BILL ANALYSIS                                                                                                                                                                                                    Ó



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

          SB 467 (Hill) - Professions and vocations
          
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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 467 would extend the sunset on the Board of  
          Accountancy (Board) and the term of its executive officer until  
          January 1, 2020, and authorize the Board to place practice  
          restrictions on licensees for disciplinary reasons. 
          The bill would transfer authority for approving pro-rata charges  
          for Department of Consumer Affairs (DCA) administrative expenses  
          that are imposed upon boards and bureaus within DCA to the  
          Legislature, rather than having those charges set by the  
          director of DCA with Department of Finance (DOF) approval.


          SB 467 would also require the Attorney General (AG) to submit an  
          annual report to the Legislature, Governor, and DCA, beginning  







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          on January 1, 2017, that includes specified information on cases  
          referred to the AG by DCA's boards and bureaus.




          Fiscal  
          Impact:  
           Board of Accountancy: projected expenditures of approximately  
            $14.1 million annually (Accountancy Fund), supporting 98.8 PY,  
            until January 1, 2020, partially offset by annual fee revenues  
            of approximately $5.4 million in 2015-16, based on the  
            proposed 2015-16 budget.  Annual fee revenues will increase to  
            approximately $11 million annually beginning July 1, 2016.

           The AG's Office indicates that it would incur significant  
            increased workload and costs of approximately $1.45 million in  
            2015-16 ($537,000 General Fund and $911,000 Legal Services  
            Revolving Fund - LSRF), $1.8 million in 2016-17 ($268,000  
            General Fund and $1.534 million LSRF), and $1.534 million  
            ongoing (LSRF).  AG costs from the LSRF would be reimbursed  
            from the funds of the boards and bureaus that refer cases to  
            the AG.

           Unknown impact on the funds and accounts of individual boards  
            and bureaus as a result of transferring the authority to the  
            Legislature for setting pro-rata charges on boards and bureaus  
            to cover DCA's administrative expenses.  There should not be a  
            net overall impact to the charges, but the change will likely  
            result in losses to some funds and gains to others. (various  
            special funds)


          Background:  Existing law, the California Accountancy Act, establishes the  
          Board of Accountancy within DCA, authorizes the Board to appoint  
          an executive officer, and sunsets the Board and executive  
          officer on January 1, 2016.  The Board licenses and regulates  
          over 81,000 accounting professionals to ensure adherence to  
          professional standards.  A person is deemed to be engaged in the  
          public practice of accountancy if he or she performs certain  
          acts, makes certain representations, and renders accounting  
          services to the public and clients for compensation.  Existing  
          law authorizes the Board to revoke, suspend, or refuse to renew  
          a license or certificate, or censure the licensee, for  








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          unprofessional conduct that includes one or any combination of  
          criminal acts, specified false statements or omissions,  
          dishonesty, fraud, gross negligence or repeated negligent acts  
          in performance of professional standards, and other acts or  
          violations, as specified.
          Existing law specifies that the boards and bureaus within the  
          DCA are established for the purpose of ensuring that those  
          private businesses and professions deemed to engage in  
          activities which have potential impact upon the public health,  
          safety, and welfare are adequately regulated in order to protect  
          the people of California.  Existing law authorizes the director  
          of DCA to levy a charge for the pro-rata share of DCA's  
          administrative expenses against any of the boards, bureaus,  
          commissions, divisions, and agencies, at the discretion of the  
          director and with approval of DOF.  DCA is required to submit an  
          annual report of the accounting of the pro-rata calculation of  
          administrative expenses to the appropriate policy committees of  
          the Legislature, beginning on July 1, 2015.  DCA is also  
          required to conduct a one-time study of its current system of  
          prorating administrative expenses to determine if that system is  
          the most productive, efficient, and cost-effective manner for  
          DCA and its boards and bureaus, and requires DCA to consider  
          certain options and include the findings from the study in the  
          July 1, 2015 report to the Legislature.




          Proposed Law:  
            SB 467 would do the following:
           Extend the sunset on the Board of Accountancy and its  
            executive officer until January 1, 2020.
           Authorize the Board to permanently restrict or limit the  
            practice of a licensee, or impose a probationary term or  
            condition on a license, for unprofessional conduct.  This  
            action would prohibit the licensee from performing or engaging  
            in any of the acts or services as provided for in the practice  
            of accountancy.  Unprofessional conduct would include, but not  
            be limited to, those grounds for discipline or denial  
            specified in current law.
           Require DCA to receive approval from the Legislature in order  
            to levy a charge for the estimated administrative expenses of  
            the DCA on a pro rata share basis against any of the boards,  
            bureaus, commissions, divisions, and agencies.








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           Require the AG to submit an annual report to DCA, the  
            Governor, and the appropriate policy committees of the  
            Legislature, beginning January 1, 2017, that includes specific  
            statistical information regarding cases referred to the AG by  
            each constituent entity comprising the DCA and the Division of  
            Investigation (DOI) within DCA.
           Require the director of DCA, through the DOI, to work  
            cooperatively with the health care boards to standardize  
            referral of complaints to the DOI and those that are retained  
            by the health care boards for investigation.


          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 DCA - including SB 465 (Hill), SB 466 (Hill), SB 468  
          (Hill), and SB 469 (Hill).  Five additional bills that extend  
          the sunset on DCA licensing boards and bureaus are being  
          considered by the Assembly this year.


          Staff  
          Comments:  DCA indicates that any costs to extend the sunset on  
          the Board of Accountancy, and provide authority for the Board to  
          place practice restrictions on licensees for disciplinary  
          reasons, would be minor and absorbable.  
          There are several things to note about the Accountancy Fund,  
          which supports the operations of the Board.  Effective July 1,  
          2014, the Board reduced licensing and exam fees in a deliberate  
          effort to bring the Accountancy Fund reserve in line with  
          appropriate levels (it had over 12-months of revenues in reserve  
          at that time).  This explains the primary source of imbalance in  
          fees and expenditures in the current year and the 2015-16 fiscal  
          year (fee revenues are approximately $5.4 million and  
          expenditures are about $13.8 million in those years).  According  
          to the proposed 2015-16 budget, there will be a projected  
          reserve of about $3.35 million at the end of the 2015-16 fiscal  
          year, which is the equivalent of an appropriate three-month  
          reserve.  The temporary reduction in licensing and exam fees  
          will expire on July 1, 2016, which is expected to bring annual  
          fee revenues to over $11 million in 2016-17.  This amount is  
          still less than projected expenditures through the remaining  
          sunset period, but the Board could raise the fees further, if  








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          necessary.  Staff notes that the 2002 Budget Act included a loan  
          of $6 million from the Accountancy Fund to the General Fund to  
          help close a budget gap.  The Governor's proposed budget  
          anticipates the repayment of this loan in 2015-16.


          Current law does not require the AG to compile statistical data  
          or results of cases referred to the AG by constituent entities  
          comprising the DCA, or to report any such information to DCA,  
          the Governor, or Legislature.  The AG reports they would  
          experience significant workload impacts as a result of this  
          bill, and would incur staffing costs of $911,000 in 2015-16 and  
          $1.534 million ongoing, as well as an 18-month contract for  
          external consulting resources of approximately $805,000. Staff  
          notes that the AG report requirement in this bill was also  
          included in the June 30, 2014 version of SB 1243 (Lieu), last  
          year's bill dealing with professions and vocations, but the  
          Assembly Appropriations Committee voted to delete the AG report  
          from the bill when it was reported to the Assembly Floor from  
          the Suspense File.

          DCA indicates that any costs related to provisions requiring  
          complaint standardization among the healing arts boards would be  
          minor. 


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