BILL ANALYSIS Ó
SENATE COMMITTEE ON
BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
Senator Jerry Hill, Chair
2015 - 2016 Regular
Bill No: AB 1175 Hearing Date: June 8,
2015
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|Author: |Ridley-Thomas |
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|Version: |April 14, 2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Mark Mendoza |
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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 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. (Business and
Professions Code (BPC) § 9800 et seq.)
2) Establishes the Bureau of Electronic and Appliance Repair,
Home Furnishings, and Thermal Insulation (Bureau) within the
Department of Consumer Affairs (DCA), and places the Bureau
under the supervision and control of the DCA Director.
(BPC § 9810)
3) Establishes the Home Furnishings and Thermal Insulation Act,
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 § 19000
et seq.)
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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 § 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.
FISCAL
EFFECT: This measure has been keyed "fiscal" by Legislative
Counsel. According to the Assembly Appropriations Committee
analysis, dated May 4, 2015:
1)If fees are raised to the statutory maximum proposed in this
bill, the Bureau of Electronic and Appliance Repair (BEAR)
fund and Home Furnishings, and Thermal Insulation (HFTI) fund
(both special funds) would receive a combined increase in
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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,
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. The Author is the sponsor of the 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. Bureau of Electronic and Appliance Repair, Home Furnishings,
and Thermal Insulation. The Bureau, which is housed within
the DCA, licenses and regulates over 40,000 related
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
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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.
3. 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 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
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consumers.
4. 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
and renewal, which will impact companies trying to legally
continue their business operations.
5. 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
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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.
6. 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
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.
7. Arguments in Support. According to the Natural Resources
Defense Council , "Fee increases are needed 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."
SUPPORT AND OPPOSITION:
Support:
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American Home Furnishings Alliance (AHFA)
Business and Institutional Furniture Manufacturers Association
(BIFMA)
Center for Environmental Health (CEH)
Natural Resources Defense Council
Opposition:
None on file as of June 2, 2015.
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