Legislative Analyst's Office
Analysis of the 2003-04 Budget Bill
The Secretary of State (SOS), a constitutionally established office, has statutory responsibility for managing the filing of financial statements and corporate-related documents for the public record. The Secretary, as the chief elections officer, also administers and enforces election law and campaign disclosure requirements. In addition, the SOS appoints notaries public, registers auctioneers, and manages the state's archives.
The budget proposes total expenditures of $69.7 million for the SOS in 2003-04—a slight increase from the current year. Expenditures total $27.1 million from the General Fund, $32.9 million from the Business Fees Fund, and $8.8 million from reimbursements.
The budget proposes to augment the Secretary of State's budget by $200,000 to restore funding eliminated in the current year as part of the effort to eliminate vacant positions in state government. We recommend denying the request since no workload data have been provided. (Reduce Item 0890-001-0228 by $200,000.)
Vacant Positions Eliminated Consistent With Legislative Direction. As part of the statewide process to eliminate 6,000 vacant positions in the current year, the Department of Finance (DOF)—pursuant to Control Section 31.60—eliminated 24 positions and $1.3 million dollars from the SOS's budget. Of this amount, 19 positions and $1 million were associated with the Business Fees Fund. Pursuant to Control Section 31.70, DOF restored $510,000 to the SOS's budget in the Business Fees Fund (the maximum restoration allowable by the control section). According to DOF, the funding was restored because the positions are associated with a revenue-raising fund.
Request for Additional Augmentation. The Governor's budget maintains the $510,000 restoration in the budget year. Furthermore, the budget proposes an additional $200,000 increase.
No Justification for Additional Funding. The SOS has not provided any workload information supporting the need for the $200,000 augmentation. Moreover, it is unclear for what specific purpose the funding would be used. Consequently, we recommend denying the request for the $200,000 augmentation. Since any balance in the Business Fees Fund at the end of the year is transferred to the General Fund, this action would result in an equivalent benefit to the General Fund.
The Secretary of State proposes setting a filing fee on common interest development associations at $30. Since only minor increased costs have been identified, we recommend that the fee be set at $5 for the budget year through the adoption of budget bill language.
New Legislation Requires Increased Association Filings. There are estimated to be more than 30,000 common interest development (CID) associations (such as condominium associations) in California. Chapter 1117, Statutes of 2002 (AB 643, Lowenthal), requires all CID associations to biennially file basic information with the SOS's office (such as address and contact information). The intent of Chapter 1117 is to gain a better understanding of the type and number of CID associations in the state.
Fee Set at Maximum Level. To cover the Secretary's costs associated with the new filings, Chapter 1117 authorizes a filing fee to be charged to associations of up to $30. The SOS has chosen to impose the maximum $30 fee for the initial filings. At the $30 level, the fee is expected to generate $450,000 in 2003-04.
Minimal Costs Identified. While the SOS asserts that $30 is the incremental cost of processing one filing, the budget proposes only $61,000 in expenditures related to the filings. Specifically, the budget requests the funds for increased mailing costs and one position to maintain a database of filers' information. While the identified costs seem reasonable, the SOS has been unable to identify any other costs associated with Chapter 1117.
Recommend Reduced Fee. Since only $61,000 in new costs have been identified, we recommend that the Legislature, through budget bill language, limit the fee in 2003-04 to generate a comparable level of revenues. A fee of $5 would generate an estimated $75,000 and, therefore, provide the SOS with sufficient revenues to cover any other incidental costs above those already identified.