Governor Brown Submits Agency M&A Proposal

Article V, Section 6 of the California Constitution provides that the legislature may provide by statute for the Governor to “assign and reorganize functions among executive officers and agencies and their employees, other than elective officers and agencies administered by elective officers.”  Pursuant to this authority, Government Code Section 8523 provides for a 60 day review of gubernatorial reorganization plans by the Milton Marks “Little Hoover” Commission on California State Government Organization and Economy

Last week, Governor Brown started the clock ticking by submitting his proposal to replace five current state agencies with three.  The business and housing departments within the current Business, Transportation & Housing Agency would be shifted into a new Business and Consumer Services Agency which would also inherit the consumer services responsibilities of the current State & Consumer Services Agency

I previously served as the Deputy Secretary for Business Regulation and General Counsel to the BTH Agency.  The business regulatory responsibilities of the BTH Agency currently include the Departments of Alcoholic Beverage Control, Corporations, Financial Institutions and Real Estate.  Each of these departments is headed by a commissioner or director and is focused on business regulation.  In contrast, the State & Consumer Services Agency oversees through the Department of Consumer Affairs more than two dozen professional boards and bureaus – everything from the Board of Accountancy to the Board of Vocational Nursing and Psychiatric Technicians.  In my view, there is very little to be gained, and much that could be lost, by the marriage of these two very different agencies.

For those not familiar with the Little Hoover Commission, the Legislature created the commission in 1962 to promote efficiency, economy and improved service on the part of the government.  The Commission issues reports and recommendations.  For example, it issued this report last October on California’s rule making procedures.  

The Commission will receive public comments and hold hearings on the Governor’s reorganization proposal.  (You can obtain information about submitting comments or testifying here.)  The Commission is required to submit a report to the Legislature with its recommendations within 30 days. 

Interestingly, this process does not require the affirmative vote of the legislature for the plan to be effective.  If neither the Assembly nor Senate adopts by majority vote a resolution rejecting the Governor’s plan, the plan will take effect on the 61st day after it has been given to the legislature.

While this may seem as just a bureaucratic exercise, I believe that the reorganization will have, as M&A lawyers like to say, a material adverse effect on the business regulatory departments within the Business, Transportation & Housing Agency.  I encourage those with an interest in the work of these departments to review the Governor’s proposal and submit comments to the Little Hoover Commission.  Here is the Governor’s summary and the complete proposal.

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