BILL ANALYSIS Ó
AB 2286
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Date of Hearing: April 5, 2016
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Rudy Salas, Chair
AB 2286
(Mullin) - As Introduced February 18, 2016
SUBJECT: Contractors: home improvement salespersons.
SUMMARY: This bill increases the fee cap for the Contractors
State Licensing Board (CSLB) fee schedule, authorizes a fee for
making changes to the personnel associated with a license, and
provides the CSLB the authority to adopt regulations to provide
for expedited processing of license applications.
EXISTING LAW:
1)Provides for the licensure and regulation of contractors by
CSLB within the Department of Consumer Affairs (DCA) pursuant
to the Contractors' Law. (Business and Professions Code (BPC)
§7000 et seq.)
2)Requires all fees and civil penalties received under the
Contractors Law to be deposited into the Contractors License
Fund, which is continuously appropriated. (BPC §7135)
3)Allows the CSLB to set fees by regulation, not to exceed the
statutory limitations on those fees for: (BPC §7137)
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a) An application for an original license in a single
classification and any additional classifications;
b) Replacing a responsible party, as specified;
c) Scheduling or rescheduling an examination, as specified;
d) Renewal of an active or inactive license or
registration;
e) Delinquent renewal applications;
f) An application for an asbestos certification
examination, hazardous substance removal or remedial action
certification examination; and,
g) Enforcing provisions in the Labor Code related to
electrician certification.
4)Defines a "home improvement salesperson" (HIS) as a person
employed by a home improvement contractor licensed under the
Contractors' Law to solicit, sell, negotiate, or execute
contracts for home improvements, for the sale, installation or
furnishing of home improvement goods or services, or of
swimming pools, spas, or hot tubs, except as specified. (BPC
§7152(a))
5)Provides that a person who wishes to practice as a HIS must
register with the CSLB as a HIS unless exempted. (BPC
§7152(b))
6)Provides that an application for renewal of registration is
delinquent if the application is not postmarked by the date on
which the registration would otherwise expire. (BPC
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§7153.3(b))
7)Provides that a registration may be renewed at any time within
three years after its expiration, as specified, and the
registrant must pay the renewal fee as well as additionally
pay a delinquent renewal penalty in the amount of twenty-five
dollars ($25). (BPC §7153.3(b))
8)The CSLB is statutorily required to maintain a balance that
does not exceed six months in reserve of its annual authorized
expenditures. (BPC §7138.1)
9)Requires a board within the DCA, on or before July 1, 2016, to
expedite and assist the initial licensure process for an
applicant who supplies satisfactory evidence that he or she
has served as an active duty member of the Armed Forces of the
United States (AFUS) and was honorably discharged. (BPC
§115.4)
10)Provides a similar expedited licensure process for an
applicant who holds a current license in another state in the
same profession or vocation for which he or she seeks
licensure and has a specified relationship with such an active
duty member who is assigned to a duty station in this state
under official orders. (BPC §115.5)
11)Provides that experience obtained in the Armed Services of
the United States should be permitted to apply to the
employment needs of the state. Provides for methods of
evaluating education, training, and experience obtained in the
armed services, if applicable to the requirements of the
profession regulated. (BPC §35)
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THIS BILL:
12)Increases the maximum fees the CSLB may set by regulation
for:
a) An application for an original license in a single
classification from $300 to $360;
b) An application for each additional classification, as
specified, from $75 to $300;
c) The application fee to replace a responsible managing
officer, responsible managing manager, responsible managing
member, or responsible managing employee, from $75 to $300.
d) The initial license fee for an active and renewal for an
inactive license from $180 to $220;
e) The renewal of an active license from $360 to $430;
f) The registration of a HIS from $75 to $90;
g) The renewal of a HIS registration from $75 to $90;
h) The application for an asbestos certification
examination from $75 to $90;
i) The application for a hazardous substance removal or
remedial action certification examination from $75 to $90;
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j) The delinquency penalty for a HIS registration renewal
application that is not postmarked or received by the
registration's expiration from $25 to 50% of the renewal
fee.
13)Specifies that the application fee for each additional
classification applied for in connection with an original
license to be limited to no more than $75.
14)Specifies that the application fee to add personnel, other
than a qualifying individual, to an existing license is to be
limited to no more than $150.
15)Requires the CSLB to establish by regulation, an expedited
process for applications for registration as a HIS for
applicants; authorizes the CSLB to establish by regulation the
criteria for approval of this expedited process.
16)Exempts from these regulations an application that is
required to be expedited pursuant to other law, including, but
not limited to, the applications of applicants who have, among
other things, served as an active duty member of AFUS or have
a specified relationship with such an active duty member.
FISCAL EFFECT: Unknown. This bill is keyed fiscal by the
Legislative Counsel.
COMMENTS:
Purpose. This bill increases the fee cap for the CSLB fee
schedule, authorizes a fee for making changes to the personnel
associated with a license, and provides authority to adopt
regulations to provide for expedited processing of license
applications.
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This bill is sponsored by the CSLB. According to the author,
"this proposal raises the statutory cap on CSLB's authorized
fees. CSLB will need to adopt regulations to set actual fee
amounts, and will continue to work with industry and interested
parties through that process. If CSLB is able to obtain
approval for a fee increase, [it] will be able to continuing
working to provide online license application and renewal
services, which will benefit all licensees. If CSLB is not able
to implement a fee increase, [it] will have to reduce costs in
Enforcement. These cuts will begin with cuts to [its] proactive
enforcement program. Certain positions will be held vacant which
will lead to backlogs in license application and complaint
handling processing."
Background. The CSLB was established in 1929 by the Legislature
as the Contractors License Bureau, under the Department of
Professional and Vocational Standards. It was designed to
regulate the state's construction industry and protect the
public from irresponsible contractors. Now classified as a board
within the DCA, the CSLB operates with a 15-member board and
upholds its mission to protect consumers by regulating the
construction industry through licensure, enforcement, and
education. The CSLB regulates contractors in 43 license
classifications and two certifications, which amounts to
approximately 285,000 licensees.
The CSLB receives no General Fund support, relying solely on
fees set by statute and collected from contractors and
applicants. Renewal fees constitute the main source of revenue,
and are collected every two years from contractors with active
licenses. Active contractor licenses expire two years from the
last day of the month in which the license was issued. Inactive
licenses are valid for four years.
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When a board or bureau under the DCA requests a fee increase,
the Assembly Committee on Business and Professions (Committee)
requests that the board or bureau complete its "Fee
Questionnaire." The information provided on this questionnaire
is the result of the board or bureau working with the DCA's
Budget Office throughout the year. The Budget Office helps to
prepare expenditure projections and fund conditions, as well as
monitors these projections to manage and watch for imbalances.
Expenditures that are projected to exceed revenues do not always
indicate that a program is in need of a fee increase. The DCA
works closely with each program that appears to have potential
reserve shortages to understand the potential implications.
Boards and bureaus have the option to have their fees audited by
the DCA in addition to working with the Budget Office throughout
the year. When a program faces a potential fund issue, the DCA
helps evaluate the need for a fee increase based on current
expenditure trends, and guides them through the available
options and the fee audit process. The Budget Office also
provides the necessary information to the fee auditors to help
ensure there is a complete, effective, and defensible fee
analysis.
According to the CSLB and its responses to the Committee's
questionnaire, the CSLB will face a deficit of approximately $6
million by Fiscal Year (FY) 2018-19. The most significant
contribution to this deficit is increased costs in personal
services, payment, which includes salary, benefits, and
retirements, into the DCA Pro Rata, and Enforcement.
In FY 2012-13, the CSLB spent approximately $54 million, and in
the current budget year is expected to spend approximately $61
million.Of that increased spending, $8.5 million, nearly half
went to personal services. During that time period, the CLSB
added 4 positions, which were approved through the annual budget
process.
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The amount the CSLB pays to the DCA recently increased by $2
million. A significant portion of that $2 million increase is
due to DCA's new BreEZe system- a computer upgrade system that
centralizes licensing and enforcement. While the CSLB was
previously scheduled to be included in Release 3 of the BreEZe
system, it is now not currently scheduled to be included. DCA
intends to conduct a cost-benefit analysis for Release 3 boards
after Release 2 is completed in 2016in response to a request for
ongoing cost benefit analyses for the project in a 2015 report
by the California State Auditor.
Despite the lack of a plan moving forward, Release 3 boards have
already paid more than $4 million. These boards are projected
to pay almost $14 million through Fiscal Year (FY) 2016-17.
These same regulatory programs, including the CSLB, could be
seeking fee increases in the next few fiscal years.
The boards have no control over the pro rata charges regardless
of the quality or quantity of services provided by the DCA.
Despite this, the executive officers are held responsible for
managing their budgets as well as spearheading requests for fee
increases. The DCA's pro rata calculations are based on
position authority rather than the actual number of employees,
which may ultimately inflate pro rata charges. Seventy-one
percent of the expenditures to the DCA is for administration
provided by the DCA, while another 22% of the expenditures to
the DCA goes toward BreEZe. The remaining seven percent paid to
the DCA is for services that the CSLB also provides in-house,
i.e. Division of Investigation, Public Affairs Office and
Consumer and Communications Relations.
The CSLB also had increased enforcement costs of about $2
million, the majority of which were costs for the use of
services by the Attorney's General (AG)'s Office and the Office
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of Administrative Hearings. This increase is in part due to
reporting requirements of the AG's office as a result of SB 467
(Hill), Chapter 656, Statutes of 2015. This bill addressed
extensions of some of DCA's boards and additionally required the
AG's office report on specific statistical information regarding
accusation matters referred to the AG for each constituent
entity within the DCA represented by the Licensing Section and
Health Quality Enforcement Section of the Office of the AG.
-----------------------------------------------------------------
| Expenditures by Program Component |
| (in thousands of dollars) |
-----------------------------------------------------------------
|---------------------+---------------------+---------------------|
| | FY 2013-14 | FY 2014-15 |
|---------------------+---------------------+---------------------|
|Enforcement | $26,840 | $28,662 |
|---------------------+---------------------+---------------------|
|Licensing/Testing | $10,725 | 11,154 |
|---------------------+---------------------+---------------------|
|Administration* | $14,276 | 15,092 |
|---------------------+---------------------+---------------------|
|DCA Pro Rata | $6,028 | $5,865 |
|---------------------+---------------------+---------------------|
|Total | $57,869 |$60,773 |
-----------------------------------------------------------------
*Administration includes costs for executive staff, information
technology, public affairs, board, administrative support, and
fiscal services.
The CSLB faces potential backlogs in handling applications for
personnel changes, primarily due to criminal background checks.
The additional level of staff involvement for these applications
is burdensome. As such, the CSLB proposes to add a fee for
processing these applications, but currently has no statutory
authority to charge the fee.
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Fee Increase History (last 10 years). The last statutory
increase for all fees was enacted with SB 1953 (Figueroa)
Chapter 744, Statutes of 2002. The CSLB promulgated regulations
to implement this fee increase in 2011.
SB 392 (Florez), Chapter 698, Statutes of 2010)authorized
licensure for Limited Liability Companies (LLCs), and made
related changes to BPC §7137 to include personnel associated
with a LLC, but did not add or increase any fees.
Veteran's Assistance Program. SB 1226 (Correa), Chapter 657,
Statutes of 2015 required, beginning July 1, 2016, boards under
the DCA to expedite the initial licensure process for veterans,
and requires boards and bureaus to accept military experience
towards licensure. This bill sought to assist veterans
transitioning into civilian life by reducing licensure delays
and making it easier to find work by giving them credit for the
skills developed during their time in the military.
According to a letter from the CSLB to the Chairs of the Senate
Committee on Business, Professions and Economic Development and
the Assembly Committee on Business and Professions regarding the
most recent Sunset Review in 2014, the CSLB offers a Veterans
Application Assistance Program for troops transitioning from
military service to civilian employment. In many cases,
veterans possess transferable skills that help meet minimum
experience and training requirements for licensure as a state
contractor. This program offers priority services to veteran
applicants by evaluating transferable military experience and
training, as well as education."
Additionally, veterans receive automatic application processing
priority, direct telephone and email contact with CSLB staff,
and verification of educational credit and military
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experience/training. Spouses and domestic partners of those on
active duty in the AFUS also are provided with expedited
licensure by CSLB pursuant to BPC §115.5.
Despite the existence of the evaluation program, the CSLB
currently does not have a formal process to expedite
applications. The CSLB receives numerous requests for this
service.
ARGUMENT IN SUPPORT:
According to the CSLB , "CSLB needs a statutory fee increase in
order to continue to fulfill its primary mission of consumer
protection. CSLB is a special fund entity, funded entirely by
the fees paid by its 285,000 licensees. If CSLB is not able to
implement a fee increase, we will have to reduce costs in
Enforcement, beginning with cuts to our proactive enforcement,
and in holding positions vacant, which will lead to backlogs in
license application processing and in complaint handling."
POLICY ISSUE FOR CONSIDERATION:
The CSLB completed this Committee's "Fee Questionnaire," but did
not conduct a fee audit with the DCA. It is unclear if the DCA's
fee audit would show a difference in need for the CSLB to raise
its fees to the amounts delineated.
REGISTERED SUPPORT:
Contractors State License Board (sponsor)
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REGISTERED OPPOSITION:
None on file.
Analysis Prepared by:Gabby Nepomuceno / B. & P. / (916) 319-3301