BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                       AB 1175|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |
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                                   THIRD READING 


          Bill No:  AB 1175
          Author:   Ridley-Thomas (D)
          Amended:  4/14/15 in Assembly
          Vote:     21  

           SENATE BUS, PROF. & ECON. DEV. COMMITTEE:  6-0, 6/8/15
           AYES:  Hill, Block, Hernandez, Jackson, Mendoza, Wieckowski
           NO VOTE RECORDED:  Bates, Berryhill, Galgiani

           SENATE APPROPRIATIONS COMMITTEE:  5-0, 6/22/15
           AYES:  Lara, Beall, Hill, Leyva, Mendoza
           NO VOTE RECORDED:  Bates, Nielsen

           ASSEMBLY FLOOR:  51-26, 5/11/15 - See last page for vote

           SUBJECT:   Bureau of Electronic and Appliance Repair, Home  
                     Furnishings, and Thermal Insulation


          SOURCE:    Author

          DIGEST:   This bill increases the statutory fee cap by  
          approximately 25% for each license type under the Bureau of  
          Electronic and Appliance Repair, Home Furnishings, and Thermal  
          Insulation, except as specified.

          ANALYSIS: 
          
          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  








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            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.)

          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%, 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  







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            January 1, 2017. 

          3)Makes conforming changes.  

          Background
          
          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 (EAR) program and the Home Furnishings and  
          Thermal Insulation (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 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 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.  

          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  







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          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 SB 1019 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.

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No

          According to the Senate Appropriations Committee:

           Minor and absorbable costs to the Bureau to update regulations  
            to increase specified fees (EAR Fund and HFTI Fund).

           Increased revenues of up to $622,000 annually, beginning in  
            2017-18, to the EAR Fund, and up to $1.03 million annually,  
            beginning in 2016-17, to the HFTI Fund, if the fees are  
            increased to the proposed statutory maximums.


          SUPPORT:   (Verified6/23/15)


          California Professional Firefighters
          Center for Environmental Health 
          Natural Resources Defense Council 


          OPPOSITION:   (Verified6/23/15)









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          None received


          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."

          ASSEMBLY FLOOR:  51-26, 5/11/15
          AYES:  Alejo, Baker, Bloom, Bonilla, Bonta, Brown, Burke,  
            Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh,  
            Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia,  
            Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Roger Hernández,  
            Holden, Jones-Sawyer, Levine, Lopez, Low, McCarty, Medina,  
            Mullin, Nazarian, O'Donnell, Perea, Quirk, Rendon,  
            Ridley-Thomas, Rodriguez, Santiago, Steinorth, Mark Stone,  
            Thurmond, Ting, Weber, Williams, Wood
          NOES:  Achadjian, Travis Allen, Bigelow, Brough, Chang, Chávez,  
            Dahle, Beth Gaines, Gallagher, Grove, Harper, Irwin, Jones,  
            Kim, Lackey, Maienschein, Mathis, Mayes, Melendez, Obernolte,  
            Olsen, Patterson, Salas, Wagner, Waldron, Wilk
          NO VOTE RECORDED:  Hadley, Linder, Atkins

          Prepared by:Mark Mendoza / B., P. & E.D. / (916) 651-1868
          6/24/15 15:26:12


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