BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 465|
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THIRD READING
Bill No: SB 465
Author: Hill (D)
Amended: 4/21/15
Vote: 21
SENATE BUS, PROF. & ECON. DEV. COMMITTEE: 9-0, 4/27/15
AYES: Hill, Bates, Berryhill, Block, Galgiani, Hernandez,
Jackson, Mendoza, Wieckowski
SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/28/15
AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen
SUBJECT: Contractors' State License Board: licensees: bond
requirement
SOURCE: Author
DIGEST: This bill extends the sunset date for the Contractors
State License Board, under the Contractors State License Act,
from January 1, 2016, until January 1, 2020, and updates and
strengthens financial requirements placed on contractors.
ANALYSIS:
Existing law:
1) Provides for the licensure and regulation of more than
300,000 contractors under the Contractors State License Law
(Contractors Law) by the Contractors State License Board
(CSLB) within the Department of Consumer Affairs (DCA). The
CSLB is under the direction of the registrar of contractors
(Registrar). (Business and Professions Code (BPC) § 7000 et
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seq.)
2) Establishes the CSLB until January 1, 2016, to license and
regulate the practice of contracting. (BPC § 7000.5)
3) Authorizes CSLB to appoint, with DCA Director approval, a
Registrar as executive officer and secretary of CSLB until
January 1, 2016. (BPC § 7011)
4) Requires that all applicants, and all licensees at renewal,
demonstrate, as evidence of financial solvency, that his or
her operating capital exceeds $2,500.
(BPC § 7067.5)
5) Requires a licensed contractor to file or have on file a
contractor's bond in the sum of $12,500. (BPC § 7071.6(a))
This bill:
1)Extends CSLB and the authorization to appoint a Registrar
until January 1, 2020.
2)Deletes the existing requirement that contractors maintain
$2,500 in capital.
3)Increases the existing surety bond requirement from $12,500 to
$15,000.
Background
1) Oversight Hearings and Sunset Review of Licensing Boards and
Programs. In 2015, the Senate Business, Professions and
Economic Development Committee and the Assembly Business and
Professions Committee (Committees) conducted joint oversight
hearings to review 12 regulatory entities: California
Accountancy Board; California Architects Board and Landscape
Architects Committee; California State Athletic Commission;
Board of Barbering and Cosmetology; Cemetery and Funeral
Bureau; Contractors State License Board; Dental Board of
California; Board for Professional Engineers, Land Surveyors
and Geologists; Board of Registered Nursing; Bureau of
Security and Investigative Services; and Board of Vocational
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Nursing and Psychiatric Technicians.
The Committees began their review of the aforementioned
licensing agencies in March and conducted two days of
hearings. This bill and the accompanying sunset bills are
intended to implement legislative changes as recommended by
staff of the Committees and which are reflected in the
Background Papers prepared by Committee staff for each agency
and program reviewed by the Committees for this year.
2) CSLB. CSLB in DCA is responsible for implementation and
enforcement of the Contractors 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 CSLB if the total cost (labor
and materials) of one or more contracts on the project is
$500 or more.
CSLB licenses approximately 290,000 contractors in 44 license
classifications and two certifications. CSLB issues some
15,000 licenses each year, and more than 121,000 licenses are
renewed each year. A license may be issued to an individual,
partnership, corporation, limited liability company, or joint
venture. All licenses must have a qualifying individual
(also referred to as "qualifier"). A qualifying individual
is the person listed on CSLB records who satisfies the
experience and examination requirements for a license.
Depending on the type of license, the qualifying individual
must be designated as an owner, responsible managing
employee, responsible managing officer, responsible managing
manager, responsible managing member, or qualifying partner
in the license records. A qualifying individual is required
for every classification and on each license issued by CSLB;
the same person may serve as the qualifier for more than one
classification. CSLB also registers some 9,600 home
improvement salespersons who are engaged in the sale of home
improvement goods and services.
CSLB has implemented important programmatic and operational
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changes and enhancements since its last sunset extension, as
well as made important policy decisions and adopted
regulatory changes.
3) Review of CSLB: issues odentified and recommended changes.
The following are some of the major issues pertaining to the
CSLB along with background information concerning the
particular issue. Recommendations were made by the Senate
Business, Professions and Economic Development Committee
staff regarding the particular issue areas which needed to be
addressed.
a) Issue: Evidence of Financial Solvency
Background. BPC § 7067.5 requires that all applicants, and
all licensees at renewal, demonstrate, as evidence of
financial solvency, that his or her operating capital
exceeds $2500. This requirement is never verified and
provides no consumer protection.
In any case in which further financial information would
assist the Registrar in an investigation, the Registrar may
obtain such information or may require any licensee or
applicant under investigation pursuant to the Contractors
Law to provide such additional financial information as the
Registrar may deem necessary.
The financial information required by the Registrar shall
be confidential and not a public record, but, where
relevant, shall be admissible as evidence in any
administrative hearing or judicial action or proceeding.
The Registrar may destroy any financial information which
has been on file for a period of at least three years.
Recommendation and Proposed Statutory Change: Given that
CSLB does not verify the capital requirement and that the
Registrar may obtain financial information, if needed, this
bill deletes this requirement and instead increase the
surety bond requirement by $2,500 (from $12,500 to
$15,000).
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b) Issue: Surety Bond
Background. BPC § 7071.6 requires that an applicant or
licensee have on file at all times proof of a $12,500
contractor bond.
The surety bond requirement was last increased in 2007,
when it was raised from $10,000. Prior to that, in 2004,
it was increased from $7,500 to $10,000. A bond increase
of $2,500 would provide greater consumer protection than
the existing $2,500 capital requirement since a consumer
can make a claim against a contractor's surety bond.
Recommendation and Proposed Statutory Change: To provide
greater consumer protection, this bill increases the surety
bond from $12,500 to $15,000.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
According to the Senate Appropriations Committee, the projected
expenditures of approximately $63 million annually (primarily
Contractors License Fund), supporting 405.6 Personnel Year,
until January 1, 2020, partially offset by annual fee revenues
of approximately $55-56 million, based on the proposed 2015-16
Budget.
SUPPORT: (Verified5/28/15)
California Professional Association of Specialty Contractors
Contractors State License Board
OPPOSITION: (Verified5/28/15)
None received
ARGUMENTS IN SUPPORT: The California Professional Association
of Specialty Contractors (CALPASC) underscores that "CALPASC
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appreciates the mission of the CSLB, which protects consumers,
while at the same time enforcing and promoting professionalism
among contractors. The CSLB and its Registrar perform vital
services to California's consumers and construction community,
and should have the real dates extend to 2020."
According to the Contractors State License Board, "CSLB believes
we are working hard to fulfill our consumer protection mandate,
and we look forward to continuing to work with the Legislature,
consumers and other interested parties to further our efforts."
Prepared by:Mark Mendoza / B., P. & E.D. / (916) 651-1868
5/31/15 12:05:52
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