Existing law, the Contractors State License Law, provides for the licensure and regulation of contractors, including home improvement contractors, by the Contractors State License Board within the Department of Consumer Affairs. Existing law also provides for the registration and regulation of home improvement salespersons, who are employed by a licensed home improvement contractor, by the board.

Existing law requires the fees and civil penalties received under this law to be deposited in the Contractors License Fund, a continuously appropriated fund. Existing law authorizes the board to set fees by regulation and sets forth certain limitations on those fees. Existing law, in connection with a delinquent application for the renewal of registration of a home improvement salesperson, establishes a delinquent renewal penalty.

This bill would increase various fee limitations and would additionally provide that the application fee to add personnel to an existing license be no more than $150. The bill would also increase the delinquent renewal penalty described above. Because the increased and new fees would be deposited into the Contractors License Fund, a continuously appropriated fund, the bill would make an appropriation.

Existing law, on and after July 1, 2016, requires a board within the department to expedite, and authorizes the department to assist with, the initial licensure process for an applicant who supplied satisfactory evidence that he or she has served as an active duty member of the Armed Forces of the United States and was honorably discharged. Existing law also establishes a similar expedited licensure process for an applicant who holds a current license in another jurisdiction and has a specified relationship with such an active duty member who is assigned to a duty station in this state under official orders.

This bill would require the board to establish, by regulation, expedited processes for applications for licensure of contractors and registration of home improvement salespersons, including criteria for approval. The bill would exempt from these regulations an application that is required to be expedited pursuant to other law, including, but not limited to, the applications of those aforementioned applicants who have, among other things, served as an active duty member of the Armed Forces of the United States or have a specified relationship with such an active duty member.

ASSEMBLY THIRD READING

ATR Bill Id:AB 2286

Author:(Mullin)

As Introduced Ver:February 18, 2016

Majority vote

SUMMARY: Increases the fee cap for the Contractors State Licensing Board (CSLB) fee schedule, authorizes a fee for making changes to the personnel associated with a license, and provides the CSLB the authority to adopt regulations to provide for expedited processing of license applications. Specifically, this bill:

1. Increases the maximum fees the CSLB may set by regulation for:
   1. An application for an original license in a single classification from $300 to $360;
   2. An application for each additional classification, as specified, from $75 to $300;
   3. The application fee to replace a responsible managing officer, responsible managing manager, responsible managing member, or responsible managing employee, from $75 to $300;
   4. The initial license fee for an active and renewal for an inactive license from $180 to $220;
   5. The renewal of an active license from $360 to $430;
   6. The registration of a home improvement salesperson (HIS) from $75 to $90;
   7. The renewal of a HIS registration from $75 to $90;
   8. The application for an asbestos certification examination from $75 to $90;
   9. The application for a hazardous substance removal or remedial action certification examination from $75 to $90; and,
   10. The delinquency penalty for a HIS registration renewal application that is not postmarked or received by the registration's expiration from $25 to 50% of the renewal fee.
2. Specifies that the application fee for each additional classification applied for in connection with an original license to be limited to no more than $75.
3. Specifies that the application fee to add personnel, other than a qualifying individual, to an existing license is to be limited to no more than $150.
4. Requires the CSLB to establish by regulation, an expedited process for applications for registration as a HIS for applicants; authorizes the CSLB to establish by regulation the criteria for approval of this expedited process.
5. Exempts from these regulations an application that is required to be expedited pursuant to other law, including, but not limited to, the applications of applicants who have, among other things, served as an active duty member of the Armed Forces of the United States (AFUS) or have a specified relationship with such an active duty member.

FISCAL EFFECT: According to the Assembly Appropriations Committee, increasing the statutory caps on several fees for the CSLB will lead to:

1) An anticipated increase in fee revenue of approximately $12 million (Contractor License Fund) beginning in Fiscal Year (FY) 2017-18 and on-going, if the CSLB's fees are increased to the proposed statutory caps and include the new fees, and regulations are adopted, but would be less to the extent that some fees are increased to less than the proposed caps;

2) A one-time cost of approximately $3,500 for Information Technology costs associated with increasing the fees. The CSLB indicates these costs are minor and absorbable; and,

3) Minor and absorbable costs for adopting regulations.

COMMENTS:

Purpose. This bill increases the fee cap for the CSLB fee schedule, authorizes a fee for making changes to the personnel associated with a license, and provides authority to adopt regulations to provide for expedited processing of license applications.

This bill is sponsored by the CSLB. According to the author, "this proposal raises the statutory cap on CSLB's authorized fees. CSLB will need to adopt regulations to set actual fee amounts, and will continue to work with industry and interested parties through that process. If CSLB is able to obtain approval for a fee increase, [it] will be able to continuing working to provide online license application and renewal services, which will benefit all licensees. If CSLB is not able to implement a fee increase, [it] will have to reduce costs in Enforcement. These cuts will begin with cuts to [its] proactive enforcement program. Certain positions will be held vacant which will lead to backlogs in license application and complaint handling processing."

Background. The CSLB was established as a board within the Department of Consumer Affairs (DCA) and upholds its mission to protect consumers by regulating the construction industry through licensure, enforcement, and education. The CSLB regulates contractors in 43 license classifications and two certifications, which amounts to approximately 285,000 licensees.

The CSLB receives no General Fund support, relying solely on fees set by statute and collected from contractors and applicants. Renewal fees constitute the main source of revenue, and are collected every two years from contractors with active licenses. Active contractor licenses expire two years from the last day of the month in which the license was issued.

When a board or bureau under the DCA requests a fee increase, the Assembly Committee on Business and Professions (Committee) requests that the board or bureau complete its "Fee Questionnaire." The information provided on this questionnaire is the result of the board or bureau working with the DCA's Budget Office throughout the year. The Budget Office can help to prepare expenditure projections and fund conditions, as well as monitor these projections to manage and watch for imbalances. Expenditures that are projected to exceed revenues do not always indicate that a program is in need of a fee increase. The DCA works closely with each program that appears to have potential reserve shortages to understand the potential implications.

Fund Condition. According to the CSLB and its responses to the Committee's questionnaire, the CSLB will face a deficit of approximately $6 million by FY 2018-19. The most significant contribution to this deficit is increased costs in personal services, which includes salary, benefits, and retirements, the DCA Pro Rata, and Enforcement. In the current budget year, the CSLB is expected to spend approximately $61 million. Of that increased spending, $8.5 million, nearly half went to personal services. During that time period, the CLSB added four positions, which were approved through the annual budget process.

The amount the CSLB pays to the DCA recently increased by $2 million. A significant portion of that $2 million increase is due to DCA's new BreEZe system – a computer upgrade system that centralizes licensing and enforcement. While the CSLB was previously scheduled to be included in Release 3 of the BreEZe system, it is now not currently scheduled to be included.

The boards have no control over the Pro Rata charges regardless of the quality or quantity of services provided by the DCA. The DCA's pro rata calculations are based on position authority rather than the actual number of employees, which may ultimately inflate pro rata charges.

The CSLB also had increased enforcement costs of about $2 million, the majority of which were costs for the use of services by the Attorney General's (AG) Office and the Office of Administrative Hearings. This increase is in part due to reporting requirements of the AG's office as a result of SB 467 (Hill), Chapter 656, Statutes of 2015. This bill required the AG's office report on specific statistical information regarding accusation matters referred to the AG for each constituent entity within the DCA represented by the Licensing Section and Health Quality Enforcement Section of the Office of the AG, and additionally extended the operation of several boards within the DCA.

Veteran's Assistance Program. SB 1226 (Correa), Chapter 657, Statutes of 2014 required boards under the DCA, beginning July 1, 2016, to expedite the initial licensure process for veterans, and requires boards and bureaus to accept military experience towards licensure. This bill sought to assist veterans transitioning into civilian life by reducing licensure delays and making it easier to find work by giving them credit for the skills developed during their time in the military.

Related Prior Legislation. SB 1953 (Figueroa), Chapter 744, Statutes of 2002 increased the statutory limit for all fees for the CSLB. The CSLB promulgated regulations to implement this fee increase in 2011.

Analysis Prepared by: Gabby Nepomuceno / B. & P. / (916) 319-3301 FN: 0002769

Date of Hearing: April 20, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

ABPCA Bill Id:AB 2286

Author:(Mullin) – As Introduced Ver:February 18, 2016

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY: This bill increases the fee cap for the Contractors State Licensing Board (CSLB) fee schedule, authorizes a fee for making changes to the personnel associated with a license, and provides the CSLB the authority to adopt regulations to provide for expedited processing of applications for licensure. Specifically, this bill:

1. Increases the maximum fees the CSLB may set by regulation for:
   1. An application for an original license in a single classification from $300 to $360;
   2. An application for each additional classification, as specified, from $75 to $300;
   3. The application fee to replace a responsible managing officer, responsible managing manager, responsible managing member, or responsible managing employee, from $75 to $300.
   4. The initial license fee for an active and renewal for an inactive license from $180 to $220;
   5. The renewal of an active license from $360 to $430;
   6. The registration of a home improvement salesperson from $75 to $90;
   7. The renewal of a home improvement salesperson registration from $75 to $90;
   8. The application for an asbestos certification examination from $75 to $90;
   9. The application for a hazardous substance removal or remedial action certification examination from $75 to $90;
   10. The delinquency penalty for a home improvement salesperson registration renewal application that is not postmarked or received by the registration’s expiration from $25 to 50% of the renewal fee.

FISCAL EFFECT:

1. Anticipated increase in fee revenue of approximately $12 million (Contractor License Fund) beginning in FY 2017-18 and on-going, if the Board's fees are increased to the proposed statutory caps and include the new fees, and regulations are adopted. This amount would be less to the extent that some fees are increased to less than the proposed caps.
2. One-time cost of approximately $3,500 for IT costs associated with increasing the fees. The Board indicates these costs are minor and absorbable.
3. Minor and absorbable costs for adopting regulations.

COMMENTS:

1. Purpose. According to the author, “this proposal raises the statutory cap on CSLB’s authorized fees. CSLB will need to adopt regulations to set actual fee amounts, and will continue to work with industry and interested parties through that process. If CSLB is able to obtain approval for a fee increase, it will be able to continue working to provide online license application and renewal services, which will benefit all licensees. If CSLB is not able to implement a fee increase, it will have to reduce costs in Enforcement. These cuts will begin with cuts to its proactive enforcement program. Certain positions will be held vacant which will lead to backlogs in license application and complaint handling processing.”
2. Background. The CSLB, established in 1929, was designed to regulate the state’s construction industry and protect the public from irresponsible contractors. Now classified as a board within the DCA, the CSLB operates with a 15-member board and upholds its mission to protect consumers by regulating the construction industry through licensure, enforcement, and education. The CSLB regulates contractors in 43 license classifications and two certifications, which amounts to approximately 285,000 licensees.

The CSLB receives no General Fund support, relying solely on fees set by statute and collected from contractors and applicants. Renewal fees constitute the main source of revenue, and are collected every two years from contractors with active licenses. Active contractor licenses expire two years from the last day of the month in which the license was issued. Inactive licenses are valid for four years.

In FY 2012-13, the CSLB spent approximately $54 million, and in the current budget year is expected to spend approximately $61 million. According to the CSLB they will face a deficit of approximately $6 million by Fiscal Year (FY) 2018-19. 

1. Prior Legislation. SB 1953 (Figueroa) Chapter 744, Statutes of 2002, enacted the last statutory increase for all fees. The CSLB promulgated regulations to implement this fee increase in 2011.

Analysis Prepared by: Jennifer Swenson / APPR. / (916) 319-2081

Date of Hearing:

ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS

Rudy Salas, Chair

ABPCA Bill Id:AB 2286

Author:(Mullin) – As Introduced Ver:February 18, 2016

SUBJECT: Contractors: home improvement salespersons.

SUMMARY: This bill increases the fee cap for the Contractors State Licensing Board (CSLB) fee schedule, authorizes a fee for making changes to the personnel associated with a license, and provides the CSLB the authority to adopt regulations to provide for expedited processing of license applications.

EXISTING LAW:

1. Provides for the licensure and regulation of contractors by CSLB within the Department of Consumer Affairs (DCA) pursuant to the Contractors' Law. (Business and Professions Code (BPC) §7000 et seq.)
2. Requires all fees and civil penalties received under the Contractors Law to be deposited into the Contractors License Fund, which is continuously appropriated. (BPC §7135)
3. Allows the CSLB to set fees by regulation, not to exceed the statutory limitations on those fees for: (BPC §7137)
   1. An application for an original license in a single classification and any additional classifications;
   2. Replacing a responsible party, as specified;
   3. Scheduling or rescheduling an examination, as specified;
   4. Renewal of an active or inactive license or registration;
   5. Delinquent renewal applications;
   6. An application for an asbestos certification examination, hazardous substance removal or remedial action certification examination; and,
   7. Enforcing provisions in the Labor Code related to electrician certification.
4. Defines a “home improvement salesperson” (HIS) as a person employed by a home improvement contractor licensed under the Contractors’ Law to solicit, sell, negotiate, or execute contracts for home improvements, for the sale, installation or furnishing of home improvement goods or services, or of swimming pools, spas, or hot tubs, except as specified. (BPC §7152(a))
5. Provides that a person who wishes to practice as a HIS must register with the CSLB as a HIS unless exempted. (BPC §7152(b))
6. Provides that an application for renewal of registration is delinquent if the application is not postmarked by the date on which the registration would otherwise expire. (BPC §7153.3(b))
7. Provides that a registration may be renewed at any time within three years after its expiration, as specified, and the registrant must pay the renewal fee as well as additionally pay a delinquent renewal penalty in the amount of twenty-five dollars ($25). (BPC §7153.3(b))
8. The CSLB is statutorily required to maintain a balance that does not exceed six months in reserve of its annual authorized expenditures. (BPC §7138.1)
9. Requires a board within the DCA, on or before July 1, 2016, to expedite and assist the initial licensure process for an applicant who supplies satisfactory evidence that he or she has served as an active duty member of the Armed Forces of the United States (AFUS) and was honorably discharged. (BPC §115.4)
10. Provides a similar expedited licensure process for an applicant who holds a current license in another state in the same profession or vocation for which he or she seeks licensure and has a specified relationship with such an active duty member who is assigned to a duty station in this state under official orders. (BPC §115.5)
11. Provides that experience obtained in the Armed Services of the United States should be permitted to apply to the employment needs of the state. Provides for methods of evaluating education, training, and experience obtained in the armed services, if applicable to the requirements of the profession regulated. (BPC §35)

THIS BILL:

1. Increases the maximum fees the CSLB may set by regulation for:
   1. An application for an original license in a single classification from $300 to $360;
   2. An application for each additional classification, as specified, from $75 to $300;
   3. The application fee to replace a responsible managing officer, responsible managing manager, responsible managing member, or responsible managing employee, from $75 to $300.
   4. The initial license fee for an active and renewal for an inactive license from $180 to $220;
   5. The renewal of an active license from $360 to $430;
   6. The registration of a HIS from $75 to $90;
   7. The renewal of a HIS registration from $75 to $90;
   8. The application for an asbestos certification examination from $75 to $90;
   9. The application for a hazardous substance removal or remedial action certification examination from $75 to $90;
   10. The delinquency penalty for a HIS registration renewal application that is not postmarked or received by the registration’s expiration from $25 to 50% of the renewal fee.
2. Specifies that the application fee for each additional classification applied for in connection with an original license to be limited to no more than $75.
3. Specifies that the application fee to add personnel, other than a qualifying individual, to an existing license is to be limited to no more than $150.
4. Requires the CSLB to establish by regulation, an expedited process for applications for registration as a HIS for applicants; authorizes the CSLB to establish by regulation the criteria for approval of this expedited process.
5. Exempts from these regulations an application that is required to be expedited pursuant to other law, including, but not limited to, the applications of applicants who have, among other things, served as an active duty member of AFUS or have a specified relationship with such an active duty member.

FISCAL EFFECT: Unknown. This bill is keyed fiscal by the Legislative Counsel.

COMMENTS:

Purpose. This bill increases the fee cap for the CSLB fee schedule, authorizes a fee for making changes to the personnel associated with a license, and provides authority to adopt regulations to provide for expedited processing of license applications.

This bill is sponsored by the CSLB. According to the author, “this proposal raises the statutory cap on CSLB’s authorized fees. CSLB will need to adopt regulations to set actual fee amounts, and will continue to work with industry and interested parties through that process. If CSLB is able to obtain approval for a fee increase, [it] will be able to continuing working to provide online license application and renewal services, which will benefit all licensees. If CSLB is not able to implement a fee increase, [it] will have to reduce costs in Enforcement. These cuts will begin with cuts to [its] proactive enforcement program. Certain positions will be held vacant which will lead to backlogs in license application and complaint handling processing.”

Background. The CSLB was established in 1929 by the Legislature as the Contractors License Bureau, under the Department of Professional and Vocational Standards. It was designed to regulate the state’s construction industry and protect the public from irresponsible contractors. Now classified as a board within the DCA, the CSLB operates with a 15-member board and upholds its mission to protect consumers by regulating the construction industry through licensure, enforcement, and education. The CSLB regulates contractors in 43 license classifications and two certifications, which amounts to approximately 285,000 licensees.

The CSLB receives no General Fund support, relying solely on fees set by statute and collected from contractors and applicants. Renewal fees constitute the main source of revenue, and are collected every two years from contractors with active licenses. Active contractor licenses expire two years from the last day of the month in which the license was issued. Inactive licenses are valid for four years.

When a board or bureau under the DCA requests a fee increase, the Assembly Committee on Business and Professions (Committee) requests that the board or bureau complete its “Fee Questionnaire.” The information provided on this questionnaire is the result of the board or bureau working with the DCA’s Budget Office throughout the year. The Budget Office helps to prepare expenditure projections and fund conditions, as well as monitors these projections to manage and watch for imbalances. Expenditures that are projected to exceed revenues do not always indicate that a program is in need of a fee increase. The DCA works closely with each program that appears to have potential reserve shortages to understand the potential implications.

Boards and bureaus have the option to have their fees audited by the DCA in addition to working with the Budget Office throughout the year. When a program faces a potential fund issue, the DCA helps evaluate the need for a fee increase based on current expenditure trends, and guides them through the available options and the fee audit process. The Budget Office also provides the necessary information to the fee auditors to help ensure there is a complete, effective, and defensible fee analysis.

According to the CSLB and its responses to the Committee’s questionnaire, the CSLB will face a deficit of approximately $6 million by Fiscal Year (FY) 2018-19.  The most significant contribution to this deficit is increased costs in personal services, payment, which includes salary, benefits, and retirements, into the DCA Pro Rata, and Enforcement.

In FY 2012-13, the CSLB spent approximately $54 million, and in the current budget year is expected to spend approximately $61 million.Of that increased spending, $8.5 million, nearly half went to personal services. During that time period, the CLSB added 4 positions, which were approved through the annual budget process.

The amount the CSLB pays to the DCA recently increased by $2 million. A significant portion of that $2 million increase is due to DCA’s new BreEZe system- a computer upgrade system that centralizes licensing and enforcement. While the CSLB was previously scheduled to be included in Release 3 of the BreEZe system, it is now not currently scheduled to be included. DCA intends to conduct a cost-benefit analysis for Release 3 boards after Release 2 is completed in 2016in response to a request for ongoing cost benefit analyses for the project in a 2015 report by the California State Auditor.

Despite the lack of a plan moving forward, Release 3 boards have already paid more than $4 million. These boards are projected to pay almost $14 million through Fiscal Year (FY) 2016–17. These same regulatory programs, including the CSLB, could be seeking fee increases in the next few fiscal years.

The boards have no control over the pro rata charges regardless of the quality or quantity of services provided by the DCA. Despite this, the executive officers are held responsible for managing their budgets as well as spearheading requests for fee increases. The DCA’s pro rata calculations are based on position authority rather than the actual number of employees, which may ultimately inflate pro rata charges. Seventy-one percent of the expenditures to the DCA is for administration provided by the DCA, while another 22% of the expenditures to the DCA goes toward BreEZe. The remaining seven percent paid to the DCA is for services that the CSLB also provides in-house, i.e. Division of Investigation, Public Affairs Office and Consumer and Communications Relations.

The CSLB also had increased enforcement costs of about $2 million, the majority of which were costs for the use of services by the Attorney’s General (AG)’s Office and the Office of Administrative Hearings. This increase is in part due to reporting requirements of the AG’s office as a result of SB 467 (Hill), Chapter 656, Statutes of 2015. This bill addressed extensions of some of DCA’s boards and additionally required the AG’s office report on specific statistical information regarding accusation matters referred to the AG for each constituent entity within the DCA represented by the Licensing Section and Health Quality Enforcement Section of the Office of the AG.

*Administration includes costs for executive staff, information technology, public affairs, board, administrative support, and fiscal services.

The CSLB faces potential backlogs in handling applications for personnel changes, primarily due to criminal background checks. The additional level of staff involvement for these applications is burdensome. As such, the CSLB proposes to add a fee for processing these applications, but currently has no statutory authority to charge the fee.

Fee Increase History (last 10 years). The last statutory increase for all fees was enacted with SB 1953 (Figueroa) Chapter 744, Statutes of 2002. The CSLB promulgated regulations to implement this fee increase in 2011.

SB 392 (Florez), Chapter 698, Statutes of 2010)authorized licensure for Limited Liability Companies (LLCs), and made related changes to BPC §7137 to include personnel associated with a LLC, but did not add or increase any fees.

Veteran’s Assistance Program. SB 1226 (Correa), Chapter 657, Statutes of 2015 required, beginning July 1, 2016, boards under the DCA to expedite the initial licensure process for veterans, and requires boards and bureaus to accept military experience towards licensure. This bill sought to assist veterans transitioning into civilian life by reducing licensure delays and making it easier to find work by giving them credit for the skills developed during their time in the military.

According to a letter from the CSLB to the Chairs of the Senate Committee on Business, Professions and Economic Development and the Assembly Committee on Business and Professions regarding the most recent Sunset Review in 2014, the CSLB offers a Veterans Application Assistance Program for troops transitioning from military service to civilian employment. In many cases, veterans possess transferable skills that help meet minimum experience and training requirements for licensure as a state contractor. This program offers priority services to veteran applicants by evaluating transferable military experience and training, as well as education.”

Additionally, veterans receive automatic application processing priority, direct telephone and email contact with CSLB staff, and verification of educational credit and military experience/training. Spouses and domestic partners of those on active duty in the AFUS also are provided with expedited licensure by CSLB pursuant to BPC §115.5.

Despite the existence of the evaluation program, the CSLB currently does not have a formal process to expedite applications. The CSLB receives numerous requests for this service.

ARGUMENT IN SUPPORT:

According to the CSLB, “CSLB needs a statutory fee increase in order to continue to fulfill its primary mission of consumer protection. CSLB is a special fund entity, funded entirely by the fees paid by its 285,000 licensees. If CSLB is not able to implement a fee increase, we will have to reduce costs in Enforcement, beginning with cuts to our proactive enforcement, and in holding positions vacant, which will lead to backlogs in license application processing and in complaint handling.”

POLICY ISSUE FOR CONSIDERATION:

The CSLB completed this Committee’s “Fee Questionnaire,” but did not conduct a fee audit with the DCA. It is unclear if the DCA’s fee audit would show a difference in need for the CSLB to raise its fees to the amounts delineated.

REGISTERED SUPPORT:

Contractors State License Board (sponsor)

REGISTERED OPPOSITION:

None on file.

Analysis Prepared by: Gabby Nepomuceno / B. & P. / (916) 319-3301