BILL ANALYSIS
SENATE COMMITTEE ON BANKING, FINANCE,
AND INSURANCE
Senator Ronald Calderon, Chair
AB 2457 (Salas) Hearing Date: June 30,
2010
As Amended: May 28, 2010
Fiscal: Yes
Urgency: No
VOTES: Asm. Floor(06/02/10)71-0/Pass
Asm. Appr. (05/28/10)12-05/Pass
Asm. B.&F. (04/19/10)11-0/Pass
SUMMARY Would establish the California Financial Literacy
Fund, administered by the State Controller, as specified.
DIGEST
Existing law lacks any requirements regarding or the provision
of instructional materials on financial matters to Californians.
This bill
1. Would establish the California Financial Literacy Fund
(CFLF) in the State Treasury, administered by the
Controller, to support partnerships with the financial
services community and other stakeholders, to improve
Californians' financial literacy;
2. Would authorize the Controller to accept private donations
from entities with no direct financial interest in any
financial products, for deposit into the CFLF, and would
make those funds available, subject to appropriation in the
annual Budget Act;
3. Would, beginning in 2012, require the Controller to submit
a brief annual summary regarding the use of the funds in the
CFLF to the chairpersons of the Assembly Committee on
Banking & Finance and the Senate Committee on Banking,
Finance & Insurance, by August 30th of each year.
COMMENTS
AB 2457 (Salas), Page 2
1. Purpose of the bill To improve financial literacy among
Californians.
2. Background This bill is based on the belief, supported by
numerous statistics, that many Californians do not
understand basic consumer finance, nor do they understand
the impacts of their financial actions. Many of the
mortgage problems currently plaguing California are due to
decisions of borrowers to take on mortgages whose terms they
did not understand, and whose debt they could not afford.
In findings and declarations contained in prior bills of this
type, and previously contained in this bill, authors have
cited the following statistics: California high school
seniors taking part in a national survey of financial
knowledge scored an average of 44%, four percentage points
lower than the national average. There were 176 million
credit card holders in the United States during 2008,
holding approximately 1.5 billion credit cards, an average
of nearly nine cards per holder. The average American
household consumer credit card debt among low- and
moderate-income households is $8,650. More than 40% of
American families spend more than they earn. Fifty-five
percent of American workers do not know how much money they
will need in retirement. Less than 20% of United States
workers are not in employer pension plans, and nearly 28
million U.S. households, 37% of the total, do not have a
retirement savings account of any kind.
If enacted, this bill would add the state and our State
Controller to a much larger effort that is already ongoing,
and is aimed at providing financial education to those who
can benefit from it. For example:
In January 2008, the Governor announced the formation of the
Bank on California program, run through his Office of
Planning and Research. That effort, which involves a
partnership with certain financial institutions and cities,
encourages the unbanked to open starter accounts at local
banks and credit unions, and includes a financial education
component to help Californians build their money management
skills.
The California State Library, and public libraries throughout
the state, work regularly with financial advisors and banks
AB 2457 (Salas), Page 3
to help provide financial literacy resources to patrons.
Wells Fargo has an ongoing relationship with the Contra
Costa County public library system, and San Francisco Public
Library has developed a program called, "Project Money,"
which focuses on the four subject areas most requested by
patrons: savings, banking, credit, and taxes.
The California Society of Certified Public Accountants (CalCPA)
states that increasing financial literacy is CalCPA's number
one community outreach program. Hundreds of CPA volunteers
have been providing free financial education "Dollars and
Sense" seminars in communities and schools throughout the
state.
Citigroup has funded over 200 non-profit organizations annually
in California, as part of its ten-year, $200 million
commitment to fund financial education programs.
The California Bankers Association has created a Financial
Empowerment Program to provide financial education tools for
adults, with an emphasis on basic personal finances and
household money management skills.
Operation HOPE, whose national partners for economic literacy
include the Federal Deposit Insurance Corporation, Federal
Reserve System, America's Community Bankers, E*TRADE
FINANCIAL, the William Jefferson Clinton Foundation in
Harlem, New York, the Bush-Clinton Katrina Fund, the New
York Bankers Association, and others, runs a Banking on Our
Future program, which it calls the leading urban delivery
system for financial literacy education across America.
Banking on Our Future, which is supported by more than 6,000
professional HOPE Corps volunteers from private and public
sector companies, is operational in more than 700 schools
and community-based organizations across the U.S., and has
educated more than 280,000 low-wealth youth about financial
literacy.
3. Support AB 2457 is co-sponsored by the New American
Foundation and State Controller John Chiang. The New
America Foundation asserts that the bill creates a pragmatic
public-private partnership that allows the state to use
private donations to promote consumer financial education.
"We believe that in the long run, providing Californians
with access to the tools and knowledge necessary to make
responsible financial decisions will benefit the State and
AB 2457 (Salas), Page 4
its economy by helping prevent potential bankruptcies and
foreclosures?AB 2457 would provide an important part of the
solution, at a time of perpetual State budget shortfalls?AB
2457 represents a much-needed commitment by the State to
address the root causes of financial struggles resulting
from the lack of consumer financial education, and codifies
the State's financial interest in reducing consumer debt."
Controller Chiang writes that, "at no cost to the state, this
proposal would establish a financial literacy fund and
enable strategic partnerships with the private and nonprofit
sectors that already are working on financial education.
This bill would express the state's financial interest in
reducing unmanageable credit card debt, bankruptcy, and
predatory lending misfortunes like those that contributed to
the current economic downturn. Importantly, this bill will
ensure that the Legislature is notified of all sources and
uses of the donated funds, allowing [it] to make more timely
and informed decisions on financial literacy issues. As the
state's Chief Fiscal Officer, I firmly believe that this
legislation constitutes a prudent investment by the state in
its citizens' long-term financial viability."
Several other organizations (listed below under "support") sent
very similar letters, asserting that the current economic
downturn, along with the rise in unemployment and
foreclosure rates in California, underscores the importance
of a solid grounding in personal finance. These
organizations believe that AB 2457 represents a much-needed
commitment by the state to address the root causes of
financial struggles resulting from the lack of consumer
financial education.
4. Opposition None received.
5. Vetoes of Related Legislation: As summarized below,
Governor Schwarzenegger has vetoed several prior attempts to
establish financial literacy funds, such as the one
envisioned by this bill. His veto message of AB 2123 from
last year (a bill very similar to AB 2457) read as follows:
"While financial literacy is not a cure-all for personal
economic troubles, expanding educational outreach efforts to
improve financial literacy can be helpful for consumers who
could be better equipped to make positive financial choices.
However, this bill merely duplicates existing services and
AB 2457 (Salas), Page 5
resources. Many financial institutions and service
providers already provide an abundance of information on
financial literacy, much of which is available online and
otherwise. Furthermore, it would better for the objective
of this bill to be achieved administratively. I prefer to
have the appropriate state agencies work collaboratively
together and with private sector entities to meet the
objective, within their existing resources."
6. Prior Legislation
a. AB 2123 (Lieu), 2008 Legislative Session:
Substantially similar to, but more expansive than,
this bill. Would have additionally required the
Controller to convene a Financial Literacy Advisory
Committee and establish and oversee a California
Financial Services Corps, as specified. Vetoed by
Governor Schwarzenegger;
b. AB 150 (Lieu), 2007 Legislative Session:
Would have required the Superintendent of Public
Instruction to administer a California Financial
Literacy Initiative as a program for improving pupil
financial literacy. Vetoed by Governor
Schwarzenegger;
c. AB 1950 (Lieu), 2006 Legislative Session:
Substantially similar to AB 2435 from the 2004
Legislative Session. Vetoed by Governor
Schwarzenegger;
d. AB 2435 (Wiggins), 2004 Legislative Session:
Would have permitted school districts to provide
instruction in economics courses related to the
understanding of personal finances including
budgeting, savings and credit. Vetoed by Governor
Schwarzenegger.
POSITIONS
Support
New America Foundation (co-sponsor)
State Controller John Chiang (co-sponsor)
AARP
American Federation of State, County, and Municipal Employees
AB 2457 (Salas), Page 6
Burbank Housing Development Corporation
California Bankers Association
California Chamber of Commerce
California Library Association
Catholic Charities of the East Bay
Consumer Federation of California
Cope Family Center
Corporate Governance
Diamond Community Investors
Nehemiah Community Foundation
Opportunity Fund
San Diego City-County Reinvestment Task Force
Treasure Island Homeless Development Initiative
Treasurer Bill Lockyer
United Way of the Bay Area
Oppose
None on file
Consultant: Eileen Newhall (916) 651-4102