BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 2457|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 2457
Author: Salas (D), et al
Amended: 7/15/10 in Senate
Vote: 21
SENATE BANKING, FINANCE, AND INS. COMMITTEE : 8-2, 6/30/10
AYES: Calderon, Correa, Florez, Kehoe, Liu, Lowenthal,
Padilla, Price
NOES: Cogdill, Runner
NO VOTE RECORDED: Cox
SENATE APPROPRIATIONS COMMITTEE : 8-1, 8/2/10
AYES: Kehoe, Alquist, Corbett, Leno, Price, Wolk, Wyland,
Yee
NOES: Ashburn
NO VOTE RECORDED: Emmerson, Walters
ASSEMBLY FLOOR : 71-3, 6/2/10 - See last page for vote
SUBJECT : California Financial Literacy Fund
SOURCE : State Controller John Chiang
California Financial Literacy Fund
DIGEST : This bill establishes the California Financial
Literacy Fund, administered by the State Controller, as
specified.
ANALYSIS : Existing law lacks any requirements regarding
or the provision of instructional materials on financial
CONTINUED
AB 2457
Page
2
matters to Californians.
This bill:
1.Establishes 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.Authorizes 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.Requires, beginning in 2012, 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.
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
AB 2457
Page
3
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 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
AB 2457
Page
4
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.
Vetoes of Related Legislation
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 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 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.
Prior Legislation
AB 2123 (Lieu), 2008 Legislative Session, substantially
AB 2457
Page
5
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.
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.
AB 1950 (Lieu), 2006 Legislative Session, substantially
similar to AB 2435 from the 2004 Legislative Session.
Vetoed by Governor Schwarzenegger.
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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12
2012-13 Fund
Admin expenses --- minor
---General
Financial literacy activities unknown, dependent of
donations Private
SUPPORT : (Verified 8/4/10)
State Controller John Chiang (co-source)
California Financial Literacy Fund (co-source)
Treasurer Bill Lockyer
AARP
American Federation of State, County, and Municipal
Employees
AB 2457
Page
6
Burbank Housing Development Corporation
California Bankers Association
California Chamber of Commerce
California Library Association
California State Teachers Retirement System
Catholic Charities of the East Bay
Consumer Federation of California
Nehemiah Community Foundation
Opportunity Fund
San Diego City-County Reinvestment Task Force
Treasure Island Homeless Development Initiative
United Way of the Bay Area
ARGUMENTS IN SUPPORT : This bill 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 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'
AB 2457
Page
7
long-term financial viability."
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Bass, Beall, Bill
Berryhill, Block, Blumenfield, Bradford, Brownley,
Buchanan, Caballero, Charles Calderon, Carter, Chesbro,
Conway, Cook, Coto, Davis, De La Torre, De Leon,
Emmerson, Eng, Evans, Feuer, Fletcher, Fong, Fuentes,
Fuller, Furutani, Gaines, Galgiani, Garrick, Gilmore,
Hagman, Hall, Hayashi, Hernandez, Hill, Huber, Huffman,
Jeffries, Jones, Knight, Logue, Bonnie Lowenthal, Ma,
Mendoza, Monning, Nava, Nestande, Niello, Nielsen, V.
Manuel Perez, Portantino, Ruskin, Salas, Saldana, Silva,
Skinner, Smyth, Solorio, Swanson, Torlakson, Torres,
Torrico, Tran, Villines, Yamada, John A. Perez
NOES: Blakeslee, DeVore, Norby
NO VOTE RECORDED: Tom Berryhill, Harkey, Lieu, Miller,
Audra Strickland, Vacancy
JA:nl 8/4/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****