BILL ANALYSIS �
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 597|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 597
Author: Eng (D)
Amended: 7/12/11 in Senate
Vote: 21
SENATE BANKING & FINANCIAL INSTITUT. COMM : 6-1, 07/06/11
AYES: Vargas, Blakeslee, Evans, Kehoe, Liu, Padilla
NOES: Walters
SENATE APPROPRIATIONS COMMITTEE : 6-3, 08/25/11
AYES: Kehoe, Alquist, Lieu, Pavley, Price, Steinberg
NOES: Walters, Emmerson, Runner
ASSEMBLY FLOOR : 75-0, 05/12/11 - See last page for vote
SUBJECT : California Financial Literacy Fund
SOURCE : State Controller John Chiang
New America Foundation
DIGEST : This bill establishes the California Financial
Literacy Fund, administered by the State Controller, as
specified.
ANALYSIS : The California Constitution requires the
Legislature to encourage the promotion of intellectual
improvement.
Existing law regulates financial institutions and their
interactions with the public.
CONTINUED
AB 597
Page
2
Existing law recognizes the existence of specialized
financial institutions that provide services, including,
but not limited to, financial literacy training, to
underserved communities.
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 for
deposit into the CFLF, and would make those funds
available, subject to appropriation in the annual Budget
Act. Provides that donations may not be used to promote
or market the financial products of any contributor.
Monies not appropriated within 18 months of being
contributed to the CFLF would have to be returned in full
to the contributor.
3.Authorizes the Controller to convene a financial literacy
advisory committee to provide additional oversight of the
CFLF and develop strategies to improve financial
literacy. Requires that, if the committee is convened,
it must comply with the Bagley-Keene Open Meeting Act.
4.Requires, beginning in 2013, the Controller to submit a
brief annual summary by August 30th of each year,
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 and Financial
Institutions.
5.Adds uncodified language which finds and declares that
contributions to the California Financial Literacy Fund
established by this bill are made for a public purpose,
and adds intent language stating the contributions should
be eligible to be claimed as deductible charitable
contributions to the extent otherwise allowable under
federal income tax law and California income tax and
franchise tax law, subject to recapture if the
contribution is subsequently returned by the state.
CONTINUED
AB 597
Page
3
Comments
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 knowledge of personal finance,
suggesting there is still considerable room for
improvement, especially among younger adults.
CONTINUED
AB 597
Page
4
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 funneled 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.
Prior and Related Legislation
AB 2457 (Salas), 2009-10 Session, virtually identical to
this bill. Vetoed by the Governor.
AB 550 (Lieu), 2009-10 Session, substantially similar to
this bill, but did not call for the creation of an advisory
committee. Held in the Assembly Appropriations Committee.
AB 2123 (Lieu), 2007-08 Session, substantially similar to,
CONTINUED
AB 597
Page
5
but more expansive than, this bill. Would have required
the Controller to convene a Financial Literacy Advisory
Committee and establish and oversee a California Financial
Services Corps, as specified. Vetoed by the Governor.
AB 150 (Lieu), 2007-08 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 the
Governor.
AB 1950 (Lieu), 2005-06 Session, substantially similar to
AB 2435 from the 2004 Legislative Session. Vetoed by the
Governor.
AB 2435 (Wiggins), 2003-04 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 the
Governor.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13
2013-14 Fund
Financial literacy program
unknown, potentially over $50
Private
SUPPORT : (Verified 8/26/11)
State Controller John Chiang (co-source)
New America Foundation (co-source)
American Federation of State, County and Municipal
Employees, AFL-CIO
California Bankers Association
California Chamber of Commerce
California Coalition for Rural Housing
California Credit Union League
CONTINUED
AB 597
Page
6
California Library Association
California School Boards Association
California State Teachers' Retirement System
Consumer Federation of California
VISA
ARGUMENTS IN SUPPORT : According to the author, "The
principal purpose of this bill is to establish a mechanism
for the State of California, under specified conditions and
with approval from the Legislature and Administration, to
partner financially with nonprofits and private entities on
solutions to the state's financial literacy challenges. In
the long run, partnering with the state to educate people
on financial literacy could benefit the California economy
by helping to prevent bankruptcies, foreclosures, and job
loss."
The author notes that four California cities are among the
top ten in the United States for credit card debt, measured
as the percentage of the city's median income being owed to
credit card companies. These cities include Los Angeles
(16.81%), Riverside (16.19%), San Diego (15.98%), and
Sacramento (15.11%). California also has one of the
nation's highest per capital bankruptcy rates, at 3.57% per
1000 people. The foreclosure rate in California is the
third worst in the nation, behind only Nevada and Arizona.
ASSEMBLY FLOOR : 75-0, 05/12/11
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani,
Beth Gaines, Galgiani, Gatto, Gordon, Grove, Hagman,
Halderman, Hall, Harkey, Hayashi, Roger Hern�ndez, Hill,
Huber, Hueso, Huffman, Jeffries, Jones, Knight, Lara,
Logue, Bonnie Lowenthal, Ma, Mansoor, Mendoza, Miller,
Mitchell, Monning, Morrell, Nestande, Nielsen, Norby,
Olsen, Pan, Perea, V. Manuel P�rez, Silva, Skinner,
Smyth, Solorio, Swanson, Valadao, Wagner, Wieckowski,
Williams, Yamada, John A. P�rez
NO VOTE RECORDED: Cedillo, Garrick, Gorell, Portantino,
Torres
CONTINUED
AB 597
Page
7
JJA:nl 8/29/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED