BILL ANALYSIS Ó
AB 1175
Page 1
Date of Hearing: April 21, 2015
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Susan Bonilla, Chair
AB 1175
Ridley-Thomas - As Amended April 14, 2015
SUBJECT: Bureau of Electronic and Appliance Repair, Home
Furnishings, and Thermal Insulation.
SUMMARY: Increases the statutory fee cap by approximately 25
percent for each license type under the Bureau of Electronic and
Appliance Repair, Home Furnishings, and Thermal Insulation,
except as specified.
EXISTING LAW:
1)Establishes the Bureau of Electronic and Appliance Repair,
Home Furnishings, and Thermal Insulation within the Department
of Consumer Affairs (DCA), and places the Bureau under the
supervision and control of the DCA Director. (Business and
Professions Code (BPC) Section 9810)
2)Establishes the Electronic and Appliance Repair Dealer
Registration Law, and provides for the licensure and
regulation of electronic and appliance repair dealers and
service contract sellers and administrators. (BPC) Section
9800 et seq.)
3)Establishes the Home Furnishings and Thermal Insulation Act,
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and provides for the licensure and regulation of
manufacturers, sellers, importers, upholsterers, and
sanitizers of home furnishings, including upholstered
furniture and bedding and thermal insulation. (BPC Section
19000 et seq.)
4)Establishes the following licensure categories, including
initial and renewal licensure fees for each of those license
types: appliance service dealers; electronic and appliance
service dealers; service contract sellers; service contract
administrators; joint service contractors and electronic and
appliance service dealers, as specified; custom upholsters;
bedding retailers; furniture retailers; bedding and furniture
retailers; importers; furniture and bedding manufacturers;
furniture and bedding wholesalers; furniture and bedding
supply dealers; sanitizers; supply dealers; and thermal
insulation manufacturers. (BPC Section 9873, 19170)
THIS BILL:
1)Increases by approximately 25 percent, licensure fees for the
following license types: appliance service dealers; electronic
and appliance service dealers; service contract sellers;
service contract administrators; joint service contractors and
electronic and appliance service dealers, as specified; custom
upholsters; bedding retailers; furniture retailers; bedding
and furniture retailers; importers; furniture and bedding
manufacturers; furniture and bedding wholesalers; furniture
and bedding supply dealers; sanitizers; and supply dealers.
2)Prohibits the Director of the DCA from adopting any regulation
to increase any fees for electronic and appliance service
dealers and service contractors licensing categories before
January 1, 2017.
3)Makes conforming changes.
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FISCAL EFFECT: Unknown. This bill is keyed fiscal by the
Legislative Counsel.
COMMENTS:
1)Purpose. This is an author-sponsored bill. According to the
author, "The last time the Bureau's licensing fees were raised
in statute was 1978 for the electronics and appliance
industries and 1998 for the home furnishings and thermal
insulation industries. The Bureau's operational costs have
continually increased with its expenditures, and it is
projected the Bureau will be in deficit in Fiscal Year (FY)
2017-18, if revenues are not increased. The Bureau has worked
diligently at minimizing operational costs and streamlining
its processes for optimum cost savings, but continued resource
and overhead costs have reached a level where increased
revenues are necessary to sustain the Bureau."
2)Background. The Bureau, which is housed within the DCA,
licenses and regulates over 40,000 businesses, including
businesses that engage in the repair of electronics and
appliances; the sale and administration of service contracts;
and the manufacture, sale, and repair of home furnishings and
thermal insulation. The Bureau also inspects businesses and
conducts investigations; researches and develops standards
for, and tests, home furnishings and thermal insulation
products; handles consumer complaints; and initiates
disciplinary action against businesses that violate statutory
or regulatory requirements.
Initial and Renewal Licensure Fees. The Bureau's fees are
currently at the ceiling for the majority of licenses, except
for thermal insulation manufacturer fees which are below the
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statutory fee cap, which are excluded from the bill. In
addition, fees have been at their statutory caps and have not
been raised in over a decade. According to the author,
statutory fee caps have not been raised since 1978 for the
electronics and appliance industries and 1998 for the home
furnishings and thermal insulation industries. Since the last
fee increase, operational costs have increased in all areas
and the Bureau's budget is facing challenges.
If fees were increased annually with the rate of inflation,
based on the U.S. Consumer Price Index (CPI) to be slightly
less than three percent a year, fees would be nearly 50%
higher than they are right now. According to the author,
these fees are used to support the Bureau's staff of 43
employees, in addition to operational expenses, for licensing
and registering businesses; inspecting businesses; ensuring
compliance with laws and regulations; handling consumer
complaints, conducting investigations; testing products to
ascertain if they meet the required standards; conducting
research and developing standards; educating applicants and
licensees; and initiating disciplinary action against
companies who commit egregious violations.
One particular area that has recently received widespread
attention under the Bureau's jurisdiction is the changes to
the regulation of flame resistance performance tests for
furniture. Existing law requires all upholstered furniture
that is sold to California consumers to be fire retardant.
California is the only state with a residential upholstered
furniture flammability standard. The Bureau recently updated
this standard in 2013 (Technical Bulletin 117-2013) and
Senator Leno recently passed legislation (SB 1019, Chapter
862, Statutes of 2014) that the Bureau is currently
implementing in regard to chemical content disclosures to
consumers.
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Fund Condition. As a Special Fund agency, the Bureau receives
no General Fund support, relying solely on fees set by statute
and collected from licensing and renewal fees. The Electronic
and Appliance Repair program and the Home Furnishings and
Thermal Insulation program each operate with their own budgets
and their own funds. There is no mandated reserve level for
the Bureau; however, the DCA Budget Office has historically
recommended that smaller programs maintain a contingency fund
slightly above the standard three to six months of reserve.
Maintaining an adequate reserve of at least six months
provides for a reasonable contingency fund so that the Bureau
has the fiscal resources to absorb any unforeseen costs, such
as costly enforcement actions or other unexpected client
service costs.
The Bureau expects the Electronic and Appliance Repair (EAR)
Fund to have 6.8 months in reserve in Fiscal Year (FY)
2015/16, 4.9 months in reserve in FY 16/17, 2.9 months in
reserve in FY 2017/18, dropping below the recommended three
month reserve, 0.7 months in reserve in FY 2018/19, and a
deficit of $446,000 in FY 19/20. The Bureau expects the Home
Furnishings and Thermal Insulation (HFTI) Fund to have 3.6
months in reserve in FY 15/16, 1.4 months in reserve in FY
2016/17, dropping below the recommended three month reserve,
and a deficit of $403,000 in FY 2017/18, which would grow to a
deficit of $1.521 million dollars in FY 2018/19 and to a
deficit of $2.745 million dollars in FY 2019/20.
Without a fee increase, the Bureau will face a deficit in FY
2017/18 for the HFTI Fund and in FY 2019/20 for the EAR Fund.
According to the Bureau, a deficit will result in curtailed
services, which will delay the handling of consumer
complaints, limit the number of disciplinary actions that
could be adjudicated, and delay the timeframes for licensure
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and renewal, which will impact companies trying to legally
continue their business operations.
Increased Costs to the Bureau. According to the Bureau, the
increase in expenditures over time is attributable to a
general increase in costs, for example, for retirement and
medical benefits and overhead expenses. In addition, in the
past several legislative sessions, the Bureau has been charged
with new responsibilities. One of these changes was SB 1019
(Leno), Chapter 862, Statutes of 2014, which required the
Bureau to partner with the Department of Toxic Substances
Control (DTSC) to establish a program for the testing of
chemical flame retardants in upholstered furniture to
determine whether they comply with a new labeling requirement.
This testing is costly, and in addition to the Bureau's
responsibility to reimburse the DTSC for these tests, the
Bureau is required under existing law to pay the full
wholesale cost of any tested upholstered product if the
product is in compliance with labeling and other requirements.
As this legislation was being developed, stakeholders were
informed that the Bureau's current fund condition could not
support the establishment of such a robust testing regime. The
increase in fees provided for in this bill, however, will
allow the Bureau to successfully implement such a testing
program, which will enable the Bureau to carry out its
statutory mandate of consumer protection.
3)Related Prior Legislation. AB 2740 (Bonilla), Chapter 428,
Statutes of 2014, subjected the powers and duties of the
Bureau of Electronic and Appliance Repair, Home Furnishings,
and Thermal Insulation (Bureau) to review by the appropriate
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policy committees of the Legislature as if these provisions
were scheduled to be repealed on January 1, 2019, and
requested the Bureau to report back to the committees on
specified issues by July 1, 2015.
ARGUMENTS IN SUPPORT:
According to the Natural Resources Defense Council , "Fee
increases are need in order to ensure that [Bureau] has the
resources to continue ensuring compliance with regulations,
conducting testing and investigations, and educating businesses,
all of which are critical to consumer protection?.[Bureau] has a
history of working effectively with stakeholders and we expect
that it will continue to do so to ensure that the fee increases
meet resource needs with minimum negative impact on businesses."
ARGUMENTS IN OPPOSITION:
None on file.
REGISTERED SUPPORT:
Natural Resources Defense Council
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REGISTERED OPPOSITION:
None on file.
Analysis Prepared by:Eunie Linden / B. & P. / (916) 319-3301