Page 5 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. 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 Council 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." FISCAL EFFECT : Appropriation: No Fiscal Com.: No Local: No According to the Senate Appropriations Committee: No new state costs to the Graphic Design License Plate Fund. This bill clarifies that license plate revenues derived from a fee increase in 2004 may be used as part of the Council's overall administrative costs. This provides parity for the Council license plate with other special interest license plate programs. SUPPORT : (Verified 8/20/13) California Arts Council (source) Arts Orange County ASSEMBLY FLOOR : 75-0, 8/19/13 AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom, Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox, Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hernández, Holden, CONTINUED SB 789 Page 6 Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal, Maienschein, Mansoor, Medina, Melendez, Mitchell, Morrell, Mullin, Muratsuchi, Nazarian, Nestande, Pan, Perea, Quirk, Quirk-Silva, Rendon, Salas, Skinner, Stone, Ting, Wagner, Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, John A. Pérez NO VOTE RECORDED: Olsen, Patterson, V. Manuel Pérez, Vacancy, Vacancy JJA:d 8/20/13 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED