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Excessive Fees at Heart of Compliance Resolution Fund Problem

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By Lowell L. Kalapa

One of the measures that has garnered a lot of publicity in the closing days of the 2004 session is the measure that would have done away with what is known as the compliance resolution fund administered by the department of commerce and consumer affairs.
This is the fund into which all of the licensing and examination fees charged by that department are deposited. The proposal that was recently vetoed by the Governor would have repealed the fund and caused the proceeds from the licensing and examination fees to be deposited into the general fund. The bill would also have added a provision that mandated the director of the department to refund fees that generated more than 110% of the cost of the program it funded or to raise fees if the amount generated by the fees provides only 90% or less of the cost of the related program.
Scores of businesses and professionals showed up to oppose the bill as it made its way through the legislative process. Businesses cited how satisfied they were with the way the department is now being run because it was self-sufficient, being run like a “business.” At the administration level, the bill was characterized as “nothing more than a money grab” because it would have put about $31 million of surplus moneys in the fund back into the general fund as a way to balance the general fund budget.
Through all of this wrangling over the raiding of the money versus the efficiency of the department today, no one seemed to want to talk about the surplus of money in the compliance resolution fund. Think about that, a surplus in the fund that is the depository for all the licensing and examination fees of businesses and professionals who are subject to regulation by the department of commerce of consumer affairs.
A surplus in moneys generally occurs when revenues exceed expenditures in any operation. That means more money is being taken in by the operation than it costs to run the operation. And that is the egregious part about this whole situation, that the department of commerce and consumer affairs has been taking in more money than it needs to run the operation.
And it seems that businesses don’t care as one professional argued that they were getting “good” service like they have never had before. But now that the receipts from the fees were proposed to go back to the general fund, businesses were up in arms that the money would go into a big black hole in the general fund and the services would suffer. Never mind that the regulatory licensing and examination activities are a requirement of state law and the oversight is provided by public employees.
Businesses also seem to overlook the fact that the Finance Committee chair brought to light in one of his hearings, that the money was being used to purchase a new building for the department or that at a time when all other departments were banned from buying new equipment, the department of commerce and consumer affairs bought all new equipment to furnish their new offices.
Finally, businesses were upset that their fees would go to pay for something other than the regulatory oversight for which the department is responsible. Never mind that the compliance resolution fund was raided last year to the tune of $15 million and this year by another $10 million to shore up the state general fund. Where do those businesses think the $25 million was or will be spent?
As long as the compliance resolution fund remains a special fund, very little attention is given to assessing whether or not the fees are sufficient or more than sufficient to fund the operations of the various regulatory activities of the department. In fact, when lawmakers were asked when was the last time they looked at the appropriateness of the level of fees being charged, there was absolute silence in the hearing room.
With annual surpluses running in the thirty million dollar range, it is quite obvious that fees are too high. In fact, in the year after all the business registration fees were raised the state auditor discovered that a surplus of $14 million had been generated. Generating a surplus like this means businesses are being charged too much, they are literally being “ripped-off” and that added cost is being passed on to their customers.
While the veto of the bill has been sustained, businesses need to work with department officials in the interim to fashion a mechanism that will insure those fees never generate such generous surpluses again.

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