BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1123 (Negrete McLeod)
Hearing Date: 05/27/2010 Amended: As Introduced
Consultant: Maureen Ortiz Policy Vote: BP&ED: 7-1
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BILL SUMMARY: SB 1123 requires licensing fees for licensees of
the Department of Real Estate (DRE) to be reduced to 1982 levels
if funds are transferred or loaned from the Real Estate Fund to
any special fund, as specified.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Potential fee reduction --unknown, potential revenue
loss of
$2
million if fees are rolled back----- Special*
*Real Estate Fund
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STAFF COMMENTS: SUSPENSE FILE.
The Department of Real Estate currently receives approximately
$40 million in license fee revenue. If the fees were required
to be reduced only 5%, the revenue loss to the Real Estate Fund
would be approximately $2 million.
Current statute provides that DRE licensing fees must be rolled
back to their 1982 levels when a loan or transfer of funds from
the Real Estate Fund to the General Fund is made. DRE last
increased its fees by regulation on July 1, 2009, when the
Department's fund condition worsened as a result of a downturn
in the real estate market and it became unlikely that the
outstanding $10.9 million loan previously made to the General
Fund would be repaid. According to the DRE, the fund would have
run out of reserves within months had fees not been increased to
their statutory maximums on July 1, 2009. If another fund
transfer is made and DRE is required to revert to the 1982 fee
structure, projections indicate the Department would not be able
to fully fund its budget in FY 2012/13.
The Department last rolled back its fees to 1982 levels
following transfers of $10 million and $3.7 million from the
Real Estate Fund to the General Fund during the 1990-91 and
1992-93 Budget Acts. After litigation, the transfer of this fee
revenue was proclaimed to be illegal. However, a decade later,
another $10.9 million was loaned from the Real Estate Fund to
the General Fund, to be repaid with interest. Since this shift
of funds was not a "transfer", but was designated as a "loan",
it was not contradictory to the litigation findings.
Consequently, legislation was enacted to provide that upon any
transfer or loan of fee revenue from the Real Estate Fund to the
General Fund, real estate licensing fees will be rolled back to
the 1982 levels.
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SB 1123 (Negrete McLeod)
More recently, in the 2009/10 Budget Act, $500,000 was
transferred from the Real Estate Fund to provide startup costs
for a new program to license mortgage foreclosure consultants at
the Department of Justice pursuant to AB 180 (Bass) Chapter 278,
Statutes of 2008. However, DRE licensing fees were not rolled
back pursuant to this transfer since the funds were placed into
another special fund, and not the General Fund, and
consequently, this particular shift of funds did not fall under
the threshold of either the lawsuit or the new legislation.
Fee increases have a tremendous operational impact on the
Department and require regulation changes and administrative law
processes to do so. When DRE increased its fees in 2009, it
utilized written and e-mail notifications, Web site alerts, Real
Estate Bulletin articles, advisories to industry groups,
notifications to real estate course providers and other means to
get the notice out to its licensees.
SB 1123 provides that the fee rollback will not be triggered if
funds are transferred or loaned from the Education and Research
Account of the fund that is consistent with the purposes of the
account and is approved by the Commissioner.