Financial Literacy Letter
MCR Public Affairs & Advocacy
37 Derow Court , Sacramento
Assemblyman Eng
California State Senate Banking and Finance Committee 6/29/11
State Capitol
Sacramento, CA 95814
RE: Opposition To AB 597 – as amended 6/27/11
NOTE: This Letter Is Submitted On Behalf Of:
The California Alliance For Consumer Protection (CACP)
and www.TheCaliforniaIndex.Org
Dear Assemblyman Eng;
I am writing today on behalf of the California Alliance For Consumer Protection (CACP) and www.TheCaliforniaIndex.org, (TCI) with respect to Assembly Bill 597 & their opposition to your AB 597 – as amended 6/27//11.
As I have pointed out before, the California Alliance For Consumer Protection (CACP) has supported measures like this, and would like to thank you for your recent amendments that make the bill more effective for consumers. Even with those amendments, the CACP and www.TheCaliforniaIndex.org (TCI) are still opposed to your AB 597 – as amended.
Since this bill is before the Senate Budget Committee, my arguments in opposition will will be relative to committee jurisdiction.
To start, we believe that the program will cost the state more than 100,000 a year, even if the money is donated. Our figures are as follows:
1) WHEN DOES THIS PROGRAM START? AB 597 states that the Controller may raise money and put together a committee, but it doesn’t say when the meetings will actually start. At what point in time does something – anything - occur? When $250,000 is raised? When $500,000 is raised? When $1,000,000 is raised?
2) ARE THE UNLIMITED, UNDEFINED CONTRIBUTIONS TO THIS COMMITTEE REPORTABLE (TO THE FPPC) OR TAX DEDUCTIBLE (AS A BUSINESS EXPENSE)? This measure does not clarify wither these donations are political or tax deductible donations (as a business expense). Additionally, it doesn’t say what will happen if the donation is large (by a corporation), or small (by an individual donor). This needs to be clarified before this measure is enacted by the Legislature, not the committee. For example, if the donation is considered political, what are the reporting requirements? Additionally, if they are political, are there contribution limits? If they are considered business expenses, what impact will that have on our budget, especially when donations of $25,000 or more are expected” (colloquial thinking is this: a business is not going to support this fund and committee if they don’t get something in return – and quite often the best thing for the business is that the donation either gets publicity, helps someone who they can then expect help from in the future or is tax deductible, often as a business expense like advertising).
3) FINANCIAL COSTS: AB 597 will cost California as follows:
a. If improperly done, AB 597 will not help our economic future. The cost here is tremendous and way over the $50,000 established by each house – what is at stake here is California’s financial future – and we can’t put a price tag on that.
b. Tax implications – as outlined above, AB 597 fails to address the concept of wither the donations to this committee are political donations or business expenses. This is important because if the committee/fund receives $125,000 in donations, how are they going to be treated? This should be stated specifically in the legislation.
In an effort to correct these problems and eliminate our opposition, we suggest that the following amendments be adopted:
a) Section 70001 should be amended to include the following language:
a. Section 70001 (c) The fund’s goal is:
i. To finance the establishment of a state oriented financial literacy policy and programs that will educate the state’s consumers about the benefits of supporting California business, while highlighting the financial products and services that are produced and sold in California;
ii. To educate Californians about what it means to be financially literate; and
iii. To develop a series of financial literacy policies that teaches and educates Californians about financial issues and their impact on California.
b) Current section 70001(c) should now become 70001 (d).
c) Section 70003, Line 24: the word MAY should be changed to SHALL.
d) Section 70004 should be created to include the following:
a. “These strategies include, but are not limited to”
i. Understanding public and private pensions
ii. Understanding how the credit system works, including how to read, correct & enhance credit scores.
iii. Understanding the Banking System, and the importance of having a bank account
iv. Understanding the importance of investing in California based investment products, including Publically Traded Securities
v. The committee shall start operations either when $1,000,000 (one million dollars) is raised or Jan. 1, 2014, whichever occurs first.
vi. Page 2, Line 26, Delete the word “if” and insert “when”
e) Section 70005 shall be created and inserted to include the following language:
a. 70005: All donations shall not exceed $25,000 (twenty five thousand dollars)
b. 70005: All financial and in kind donations made by a donor to this committee are tax deductible as a business expense.
f) Current section 70004 should be renumbered to become 70006.
In closing, we look forward to working with you as this measure makes its way through the legislative process.
Sincerely,
Michael Ross, Legislative Advocate
