BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
691 (Yee)
Hearing Date: 5/28/2009 Amended: 4/13/2009
Consultant: Bob Franzoia Policy Vote: B,P&ED 7-0
_________________________________________________________________
____
BILL SUMMARY: SB 691 would delete one of two education,
examination, and experience requirements pathways available to
applicants for the certified public accountant (CPA) license on
January 1, 2014. This bill would require, on and after January
1, 2014, that an applicant comply with the second pathway.
_________________________________________________________________
____
Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Increased undergraduate $442 $884
$884*General
coursework require- Up to $1,274 Up to
$2,548 Up to $2,548**
ments $200-$1,000 $400-$2,000
$400-$2,000***
* University of California
** California State University
*** California Community Colleges
_________________________________________________________________
____
STAFF COMMENTS: SUSPENSE FILE.
The Uniform Accountancy Act (UAA), developed by the American
Institute of Certified Public Accountants and the National
Association of State Boards of Accountancy, is designed to
provide a uniform approach to regulation of the accounting
profession. A substantial number of state accountancy laws now
in force follow the example provided by earlier model
accountancy bills and the UAA. The UAA is expressed as an
attempt to eliminate differences and barriers posed to the
practice of CPAs through a standard of "substantial equivalency"
that was added to the UAA.
It appears the purpose of this bill is to conform the state's
CPA education and licensing requirements to the UAA and to those
of most other states. Without conforming to certain education
requirements, California CPAs may be unable to represent their
clients in other states or provide services where there are
out-of-state transactions.
Currently, California differs from other states in that it
allows two pathways to licensure: - Pathway One requires a
person to have a Bachelor of Arts (BA) degree to sit for the
Uniform CPA Exam and two years of experience for licensing.
- Pathway Two requires a person to have a Bachelor of Arts
degree to sit for the Uniform CPA Exam and 150 semester units
total and one year of experience prior to licensure.
Only the Pathway Two meets the UAA standard. Staff notes there
are no curriculum requirements on the additional course work
between the units required for a BA and the
Page 2
SB 691 (Yee)
150 unit total.
This bill would sunset Pathway One effective 2014, so that CPAs
licensed after January 1, 2014 will presumably be considered
equivalent to CPAs for other states and allowed
to represent their client's interests in other states. All
existing CPAs and those licensed before 2014, would be
grandfathered.
By sunsetting Pathway One, undergraduates graduating after
January 1, 2014, and meeting experience requirements, could sit
for the CPA exam but would be required to take up to 30
additional units in order to be licensed.
This additional educational requirement will require students to
take additional course work at the University of California
(UC), the California State University (CSU) and the California
Community Colleges (CCCs) or at private colleges and
universities. How students will respond with regard to how many
additional courses will be taken by how many students and where
those courses will be take is unknown. For marginal cost
funding purposes, a full time equivalent (FTE) undergraduate
student takes 30 units per academic year. For purposes of
providing the committee with a general representation of costs,
the following fiscal impacts on UC, CSU and CCCs are estimated:
- For 2009-10, the cost of a FTE student at UC is $16,646. Of
that amount, $11,046 is General Funds and $5,600 is student fees
(revenue from mandatory systemwide fees, net of financial aid).
If 100 UC undergraduate students chose to take 12 units per
semester for two semesters, the General Fund cost would be
$884,000 (100 x 24/30 x $11,046).
- For 2009-10, the cost of a FTE student at CSU is $10,337. Of
that amount, $7,964 is General Funds and $2,373 is student fees.
If 400 CSU undergraduate students chose to take 12 units per
semester for two semester, the General Fund cost would be
$2,548,480 (400 x 24/30 x $7,964). CSU information shows that
undergraduate degree recipients are earning over 132 units on
average to complete 120 semester unit degree programs.
- For CCCs, the General Fund impact would be approximately
$4,000 per FTE student. If 100 to 500 students chose to take
the additional units at CCCs, General Fund costs would range
between $400,000 and $2,000,000 annually.
These estimates assume that the state would increase funded
enrollment growth in order to accommodate the increased demand
created by this bill. Actual state costs could be lower to the
extent that state funded enrollment was not increased and the
students seeking a CPA license competed with other students for
course seats.
Staff notes there have been proposals that UC and CSU adopt
"excess unit fees." Such a proposal would increase student
costs and potentially decrease General Fund costs as upper
division course tend to be more costly. It appears such a
proposal would have only a marginal impact on UC. An analysis
conducted by UC found that excess units are not a significant
problem at UC. Among students who entered as
Page 3
SB 691 (Yee)
freshmen, approximately 600 FTE students are enrolled in any
given year with units completed in excess of 110 percent of the
units required for graduation. This
amounts to approximately two percent of an entering freshman
cohort. Among transfer students, approximately 300 FTE students
are similarly enrolled in excess units, also amounting to about
two percent of an entering cohort. UC expects even these rates
will decline as four year graduation rates continue to improve
and time-to-degree, a measure of accountability, continues to
decline for all students.