BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          SB 465 (Hill) - Contractors' State License Board: licensees:  
          bond requirement.
          
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          |Version: April 21, 2015         |Policy Vote: B., P. & E.D. 9 -  |
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          |Urgency: No                     |Mandate: No                     |
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          |Hearing Date: May 11, 2015      |Consultant: Mark McKenzie       |
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          This bill meets the criteria for referral to the Suspense File.







          Bill  
          Summary:  SB 465 would extend the sunset on the Contractors'  
          State License Board (CSLB) and the registrar of contractors  
          (Registrar) until January 1, 2020. The bill would also revise  
          the financial security requirements placed on contractors.


          Fiscal  
          Impact:  Projected expenditures of approximately $63 million  
          annually (primarily Contractors License Fund), supporting 405.6  
          PY, until January 1, 2020, partially offset by annual fee  
          revenues of approximately $55-56 million, based on the proposed  
          2015-16 budget. 







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          Background:  The CSLB, within the Department of Consumer Affairs, is  
          responsible for the implementation and enforcement of the  
          Contractors State License Law, including the laws and  
          regulations related to the licensure, practice, and discipline  
          of the construction industry in California.  All businesses and  
          individuals who construct or alter, or offer to construct or  
          alter, any building, highway, road, parking facility, railroad,  
          excavation, or other structure in California must be licensed by  
          the CSLB if the total cost (labor and materials) of one or more  
          contracts on the project is $500 or more.  The CSLB licenses  
          approximately 290,000 contractors in 44 license classifications  
          and two certifications, and also registers an additional 9600  
          home improvement salespersons who are engaged in the sale of  
          home improvement goods and services.  The CSLB issues  
          approximately 15,000 new licenses each year, and renews more  
          than 121,000 existing licenses.  Existing law provides for a  
          sunset of the CSLB and the Registrar on January 1, 2016, which  
          provides for continued legislative oversight the regulatory  
          board's activities.
          Existing law requires all applicants for a new or renewed  
          license to demonstrate, as evidence of financial solvency, that  
          his or her operating capital exceeds $2,500.  Existing law also  
          requires that a contractor, as a condition of licensure, have on  
          file at all times proof of a $12,500 contractor's surety bond,  
          and authorizes the CSLB to temporarily require an applicant to  
          post a bond of twice this amount it he or she has been convicted  
          or cited for certain violations.   


          Proposed Law:  
            SB 465 would extend the sunset of the CSLB and the term of the  
          Registrar until January 1, 2020.  The bill would also delete the  
          requirement that contractors maintain $2,500 in capital, and  
          increase the surety bond requirement from $12,500 to $15,000.


          Related  
          Legislation:  This bill is one of five measures introduced this  
          session by the Senate Business, Professions, and Economic  
          Development Committee to extend the sunset on licensing boards  
          within the Department of Consumer Affairs - including SB 466  
          (Hill), SB 467 (Hill), SB 468 (Hill), and SB 469 (Hill).  Five  








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          additional bills that extend the sunset on DCA licensing boards  
          and bureaus are being considered by the Assembly this year.


          Staff  
          Comments:  The Department of Consumer Affairs indicates that the  
          provisions of the bill that extend the sunset on the CSLB, and  
          revise the financial security requirements for contractors are  
          minor and absorbable.  
          Staff notes that the Contractors License Fund, which supports  
          the operations of the CSLB, is in a declining condition.   
          According to the fund condition statement in the proposed  
          2015-16 budget, expenditures have been outpacing revenues by  
          approximately $3 million to $6 million annually in recent years,  
          and expenditures are expected to exceed revenues by nearly $7.7  
          million in 2015-16.  The fund's reserve has declined from $26.4  
          million at the end of 2013-14, to $19.2 million at the end of  
          the current year.  The reserve is projected to be at $11.5  
          million at the end of the 2015-16 fiscal year, which the  
          equivalent of a two month reserve.  At the current pace, and  
          without corrective action or adjustment, the fund will be  
          insolvent sometime during the 2017-18 fiscal year, which is  
          approximately two years before the sunset date specified in the  
          bill.




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