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. ----------------------------------------------------------------- | | | | | | ----------------------------------------------------------------- |--------------------------------+--------------------------------| | | | |Version: April 21, 2015 |Policy Vote: B., P. & E.D. 9 - | | | 0 | | | | |--------------------------------+--------------------------------| | | | |Urgency: No |Mandate: No | | | | |--------------------------------+--------------------------------| | | | |Hearing Date: May 11, 2015 |Consultant: Mark McKenzie | | | | ----------------------------------------------------------------- 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. SB 465 (Hill) Page 1 of ? 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 SB 465 (Hill) Page 2 of ? 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. -- END --