BILL ANALYSIS �
AB 597
Page 1
ASSEMBLY THIRD READING
AB 597 (Eng)
As Introduced February 16, 2011
Majority vote
BANKING & FINANCE 11-0 APPROPRIATIONS 17-0
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|Ayes:|Eng, Achadjian, Charles |Ayes:|Fuentes, Harkey, |
| |Calderon, Fuentes, Gatto, | |Blumenfield, Bradford, |
| |Harkey, | |Charles Calderon, Campos, |
| |Roger Hern�ndez, Lara, | |Davis, Donnelly, Gatto, |
| |Morell, Perea, Torres | |Hall, Hill, Lara, |
| | | |Mitchell, Nielsen, Norby, |
| | | |Solorio, Wagner |
| | | | |
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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
(Controller).
2)Authorizes the 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 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 Controller, beginning in 2013 to provide an
annual report to the chairpersons of the Assembly Banking and
Finance Committee and the Senate Banking and Financial
Institutions Committee on the use of the funds, when
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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
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. This bill 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 establish a
fund in the State Treasury for the sole purpose of promoting
financial literacy.
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The Jumpstart Coalition for Personal Financial Literacy
conducted a survey of college students in 2007 that found more
than 75% 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 : In April, 2010, a survey created by
Harris Interactive for the National Foundation for Credit
Counseling found:
1)One-third of adults (33%), or about 75 million people, do not
put any part of their annual household income toward
retirement.
2)Though the proportion of adults who have non-retirement
savings has increased over the years, three in ten (30%), or
more than 68 million people, report that they have no savings.
3)Nearly two in five (39%) Generation 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%) or take
out a loan (29%), thus adding to any existing debt.
4)Nearly 64 million adults (28%), admit to not paying all of
their bills on time. Among minorities, this number is at 47%
for African-Americans and 42% for Hispanics.
5)Though a majority of adults (67%) say they pay for most
purchases with cash or a debit card, about two in five (41%)
report that their household carries credit card debt and more
than 11 million people (5% of adults) say they carry $10,000
or more in credit card debt from month to month.
6)In spite of it being free, nearly two-thirds of adults (65%),
or nearly 148 million people, have not ordered a copy of their
credit report in the past year, and nearly one-third (31%) do
not know their credit score.
7)Though more adults now give themselves an A, 34%, or nearly 77
million people, gave themselves a grade of C, D, or F on their
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knowledge of personal finance, suggesting there is still
considerable room for improvement, especially among younger
adults.
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. The Young Adults Financial Literacy Act 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. President Obama 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 (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) of 2010, 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. It was vetoed by Governor
Schwarzenegger.
AB 550 (Lieu) of 2009, would have established the California
Financial Literacy Fund in the State Treasury and enable the
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California State Controller to administer the Fund. It was held
in the Assembly Appropriations Committee. Appropriations
determined, "Unknown costs, presumably in excess of 150,000, to
the controller to administer the new initiative and prepare
annual reports."
ACR 113 (Niello and Lieu) Resolution 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) of 2008, would have established the California
Financial Literacy Initiative for the purpose of improving
financial literacy by offering instructional materials to
citizens of California. It was vetoed by Governor
Schwarzenegger.
AB 150 (Lieu) of 2007, would have required the Superintendent of
Public Instruction to administer a California Financial Literacy
Initiative (CFLI) as a program for improving pupil financial
literacy. It was vetoed by Governor Schwarzenegger.
AB 1950 (Lieu) of 2006, was substantially similar to AB 2435
(Wiggins). It was vetoed by Governor Schwarzenegger.
AB 2435 (Wiggins) of 2004, would have permitted school districts
to provide instruction in economics courses related to the
understanding of personal finances including budgeting, savings
and credit. It was vetoed by Governor Schwarzenegger.
Analysis Prepared by : Kathleen O'Malley / B. & F. / (916)
319-3081
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