Analysis of the 2004-05 Budget Bill Legislative Analyst's Office February 2004

Secretary for Business, Transportation and Housing (0520)

The Secretary for Business, Transportation, and Housing oversees the following 14 departments that develop and maintain the state's transportation infrastructure, promote traffic safety, promote housing availability in the state, and regulate state-licensed financial institutions as well as managed health care:

Business and Regulatory Agencies

• Alcoholic Beverage Control
• Financial Institutions
• Corporations
• Real Estate
• Office of Real Estate Appraisers 
• Managed Health Care
• Office of Patient Advocate
• Stephen P. Teale Data Center

Transportation Agencies

• Transportation
• California Highway Patrol
• Motor Vehicles
• Office of Traffic Safety

Housing Agencies

• Housing and Community Development
• California Housing Finance Agency

Inherited Programs From Former Agency. The 2003-04 Budget Act eliminated the Technology, Trade, and Commerce Agency effective January 1, 2004. Some of the agency's programs, however, were maintained and transferred to other state entities. The Business, Transportation, and Housing Agency inherited the following programs:

• Infrastructure Bank—Provides loans to local governments for infrastructure projects. Loan repayments become available to finance future projects.
• Tourism Commission—Promotes travel in California through marketing and advertising campaigns, using funds from industry assessments.
• Small Business Loan Guarantee Program—Eleven nonprofit financial development corporations use a reserve fund to back bank loans to small businesses.
• Manufacturing Technology Program (MTP)—Two nonprofit organizations provide business consulting services to small manufacturers.
• Film Commission—Provides a one-stop shop for issuing film permits.

Budget. The budget requests $18 million and 59 positions for the Secretary's operations in 2004-05. This is $5.8 million, or 49 percent, higher than the current-year level, due mainly to the full-year costs of the inherited programs noted above. The Secretary's support includes $4.8 million from the General Fund, $1.3 million from the Motor Vehicle Account, and $4.9 million in reimbursements from the agency's constituent departments and the Employment Training Panel (for MTP).

General Fund Savings Possible From Film Activities

We recommend that the Film Commission use existing statutory authority to charge fees for its film permitting activities to cover its costs. This would provide General Fund savings of $0.8 million. We further recommend that the Legislature transfer the $1.1 million fund balance from the inactive Film California First program, for an additional one-time General Fund benefit. (Delete Item 0520-001-0001 and increase reimbursements by $832,000. Transfer $1,073,000 to the General Fund.)

Film Commission Has Statutory Authority to Charge Permit Fees. The Film Commission serves as a one-stop shop for issuing permits to crews filming on state property and more generally promotes the state to the film industry. Film projects currently do not pay fees to get permits. Rather, the General Fund pays the costs of permitting. The commission, however, has statutory authority to charge fees to cover the costs of filming on state property and state employee services. It is reasonable for film projects to pay for these permits as a basic cost of doing business. Therefore, we recommend that the Legislature require the Film Commission to charge fees to cover its costs. This would result in $832,000 in ongoing General Fund savings.

Transfer Funds From Inactive Film California First Program. Started in 2000-01, the Film California First program subsidized filming-related fees that movie and television production crews paid to the federal and local governments for on-site filming in California. Reimbursements covered costs such as public safety expenses and public property use fees. The program was discontinued in the current year and no funding is proposed for 2004-05. There is, however, $1.1 million in unspent General Fund dollars previously provided to the program.

In last year's Analysis (please see pages F-103 to F-104), we concluded the following:

• There was no rationale to favor this particular industry over others by subsidizing reasonable business expenses.
• The program was unlikely to affect filming location decisions since it covered only a small fraction of filming costs.

Given our review of the program, we recommend the Legislature approve the administration's proposal not to fund this program in 2004-05. Moreover, there is no reason for these idle funds to remain in the program's account. Therefore, we also recommend that the Legislature transfer the remaining $1.1 million back to the General Fund.