BILL ANALYSIS �
AB 597
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Date of Hearing: April 11, 2011
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Mike Eng, Chair
AB 597 (Eng) - As Introduced: February 16, 2011
SUBJECT : California Financial Literacy Fund.
SUMMARY : Establishes the California Financial Literacy Fund
(CFLF) in the State Treasury. Specifically, this bill :
1)Requires the CFLF to be administered by the State Controller.
2)Authorizes the State Controller to deposit private donations
into the CFLF from entities with no direct financial interest
in any financial products.
3)Requires private donations to be made available upon
appropriation in the annual Budget Act.
4)Allows the State Controller to convene a financial literacy
advisory committee which may be comprised of the
Superintendent of Public Instruction, the Treasurer, the
California State Library, the Department of Corporations, the
Department of Financial Institutions, the Department of
Consumer Affairs, and the Department of Finance.
5)Requires state agencies to use existing resources to
participate in the financial literacy advisory committee.
6)Requires the State Controller, beginning in 2013 to provide an
annual report to the chairpersons of the Assembly Committee on
Banking and Finance and the Senate Committee on Banking and
Financial Institutions on the use of the funds, when
appropriated. This report shall be submitted no later than
August 30 each year.
7)Enables partnerships with the financial services community and
governmental and nongovernmental stakeholders to improve
Californian's financial literacy.
EXISTING LAW does not have an official statewide policy or
educational plan for the teaching of financial literacy.
FISCAL EFFECT : Unknown
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COMMENTS : California does not have a one-stop shop system for
collecting and administering financial literacy funds and
implementing programs. A number of financial institutions and
non-profit organizations conduct their own events and workshops
to promote financial literacy. AB 597 would provide an outlet
for the Controller to deposit private donations into the
financial literacy fund from entities with no direct financial
interest in any financial products. Through the financial
literacy fund, the Controller would have the ability to promote
financial literacy events, create and distribute financial
literacy documents and make the public aware of more serious
issues related to scams. The bill also allows the Controller to
convene an advisory committee allowing the appropriate
stakeholders to gather and discuss financial literacy
priorities. The bill contains a reporting requirement allowing
the Legislature to receive necessary information into how the
funds are used and appropriated on a yearly basis.
More efforts aimed at promoting financial literacy can produce
long-term, beneficial effects, onto California citizens.
Promoting financial literacy allows consumers to make smarter
financial decisions that reduce personal financial collapse and
ease the corresponding burden on the state. The economic crisis
demonstrates there is a vast need for people to become more
financially literate. California does not require financial
education which makes constituents more susceptible to scams and
other forms of financial abuse. If California did have more
education requirements in place, the overall impact of the
foreclosure crisis may have been less. Although this bill does
not place education requirements in schools, it does take a step
in the right direction by establishing a fund in the State
Treasury for the sole purpose of promoting financial literacy.
The Jumpstart Coalition for Personal Financial Literacy
conducted a survey of college students in 2007 that found more
than 75 percent of the respondents wish they had more help
preparing for their financial future. Despite surveys and
reports documenting Americans' poor knowledge of personal
finance basics, financial education is currently only required
learning in twenty states. California is not one of these
states.
FINANCIAL STATISTICS:
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In April, 2010, a survey created by Harris Interactive for the
National Foundation for Credit Counseling found:
One-third of adults (33 percent), or about 75 million people,
do not put any part of their annual household income toward
retirement.
Though the proportion of adults who have non-retirement
savings has increased over the years, three in ten (30
percent), or more than 68 million people, report that they
have no savings.
Nearly two in five (39 percent) Gen Y adults - more than any
other age group - report having no savings. Of those with no
savings, one in four say that, if faced with an emergency,
they would charge that expense to a credit card (25 percent)
or take out a loan (29 percent), thus adding to any existing
debt.
28 percent, or nearly 64 million adults, admit to not paying
all of their bills on time. Among minorities, this number is
at 47 percent for African-Americans and 42 percent for
Hispanics.
Though a majority of adults (67 percent) say they pay for most
purchases with cash or a debit card, about two in five (41
percent) report that their household carries credit card debt
and more than 11 million people (5 percent of adults) say they
carry $10,000 or more in credit card debt from month to month.
In spite of it being free, nearly two-thirds of adults (65
percent), or nearly 148 million people, have not ordered a
copy of their credit report in the past year. And nearly
one-third (31 percent) do not know their credit score.
Though more adults now give themselves an A, 34 percent, or
nearly 77 million people, gave themselves a grade of C, D, or
F on their knowledge of personal finance, suggesting there is
still considerable room for improvement, especially among
younger adults.
OTHER STATES:
In 2009, Delaware enacted SB 108, which requires businesses
making short-term consumers loans (e.g., title loans, payday
loans, etc.) to pay an annual high-cost loan license fee of
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$1,500 for each licensed office. The fees must be used to fund
grants to or contracts with schools or other organizations that
provide financial and economic literacy skills to adults and
youth in accordance with guidelines and/or regulations to be
established by the Commissioner and the Delaware Secretary of
Education.
In Vermont, during the 2008 Legislative session, legislators
authorized the establishment of a trust fund to finance
financial literacy in Vermont. According to the legislation,
"The purpose of the fund is to promote the adoption of fiscally
sound money management practices by Vermonters through education
and outreach efforts that raise awareness of the need for and
benefits of practicing such skills; and to create opportunities
to build and encourage the development of new financial literacy
activities and educational products for Vermont citizens." The
Treasurer's Office is authorized to accept funding from a
variety of sources to support these activities.
In 2008, Ohio established the financial literacy education fund
in the state treasury, administered by the director of commerce.
(The Ohio Department of Commerce is one of the state's chief
regulatory agencies.) The fund is used to support various adult
financial literacy education programs developed or implemented
by the director of commerce. The director of commerce requires
that at least one-half of the financial literacy education
programs developed or implemented, and offered to the public, be
presented by or available at public community colleges or state
institutions throughout the state. The director of commerce
shall deliver to the president of the senate, the speaker of the
house of representatives, the minority leader of the senate, the
minority leader of the house of representatives, and the
governor an annual report that includes an outline of each adult
financial literacy education program developed or implemented,
the number of individuals who were educated by each program, and
an accounting for all funds distributed.
According to the Jumpstart Coalition, Tennessee and Iowa have
used their partnerships with state and local business leaders
and the financial sector to establish Financial Literacy Funds.
These funds are gathered as partners are asked to donate when
participating in discussions regarding curriculum, teacher
trainings, and classroom tools. The Funds are then used to
ensure teacher training and materials are available to educators
delivering financial education.
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FEDERAL ACTION:
In February, 2011, Rep. Andre Carson, D-Ind., introduced HR 300,
which would create a federal grant program intended to increase
financial literacy among teens and young adults. Called the
Young Adults Financial Literacy Act and calls for grants to be
funnelled to organizations that could develop and implement
financial education programs for students 15 through 24. The
program would include teaching skills such as financial
planning, budgeting, saving and managing debt.
President Barack Obama named the month of April, National
Financial Literacy Month. The President said in a proclamation
that a better understanding of the financial system can help
prevent another economic crisis. He called on Americans during
April to recommit "to teaching ourselves and our children about
the basics of financial education."
The Federal Government established The Financial Literacy and
Education Commission under Title V, the Financial Literacy and
Education Improvement Act which was part of the Fair and
Accurate Credit Transactions (FACT) Act of 2003, to improve
financial literacy and education of persons in the United
States. The FACT Act named the Secretary of the Treasury as head
of the Commission and mandated the Commission include 19 other
federal agencies and bureaus. The Commission coordinates the
financial education efforts throughout the federal government,
supports the promotion of financial literacy by the private
sector while also encouraging the synchronization of efforts
between the public and private sectors.
PREVIOUS LEGISLATION:
AB 2457 (Salas) 2010 Legislative Session. Would have
established the California Financial Literacy Fund in the State
Treasury, administered by the Controller, to support
partnerships with the financial services community and other
stakeholders, to improve Californians' financial literacy.
Vetoed by Governor Schwarzenegger
AB 550 (Lieu) 2009 Legislative Session. Would have established
the California Financial Literacy Fund in the State Treasury and
enable the California State Controller to administer the Fund.
Held in the Assembly Appropriations Committee. Appropriations
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determined, "Unknown costs, presumably in excess of 150,000, to
the controller to administer the new initiative and prepare
annual reports."
ACR 113 ((Niello & Lieu) Res. Chapter 32, Statutes of 2008)
declares the month of April, 2008, as Financial Literacy Month,
in order to raise public awareness about the need for increased
financial literacy.
AB 2123 (Lieu), 2008 Legislative Session. Would have
established the California Financial Literacy Initiative for the
purpose of improving financial literacy by offering
instructional materials to citizens of California. 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 (CFLI) as a program for
improving pupil financial literacy. Vetoed by Governor
Schwarzenegger.
AB 1950 (Lieu), 2006 Legislative Session: Substantially similar
to AB 2435. 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.
The Assembly Banking and Finance Committee conducted an
informational hearing on Financial Literacy on February 20,
2007. The Committee found through this hearing that numerous
programs exist in California from the financial community and
from non-profit organizations but no central authority
determines what materials or programs are best suited for
Californians.
REGISTERED SUPPORT / OPPOSITION :
Support
California State Controller, Sponsor
American Federation of State, County and Municipal Employees
(AFSCME), AFL-CIO
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California Credit Union League (CCUL)
Opposition
None on file.
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
319-3081