BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1175| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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 AB 1175 Page 2 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 AB 1175 Page 3 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 AB 1175 Page 4 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) AB 1175 Page 5 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 **** END ****