BILL ANALYSIS Ó
AB 1175
Page 1
ASSEMBLY THIRD READING
AB
1175 (Ridley-Thomas)
As Amended April 14, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
| | | | |
| | | | |
|----------------+------+--------------------+--------------------|
|Business & |11-2 |Bonilla, Baker, |Jones, Wilk |
|Professions | |Bloom, Campos, | |
| | |Dodd, Eggman, | |
| | |Gatto, Holden, | |
| | |Mullin, Ting, Wood | |
| | | | |
|----------------+------+--------------------+--------------------|
|Appropriations |12-5 |Gomez, Bloom, |Bigelow, Chang, |
| | |Bonta, Calderon, |Gallagher, Jones, |
| | |Daly, Eggman, |Wagner |
| | |Eduardo Garcia, | |
| | |Holden, Quirk, | |
| | |Rendon, Weber, Wood | |
| | | | |
| | | | |
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SUMMARY: Increases the statutory fee cap by approximately 25% for
each license type under the Bureau of Electronic and Appliance
Repair (Bureau), Home Furnishings, and Thermal Insulation (HFTI),
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except as specified. Specifically, this bill,
1)Increases by approximately 25%, 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 Department of Consumer Affairs
(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.
FISCAL EFFECT: According to the Assembly Appropriations
Committee:
1)If fees are raised to the statutory maximum proposed in this
bill, the Bureau fund and HFTI fund (both special funds) would
receive a combined increase in revenues of $1 million in
2016-17, and $1.65 million on-going.
Without a fee increase, the BEAR fund is projected to go
insolvent in Fiscal Year (FY) 2019-2020, and the HFTI fund is
projected to go insolvent in FY 2017-18. The Bureau receives no
General Fund support, relying solely on fees set by statute and
collected from licensing and renewal fees. The fees are
currently at the statutory cap for the majority of licenses,
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except those excluded from this bill.
2)One-time minor and absorbable IT costs of approximately $5,000.
3)One-time minor and absorbable costs to DCA to adopt regulations
and increase fees.
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
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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
statutory fee cap, which are excluded from this 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 United States Consumer Price Index (CPI) to be
slightly less than 3% 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
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(Technical Bulletin 117-2013) and Senator Leno recently passed
legislation (SB 1019 (Leno), Chapter 862, Statutes of 2014) that
the Bureau is currently implementing in regard to chemical
content disclosures to consumers.
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 HFTI 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 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 HFTI Fund to have 3.6 months in reserve
in FY 2015-16, 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 Electronic
and Appliance Repair 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
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that could be adjudicated, and delay the timeframes for
licensure 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, which
required the Bureau to partner with the Department of Toxic
Substances Control 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 Department of Toxic Substances
Control 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.
Analysis Prepared by:
Eunie Linden / B. & P. / (916) 319-3301 FN:
0000349
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