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Out of Control Policy Blog Archives: 7.21.13–7.27.13

Occupational Licensing in California

Occupational licensing requires individuals to get government permission to work. Aside from being an overreach of government in the economic affairs of individuals, licensing requirements tend to be arbitrary, protectionist, and ultimately unnecessary. This is particularly true in California, which licenses millions of people in hundreds of occupations. Occupational licensing is just one of many hurdles that California legislators and regulators have thrown in the way of people trying to make a living. California goes to great lengths to assert this system of licensing to the point of arranging sting operations against unlicensed home improvement contractors and charging them with misdemeanors.

Reason Foundation published an article today that I wrote reviewing the mess that is occupational licensing in California.

The following is an excerpt illustrating how arbitrary and onerous California's policies of licensing are in comparison to the rest of the country:

A 2007 Reason Foundation study found grossly disparate numbers of occupations requiring government licenses, even among bordering states. California was found to require licenses for 177 occupations, far more than Arizona (72), Nevada (95), and Oregon (107). Of these, only 46 occupations require licenses in all four states. More than 100 of the 177 occupations California required licenses for in 2007 were licensed in fewer than half of all states. The average number of occupations licensed for all states in 2007 was 92, though states ranged from as little as 41 (Missouri) to California’s 177.

The Institute for Justice conducted a more recent review of occupational licensing in 2012, which reviewed 102 “low- and moderate-income occupations,” defined as occupations with incomes below the national average, and the nature of licensing in all 50 states and the District of Columbia. California licenses 62 of the 102 occupations reviewed by the Institute for Justice, and as “the second most broadly and onerously licensed state in the country” required an average of $300 in fees and 549 days of education and/or work experience to acquire a license.

For the full article, Occupational Licensing in California: Arbitrary, Protectionist, and Unneccesary, click here.

A 2007 Reason Foundation study found grossly disparate numbers of occupations requiring government licenses, even among bordering states. California was found to require licenses for 177 occupations, far more than Arizona (72), Nevada (95), and Oregon (107). Of these, only 46 occupations require licenses in all four states. More than 100 of the 177 occupations California required licenses for in 2007 were licensed in fewer than half of all states. The average number of occupations licensed for all states in 2007 was 92, though states ranged from as little as 41 (Missouri) to California’s 177.

The Institute for Justice conducted a more recent review of occupational licensing in 2012, which reviewed 102 “low- and moderate-income occupations,” defined as occupations with incomes below the national average, and the nature of licensing in all 50 states and the District of Columbia. California licenses 62 of the 102 occupations reviewed by the Institute for Justice, and as “the second most broadly and onerously licensed state in the country” required an average of $300 in fees and 549 days of education and/or work experience to acquire a license.

- See more at: http://reason.org/news/show/occupational-licensing-in-californi#sthash.TMqAbses.dpuf

A 2007 Reason Foundation study found grossly disparate numbers of occupations requiring government licenses, even among bordering states. California was found to require licenses for 177 occupations, far more than Arizona (72), Nevada (95), and Oregon (107). Of these, only 46 occupations require licenses in all four states. More than 100 of the 177 occupations California required licenses for in 2007 were licensed in fewer than half of all states. The average number of occupations licensed for all states in 2007 was 92, though states ranged from as little as 41 (Missouri) to California’s 177.

The Institute for Justice conducted a more recent review of occupational licensing in 2012, which reviewed 102 “low- and moderate-income occupations,” defined as occupations with incomes below the national average, and the nature of licensing in all 50 states and the District of Columbia. California licenses 62 of the 102 occupations reviewed by the Institute for Justice, and as “the second most broadly and onerously licensed state in the country” required an average of $300 in fees and 549 days of education and/or work experience to acquire a license.

- See more at: http://reason.org/news/show/occupational-licensing-in-californi#sthash.TMqAbses.dpuf

A 2007 Reason Foundation study found grossly disparate numbers of occupations requiring government licenses, even among bordering states. California was found to require licenses for 177 occupations, far more than Arizona (72), Nevada (95), and Oregon (107). Of these, only 46 occupations require licenses in all four states. More than 100 of the 177 occupations California required licenses for in 2007 were licensed in fewer than half of all states. The average number of occupations licensed for all states in 2007 was 92, though states ranged from as little as 41 (Missouri) to California’s 177.

The Institute for Justice conducted a more recent review of occupational licensing in 2012, which reviewed 102 “low- and moderate-income occupations,” defined as occupations with incomes below the national average, and the nature of licensing in all 50 states and the District of Columbia. California licenses 62 of the 102 occupations reviewed by the Institute for Justice, and as “the second most broadly and onerously licensed state in the country” required an average of $300 in fees and 549 days of education and/or work experience to acquire a license.

- See more at: http://reason.org/news/show/occupational-licensing-in-californi#sthash.TMqAbses.dpuf

A 2007 Reason Foundation study found grossly disparate numbers of occupations requiring government licenses, even among bordering states. California was found to require licenses for 177 occupations, far more than Arizona (72), Nevada (95), and Oregon (107). Of these, only 46 occupations require licenses in all four states. More than 100 of the 177 occupations California required licenses for in 2007 were licensed in fewer than half of all states. The average number of occupations licensed for all states in 2007 was 92, though states ranged from as little as 41 (Missouri) to California’s 177.

The Institute for Justice conducted a more recent review of occupational licensing in 2012, which reviewed 102 “low- and moderate-income occupations,” defined as occupations with incomes below the national average, and the nature of licensing in all 50 states and the District of Columbia. California licenses 62 of the 102 occupations reviewed by the Institute for Justice, and as “the second most broadly and onerously licensed state in the country” required an average of $300 in fees and 549 days of education and/or work experience to acquire a license.

- See more at: http://reason.org/news/show/occupational-licensing-in-californi#sthash.TMqAbses.dpuf

A 2007 Reason Foundation study found grossly disparate numbers of occupations requiring government licenses, even among bordering states. California was found to require licenses for 177 occupations, far more than Arizona (72), Nevada (95), and Oregon (107). Of these, only 46 occupations require licenses in all four states. More than 100 of the 177 occupations California required licenses for in 2007 were licensed in fewer than half of all states. The average number of occupations licensed for all states in 2007 was 92, though states ranged from as little as 41 (Missouri) to California’s 177.

The Institute for Justice conducted a more recent review of occupational licensing in 2012, which reviewed 102 “low- and moderate-income occupations,” defined as occupations with incomes below the national average, and the nature of licensing in all 50 states and the District of Columbia. California licenses 62 of the 102 occupations reviewed by the Institute for Justice, and as “the second most broadly and onerously licensed state in the country” required an average of $300 in fees and 549 days of education and/or work experience to acquire a license.

- See more at: http://reason.org/news/show/occupational-licensing-in-californi#sthash.TMqAbses.dpuf

A 2007 Reason Foundation study found grossly disparate numbers of occupations requiring government licenses, even among bordering states. California was found to require licenses for 177 occupations, far more than Arizona (72), Nevada (95), and Oregon (107). Of these, only 46 occupations require licenses in all four states. More than 100 of the 177 occupations California required licenses for in 2007 were licensed in fewer than half of all states. The average number of occupations licensed for all states in 2007 was 92, though states ranged from as little as 41 (Missouri) to California’s 177.

The Institute for Justice conducted a more recent review of occupational licensing in 2012, which reviewed 102 “low- and moderate-income occupations,” defined as occupations with incomes below the national average, and the nature of licensing in all 50 states and the District of Columbia. California licenses 62 of the 102 occupations reviewed by the Institute for Justice, and as “the second most broadly and onerously licensed state in the country” required an average of $300 in fees and 549 days of education and/or work experience to acquire a license.

- See more at: http://reason.org/news/show/occupational-licensing-in-californi#sthash.TMqAbses.dpuf
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California Doesn't Need The Board of Occupational Therapy

Occupational therapists (OTs) and occupational therapy assistants (OTAs) help clients develop, maintain, and recover skills necessary for daily living or for particular purposes. From helping elderly clients achieve independence to assisting individuals recovering from an injury work on skills necessary for getting back on the workforce. With thousands of occupational OTs and OTAs, all 50 states have decided that some form of regulation was in order, with a particular emphasis on forcing aspiring OTs and OTAs to acquire state-issued licensed.

In California, over 4,000 OTs and over 700 OTAs are currently licensed by the California Board of Occupational Therapy (BOT). OTs and OTAs must submit fingerprints, meet education and work requirements, agree to submit to continuing education requirements, and apply for license renewal every two years. Applicants must be certified by the National Board for Certification in Occupational Therapy (NBCOT), a private organization nationally with a nationally recognized certification program. More on that later.

Prior to the creation of the BOT through Senate Bill 1046 in 2000, California utilized a title protection law, which made it a crime to call oneself an OT unless they were certified by the (now called) NBCOT. Arguments in support of regulation, made by the Occupation Therapy Association of California (OTAC), included claims that laws at the time did "not provide sufficient protection or effective recourse for consumers against uncertified therapists." Other claims made by proponents included the idea that licensure offers unique protection against "unqualified individuals from providing occupational therapy services." Naturally, there wasn't any particular evidence in support of these claims. As recently as March 2013, the sole justification for the BOTs existence provided for a background paper for state legislators was: "The health and safety of consumers is protected by well-regulated professions. The Board is charged with protecting the consumer from unprofessional and unsafe licensees."

The BOT’s 2012 sunset review report provides little information about whether or not it is fulfilling its mission; it does note that it issued 173 fines in FY 2011-2012.  The top three reasons for citations were (in order): “failure to report a change of mailing address within 30 days,” “practicing with an expired licensed or with an inactive license,” or violations pertaining to the required continuing education mandated by the BOT. In other words, violations that don’t relate to quality of work, competence, or professional conduct. The BOT also maintains a public list of licensees and other individuals "on probation." The list primarily consists of individuals who either committed offenses unrelated to their occupation or who were working without a license. Given this information, it doesn't seem that the health and safety of consumers is protected uniquely by licensing requirements and enforcement activities of the BOT.

Colorado has long resisted licensing and regulating the occupational therapy field, and research going back to the 1980s has repeatedly demonstrated that it isn’t necessary. Colorado has had a title protection law since 1996, which prevented individuals from calling themselves "occupational therapists," "certified occupational therapists," and related titles, unless they had met certain educational and certification requirements. Former state legislator Jerry Kopel wrote in 2008 that despite this, there exist many individuals in Colorado who work as OTs without calling themselves OTs. Despite this, there doesn't seem to be much of a problem. From 1987 to 2006, the NBCOT had only received 29 complaints related to occupational therapists in Colorado; and only in two cases was there any resulting disciplinary action by the private organization.

The Department of Regulatory Agencies (DORA), which conducts sunset reviews on regulatory policies in Colorado, has repeatedly argued against regulation. In 2006, DORA was charged with reviewing whether or not regulation of OTs or OTAs was justified. DORA began on the premise that "regulation is justified only when the public is being harmed." Reviewing the previously mentioned NBCOT data that indicated there was no pressing public safety interest in regulating the industry, the DORA reported, "regulation is a poor vehicle by which to address unethical business practices or fraud."

Despite this, the Colorado legislature enacted the Occupational Therapy Practice Act (OTPA) of 2008, requiring the registration of occupational therapists. Less onerous than licensing, the registration requirement in Colorado requires occupational therapists (and not occupational therapy assistants) to prove that they have completed an educational program for occupational therapy, are accredited, and have six months of supervised field experience.

Operating under the same justification of California’s BOT, of protecting consumers, the registration requirements were reviewed by DORA in 2012. The sunset committee concluded, “there is no evidence that the public was being harmed before the OTPA was enacted,” and observed no changes in the three years that the OTPA was in place. As a result, DORA recommended the repeal of the OTPA on the grounds that it was never necessary.

Also in 2012, the Michigan Office of Regulatory Reinvention reviewed all occupational boards in the state. It recommended the abolition of the state Board of Occupational Therapy, on the grounds that credentialing by the private NBCOT “provides sufficient qualifications to employers.” If only this thought occurred to California legislators and regulators. This is a point often lost in the development of occupational licensing requirements. Given the litany of private organizations that offer certification to individuals in virtually any profession, and considering that state licensing requirements bestow no particular contributions to quality, an absence of state licensure does not mean that quality control is lost. Consumers and employers now have a number of tools available to them, from the Better Business Bureau to Angie’s List, which, coupled with private certification, give both far more meaningful information about a service provider than unnecessary state licenses.

Given that California’s primary problems with OTs and OTAs have been unrelated to their actual practice, California’s licensure requirements revolve around standards set by a nationally recognized credentialing organization, and that nearby Colorado has long found even minimal regulation to be unnecessary, California should reconsider its practice of licensing OTs and OTAs. Further, sunset reviews shouldn’t be focused entirely on streamlining and improving the efficacy of regulations, but instead should focus on whether or not the regulations are necessary in the first place.

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California's Latest "Blitz" Against Unlicensed Contractors

On Friday, July 19th, the California Contractors State Licensing Board (CSLB) announced it had completed a “summer blitz” sting operation against 79 unlicensed contractors in six California cities. The contractors were arrested and issued Notices to Appear (NTA) in court to potentially face misdemeanor charges of unlicensed contracting, which could result in up to six months in jail and/or a fine of $5000.

A press release put out by the CSLB indicates that the majority of the “phony contractors” were busted after CSLB investigators contacted them in response to advertisements for contracting work on Craigslist. Those who were busted through Craigslist often face charges of "illegal advertising" as well. Sting operations against those willing to work but unable or unwilling to comply with onerous and excessive licensing requirements has become a pastime of the CSLB, which sustains itself with a $60 million annual budget predicated on various fees and fines it issues in exchange for government permission to work or punishment to those who fail to comply.

The CSLB’s Statewide Investigative Fraud Team (SWIFT) conducted the July 17-18th operation by posing as “homeowners seeking bids for home improvement projects, including painting, electrical, landscaping, flooring, tile, concrete, ornamental metal, fencing, and tree removal work.”

 The CSLB notes in the press release various examples of the people they’ve busted:

  •  “One suspect brought two employees and supplies with him, expecting to get the job and start right away. As the employees started to unload their tools, the boss received his NTA.”

  • "A suspect asked investigators not to give him an NTA because it would violate his parole. He received an NTA.”

  • “Oxnard Code Enforcement issued 15 citations to suspects who didn’t have a city business license. Redding (July 17 only)”
  • “At least one suspect is a repeat offender and could face a mandatory 90-day jail sentence if convicted a second time.”

The CSLB, which licenses approximately 300,000 contractors in over 40 different specialties ranging from electrical work to tree trimming, routinely conducts large-scale sting operations and produces videos on its Youtube channel featuring the sting operations. The sting operation press releases often make a point of mentioning whether or not any of those busted have been convicted of a felony in the past; one convicted felon was among the 79 busted in the latest "blitz." Of course, the majority of those arrested in CSLB sting operations aren't arrested for harming consumers, or for what they'd done in the past, but instead for being willing to work and following up on (set-up) customer inquiries.

In California, it is against the law to work as a contractor without a license on projects worth more than $500.  Aspiring tree trimming, landscaping, or concrete laying contractors must submit fingerprints, take licensing exams, and have four years of work and education experience in order to become a contractor. According to the Institute for Justice, California licenses 18 medium- to low-wage contracting jobs that many, if not most, states don’t bother to regulate. Not too surprising from a state that once considered licensing dog groomers.

California legislators and regulators should ask themselves: Do we really need to be using the force of the state and resources of law enforcement to regulate who can perform home improvement projects? Even accepting the notion that government intervention is justified when public and consumer safety is at risk, it is a stretch to argue that consumers can't make simple home improvement contracting decisions for themselves. Even less sensible is the idea that government should be purposely arranging sting operations to bust people willing to take on such work.

For more on occupational licensing, check out Adam Summers' 2007 report on the state of licensing across the country.

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California Legislators Trying Really Hard To Raise Taxes

They don’t call it Taxifornia for nothing. California is a national leader in overall tax burden on individuals and businesses. A 7.5% statewide sales tax, a 39-cent-per-gallon gasoline tax, some of the highest income taxes in the country, and a litany of other local, county, and state claims to California denizens’ money, apparently aren’t enough for several state legislators. A number of constitutional amendments have been proposed to reduce the current two-thirds-of-voters requirement necessary for local government to raise taxes and incur bond indebtedness to 55%.  These bills represent just the latest effort by California legislators to undo the “taxpayer revolt” put in motion by Proposition 13.

In 1978 California voters approved Proposition 13, which requires a two-thirds vote threshold in each house of the legislature for a state tax increase, and requires the same threshold of voter approval for local special taxes. Most significantly, though, is Proposition 13’s limit on property taxes. Proposition 13 limited property taxes to 1% of the “full cash value” of the property. Local governments have subsequently generated parcel taxes; or taxes variously based not on the value of the property, but either on the size of the property or just a flat tax on property regardless of its size. Proposition 39 passed in 2000 reduced the two-thirds requirement to 55% for local school districts to pass bond measures to fund education projects (also known as taking on debt). Bonds represent yet another means of getting around the 1% property tax limit; “General Obligation” bonds allow for property tax rates above 1% in order to pay for the bonds. In other words, a reduced bond threshold also thereby reduces the threshold for raising property taxes.

California governments have generally had little problem increasing taxes and fees on Californians, while managing to get themselves hundreds of billions of dollars in debt (including  “unfunded liabilities”). But apparently local governments need more money, and want to make it easier to do so. State Senators Carol Liu (D-La Canada Flintridge), Ellen Wolk (D-Davis), Ellen Corbett (D-East Bay), and Loni Hancock  (D-Oakland) have proposed Senate Constitutional Amendments (SCA's), aimed at lowering the threshold necessary for tax increases and bond purchasing from the current 2/3 rate for special taxes to 55%. Special taxes are taxes that are meant to go to specific projects.

A summary of the Amendments:

  • SCA 4 (Liu): allows local agencies to levy, extend, or increase special taxes at 55% vote for local transportation projects (passed Senate Committee on Governance and Finance)
  • SCA 7 (Wolk): Lowers the vote threshold from   two-thirds to 55 percent for cities, counties, or library districts to issue bonds (e.g. take on debt) or to levy special taxes (passed Senate Committee on Governance and Finance and Committee on Elections and Constitutional Amendments)
  • SCA 8 (Corbett): reduces the voter threshold from two-thirds to 55 percent for passage of local sales taxes dedicated to transportation purposes. (A scheduled July 9th hearing was canceled by the author of the bill, for unspecified reasons; passed Senate Committee on Governance and Finance)
  • SCA 9 (Corbett): allows local agencies to levy, extend, or increase special taxes at 55% vote for community and economic development projects (passed Senate Committee on Governance and Finance and Committee on Elections and Constitutional Amendments)
  • SCA 11: allows local agencies to levy, extend, or increase special taxes at 55% for any purpose (passed Senate Committee on Governance and Finance and Committee on Elections and Constitutional Amendments)

Another, SCA 3 proposed by Senator Mark Leno (D-San Francisco), was amended to remove language that would allow local education agencies to levy parcel taxes at a 55% threshold. SCA 3 was subsequently morphed into a bill to guarantee a right of the public to obtain government documents; following a failed effort by the State Senate to make public records compliance for local governments “optional” in a budget trailer bill revised after media scrutiny.

Most notable of all, though, is Assembly Constitutional Amendment 8, proposed by Assemblymember Bob Blumenfield (D-San Fernando Valley). ACA 8, if passed, would allow local government to reduce the voting threshold from two-thirds to 55% to pass bond measures for various infrastructure projects as General Obligation bonds. Given that General Obligation bonds result in higher property taxes, ACA 8 would make it easier for local governments to raise taxes. According to the Howard Jarvis Taxpayer Association, ACA 8 is a “direct assault on Prop 13” and would ultimately enable local government to incur significant debt at the expense of taxpayers, especially property owners.

What makes ACA 8 most notable though, is how it was passed. Without public hearings or debate, it was scheduled for a vote just before the California Assembly went on summer break. It passed 54-25. ACA 8 is now awaiting Senate action.

The Senate bills, referred to by the California Chamber of Commerce as “job killers,” still await public hearings. With state and local governments in California spending a combined $400 billion a year, and a political culture seemingly predicted on the notion that government can and should do more, it remains to be seen whether or not California voters will be able to defend themselves from higher tax burdens this time.

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Baltimore Local Hiring Law Will Hurt Locals

In a misguided effort to reduce unemployment, cities around the country are legislating local hiring mandates. Baltimore's city council recently passed a law mandating that companies awarded city contracts of $300,000 or more, or any project that receives at least $5 million in city funding, must ensure that at least 51% of the new hires required to fulfill the contract are Baltimore city residents. This law creates a costly hurdle for businesses to leap and will likely have no effect on the city's 10% unemployment rate.        

Since the bill specifically targets the new hiring necessary to fulfill a contract, it discourages companies from taking on new workers. Contractors will be incentivized to get the work done with their existing workforce rather than jump through the local hiring hoops created by the bill. This will have the opposite effect of what the council intended and will harm residents. Consider the case of hiring two workers for a project: under the new law both would have to be local since 1 out of 2 does not meet the 51% threshold. Marginal increases in a contractor's workforce such as this will be especially difficult since there is no flexibility. A contractor may decide it is better to simply pay overtime to their existing employees rather than engage in a costly search of local workers capable of doing the job.           

And let's not forget about non-city workers. Baltimore's superficial attempt to lower the city unemployment rate directly deprives non-Baltimore residents of jobs. Discriminating against workers based on their address is neither a fair nor an efficient hiring practice.

Even worse for Baltimore taxpayers, complying with the bill will be costly for contractors and much of this cost will likely be passed on to taxpayers in the form of higher bids. Searching for the skilled workers needed for many of the construction jobs in a shrunken labor pool decreases the chance of finding the best worker for the job. This means lower quality work for the residents of Baltimore at a higher cost, since the workers hired may need costly training or be error prone if required to learn on the job.

Passed in June, the bill will not take effect until November in order to give the mayor's office time to prepare for enforcement. This gives the business community time to challenge the bill in court, where other similar bills have been struck down. The Baltimore city council approves approximately 10 contracts every week that total $300,000 or more. That is a lot of contracts that will be impacted if the local hiring bill goes into effect.

Forcing contractors to hire six local workers for every 10 new employees is a costly regulation that will not ease Baltimore's employment problem. The arbitrary cutoff of 51% puts contractors in a difficult situation, especially when hiring at the margin. This bill will lead to less hiring of local workers and higher costs for taxpayers while unfairly discriminating against non-city workers. If the city council cares about their constituents they will scrap this bill, which is nothing but window dressing, and instead take steps to create a better overall business environment in Baltimore.

 

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