BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 1508 (Assembly Member Roger Hernández) - Underground economy:
policy adviser
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|Version: March 26, 2015 |Policy Vote: B., P. & E.D. 9 - |
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|Urgency: No |Mandate: No |
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|Hearing Date: July 13, 2015 |Consultant: Robert Ingenito |
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This bill meets the criteria for referral to the Suspense File.
Bill
Summary: AB 1508 would require the establishment of an
independent policy advisor for the underground economy, as
specified.
Fiscal
Impact: This bill would result in General Fund costs, likely in
the low hundreds of thousands of dollars annually, to (1)
establish a chief policy advisor, (2) evaluate the various task
forces and partnerships, and (3) submit a report to the
Legislature, as specified.
Background: The underground economy encompasses any unlawful or "off the
books" activities conducted by businesses or individuals that
AB 1508 (Assembly Member Roger Hernández)
create an illegal and unfair business environment, put employees
at a disadvantage or in harm's way or reduce revenues relative
to what would be owed under current law. Examples (1) include
working without required permits or licenses, (2) not complying
with regulated mandatory processes, and (3) evading taxes and
operating without proper insurance. Others include underpaying
employees, underreporting numbers of employees, inaccurately
reporting employee hours or wages and allowing unsafe working
conditions. The Board of Equalization's Research and Statistics
Section has estimated that state government loses $8.5 billion
annually in tax revenue to the underground economy. The
Franchise Tax Board estimates the annual revenue loss at
approximately $10 billion.
The State currently has four major task forces focused on the
underground economy, but their overall progress is unclear. The
Labor Enforcement Task Force and the Joint Enforcement Strike
Force primarily focus on labor violations. Two more recently
established task forces, the Revenue Recovery and Collaborative
Enforcement Team and the Tax Recovery and Criminal Enforcement
Task Force, focus on identifying and prosecuting criminal tax
evasion. In March 2015, the Little Hoover Commission released a
report entitled, "Level the Playing Field: Put California's
Underground Economy Out of Business," which made a number of
findings and recommendations. One of these recommendations was
the establishment of a chief policy advisor for the underground
economy. Specifically, the Commission recommended the Governor
appoint an independent leader, in consultation with state
leaders who have jurisdiction over the underground economy, with
clear authority to untangle any overlaps in responsibilities,
bridge silos and move efficiently toward results. The Commission
recommended that this leader should report back on
administrative or legislative changes needed to better combat
the underground economy.
Proposed Law:
This bill would require the Governor to designate an
independent chief policy adviser for the underground economy.
Specifically, this bill would do the following:
Specify the adviser's responsibilities, including
monitoring and evaluating the state's existing underground
economy task forces and interagency partnerships to ensure
AB 1508 (Assembly Member Roger Hernández)
that they are organized efficiently and to determine
whether they should be restructured or eliminated to
improve effectiveness. Moreover, the bill would require the
advisor to assess whether resources are sufficient;
including review of enforcement staffing and funding
levels.
Require the advisor, on or before than January 1, 2017,
to submit a report to the Governor and the Legislature that
summarizes the adviser's findings and recommendations, with
a particular emphasis on any recommended administrative or
legislative changes.
Staff Comments: The bill as currently drafted does not give
guidance concerning whether the policy advisor would be staffed
to perform the required workload. Providing staff to the advisor
would result in further increased General Fund costs of hundreds
of thousands of dollars annually.
Given that (1) the bill would require the newly created position
to report to the Legislature on January 1, 2017, but (2) the
bill does not contain a sunset, it is unclear whether the intent
of the bill is to continue the existence of the advisor past
that point in time. Staff notes that, with respect to the
evaluative work required of the policy advisor concerning
recommended administrative or legislative changes to improve
efforts to curtail the underground economy, this workload is
likely one-time in nature.
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AB 1508 (Assembly Member Roger Hernández)