The Business, Consumer Services and Housing Agency (BCSH) debuted on July 1, 2013, as part of a broad reorganization of state government’s executive branch. It retained many of the functions of the State and Consumer Services Agency, while adding housing and business functions shed by other agencies. The agency oversees licensing, regulation and enforcement of professionals and businesses in the state.

Governor Jerry Brown’s broad reorganization of the executive branch, which kicked into high gear on July 1, 2013, had a profound effect on three agencies, many of whose entities are now ensconced at the Business, Consumer Services and Housing Agency (BCSH).

Anna Cabellero, who was secretary of the State and Consumer Services Agency, was named secretary of the new agency. She picked up the Department of Consumer Services from her old stomping grounds, as well as major housing and business from agencies that were also being retooled.   

The Agency oversees the following departments that license more than 3.3 million Californians in more than 250 different professions:

Business

Alcoholic Beverage Control (ABC)

The Department of Alcoholic Beverage Control licenses and regulates people and businesses engaged in the manufacture, importation, distribution and sale of alcoholic beverages. The department administers the provisions of the Alcoholic Beverage Control Act and maintains 24 field offices throughout the state. It investigates applications for licenses to sell alcoholic beverages and reports on the fitness of applicants and the suitability of premises where sales are to be conducted.

Board of Chiropractic Examiners (BCE)

The board protects the state’s consumers from fraudulent, negligent or incompetent chiropractic care.  It issues regulations and licenses, investigates possible insurance fraud and follows up on consumer complaints.

California Horse Racing Board (CHRB)

The board regulates horse racing and, betting at licensed race tracks (called pari-mutuel). It also, and licenses and supervises racing associations, horse owners, veterinarians, trainers, jockeys, grooms and others involved in the sport, and sets policies and regulations that govern the sport. CHRB The racing board also collects professional fees from granting licenses to the participants, and collects takes a portion of  theof the revenue from betting and admission fees at the tracks. The boardIt has a quasi-judicial function, hearing complaints into about misconduct, issuing rulings and imposing fines or other sanctions on those it finds guilty of violating its rules.

Department of Business Oversight (DBO)

The department was created in 2013 when the Department of Corporations (DOC) and the Department of Financial Institutions merged as part of a broad reorganization of state government’s executive branch. The DBO inherits the Department of Corporations’ oversight of the non-banking financial services industry in California, monitoring and regulating the offering and sales of securities, franchises and off-exchange commodities. It is responsible for the licensing of securities brokers and dealers, investment advisers and financial planners, and certain fiduciaries and lenders. The department also regulates “payday” check cashing firms and has the authority to suspend or revoke a license for a violation of the California Corporations Code. Despite its accomplishments, the DOC’s history was studded with examples of failed stewardship. It figured controversially in the savings and loan industry meltdown of the 1980s, the HMO scandals of the 1990s and the mortgage meltdown that began in 2008.

The DBO picked up the Department of Financial Institutions’ oversight of California’s state-chartered financial institutions, including community banks, credit unions and money transmitters. The department has the authority to close troubled financial institutions through merger or liquidation, a power it has exercised frequently since the 2008 financial downturn. The department also administers the Local Agency Security Program, which ensures that public deposits in California financial institutions that exceed the federal deposit insurance limit are secured by pledged assets.

Consumer Services

Department of Consumer Affairs
The Department of Consumer Affairs (DCA) regulates and licenses or certifies more than 2.5 million professionals in more than 250 categories—including auto mechanics, building contractors, cosmetologists, doctors and dentists—to ensure they meet minimum standards of competency. The department investigates complaints against those professionals and businesses and can impose fines or revoke licenses. The department also provides information and resources to educate the public about their rights as consumers.

Housing

Alfred E. Alquist Seismic Safety Commission

The commission was established in 1975 to investigate earthquakes, research quake-related issues, and recommend to the governor and Legislature policies and programs to reduce quake risk.  

Department of Fair Employment and Housing
The Department of Fair Employment and Housing (DFEH) is California’s civil rights agency, charged with investigating, mediating and prosecuting violations of employment, housing and public accommodation law as well as hate violence.

Department of Housing and Community Development (HCD)

The Department of Housing and Community Development was created to provide safe and affordable housing opportunities in California. . HCD primarily funds local governments and project-specific housing sponsors. It provides housing finance, economic development and community development programs; develops housing policy and advocates for an adequate housing supply; and develops building codes and regulates manufactured homes and mobile home parks. HCD also supports increasing the supply of housing, especially affordable housing, and works to improve the state’s housing conditions and the health and safety of its residents. The department is the lead entity for the distribution of the housing bonds, Propositions 46 and 1C.

A Guide for the Media (BTH website)

The Business, Consumer Services and Housing Agency is one of the state’s smallest agencies in terms of state funding for its budget. The agency’s departments receive a total of $1.48 billion from the state: $646.2 million from the General Fund; $745.9 million from Special Funds; and $92.4 billion from bond funds. The agency receives an addition $380.1 million from other sources.  

The largest recipient of funds is the Department of Consumer Affairs. It gets $576.6 million, followed by the Department of Housing and Community Development, $393.6 million, the Department of Business Oversight, $79.5 million, the Department of Alcoholic Beverage Control, $56.8 million, the Department of Fair Employment and Housing, $21.7 million, the Seismic Safety Commission, $3.2 million, the office of the agency secretary, $2.8 million, and the Alcoholic Beverage Control Appeals Board, $1 million.   

2013-14 Budget

Ballpark Estimate: No Violations

When Brian Stow was beaten senseless on March 31, 2011, in the Dodger Stadium parking lot, questions were raised about the job being done by state regulators to control the ongoing problems with drunken hooliganism there.

The Department of Alcoholic Beverage Control (ABC) hadn’t issued a citation for liquor law violations at the ballpark since 1999 and rarely visited the stadium. And it’s not that they aren’t welcome.  The ABC required the company holding the Dodgers’ two master alcohol licenses to give the agency four passes and free parking for every game.

Back in the ‘90s, when the O’Malley family and then Rupert Murdoch’s Fox Entertainment Group owned the team, the stadium’s vendor, Aramark, was cited three times for selling alcohol to underage fans and letting a customer buy more than the two-drink maximum per purchase. The first two violations resulted in fines of $3,000 and $6,000.

The third violation resulted in a 20-day suspension of alcohol sales, but the ABC waiting until the off-season to assess the penalty.

Angel Stadium, just south of Los Angeles, also hasn’t had a violation since 1992 and the downtown Staples Center arena managed to avoid running afoul of the agency since 2002. 

California Regulators Rarely Visit Dodger Stadium to Enforce Alcohol Rules (by Paul Pringle, Los Angeles Times)

Agency Chief Marin Resigns

Under fire for receiving thousands of dollars from pharmaceutical companies regulated by her agency, State and Consumer Services Agency Secretary Rosario Marin resigned in March 2009. The agency was the precursor to the Business, Consumer Services and Housing Agency.

Marin was paid for speaking engagements within months of her agency’s decision to reduce oversight of prescription drugs. Pfizer Inc. gave her $15,000 for a 2007 speech and Bristol-Myers Squibb paid $13,500. The former George W. Bush Treasury secretary said in her resignation speech, “I have always followed the spirit and the intent of the law,” but some thought that she might have ignored the letter of the law.

“I don't know how you could justify that,” said Assemblyman Hector De La Torre (D-South Gate), chairman of a legislative committee on accountability and oversight. “The conflict is so clear, in my mind.”

Marin was paid for a speech she gave to Pfizer employees in October 2007 about “the Hispanic experience in the United States.” The next year, one of Marin’s deputies appealed to state lawmakers to exempt drug manufacturers from a proposed program, E-Pedigree, that would electronically track prescription drugs to help combat the prevalence of counterfeit medicines and locate those that had been recalled. Meanwhile, lobbyists for the pharmaceutical industry lobbied the Board of Pharmacy, overseen by Marin’s agency, to drop or delay the tracking requirement because of its cost. The effort was joined by Marin’s aide. Board Chairman Bill Powers said, “The board was put under a lot of pressure by the agency.”

Weeks after the Schwarzenegger administration delayed the tracking program on October 16, 2008, Bristol-Myers Squib paid Marin for sharing her “inspiring story.”

A two-decade-old state law prohibits acceptance of speaking fees when they are directly related to the speaker’s work. The Fair Political Practices Commission eventually fined Marin $5,400 for the speeches but did not pursue criminal charges although commission Chairman Ross Johnson said, “It’s illegal and it’s wrong,”

Schwarzenegger Cabinet Member Resigns after Accepting Speaking Fees (by Michael Rothfeld, Los Angeles Times)

Former Secretary of State and Consumer Services Agency Pays Fine (by Steve Shadley, Capital Public Radio)

Should the State’s Business be Outsourced Overseas to Save Money?

In July 2011, a ship left Shanghai, China, with the last four giant steel modules to complete a new expanse of the San Francisco-Oakland Bay Bridge. American steelworkers weren’t happy that California was importing bridge decks made in China. They accused the state of sending  jobs overseas and settling for what they said was poor-quality Chinese steel.

The outsourcing was driven by Governor Arnold Schwarzenegger’s desire to trim California’s spending by seeking less expensive alternatives to domestic goods and services. That campaign directly affected the Department of General Services in its purchasing activities.

Fred Aguiar, agency director during the Schwarzenegger administration’s early years, had been tasked with reducing the state’s procurement bill by the new governor. In 2004, Schwarzenegger proposed saving the state up to $600 million per year by turning over many of the state’s spending decisions to a Canadian-owned company, CGI-AMS. One of the “strategic sourcing tools” that a news release from the governor’s office alluded to was expected to be more state contracts that use overseas workers.

Aguiar said that, all things being equal, the state would look for California sources for its goods and services. But Schwarzenegger spokesman Vince Sollitto said the governor wouldn’t hesitate to look overseas if the same quality could be had for less money. “At the end of the day, the governor’s focus is on the taxpayer,” Sollitto said.

In a year that saw a rise in such outsourcing and a backlash against it, Democrats in the Legislature sponsored three bills intended to prevent jobs from being sent abroad.  The chief measure would have prohibited the state from contracting with any company that planned to use foreign workers.  Schwarzenegger vetoed all three bills, calling such a ban a restriction of foreign trade that could hurt the economy and stymie entrepreneurship.

“Our focus should not be on erecting artificial barriers that that will thwart the spirit of our citizens and the businesses that will help our economy grow,” he said in his veto message.  The governor cited a study by the Public Policy Institute of California that concluded outsourcing  affected relatively few workers and that a ban could have unintended negative consequences, such as a slow-down of foreign investment in California.

“Now, the people’s tax dollars will continue to support jobs in India and Mexico,”  Assembly Speaker Fabian Nunez, D-Los Angeles, told media at the time.

The issue surfaced again in the gubernatorial race of 2010, when Republican candidate Meg Whitman came out in support of replacing thousands of state employees by privatizing state services and outsourcing, something which she had done in her tenure as chief executive of eBay.

When Jerry Brown triumphed over Whitman and took over the governor’s office, many expected the debate over outsourcing and offshoring would abate. But contrary to his critics’ ads, Brown doesn’t always side with state unions. In October 2011, Brown handed labor a legislative loss by rejecting a union-backed bill, AB 172, that would have forced the government to post privatized contracts of $5,000 or more on the Reporting Transparency in Government website.

Part of Brown’s rationale was that such contracts would be posted on the state’s “eProcurement” website and the state’s anticipated all-in-one finance-tracking program, FI$Cal, intended to make navigating outsource contracts easier, according to Brown’s veto message.  

Brown did, however, sign into law a union-sponsored bill, AB 740, that forces state agencies to drop private contracts that are found to be illegal or improperly wasteful and instead use state employees for that work.

Bridge Comes to San Francisco With a Made-in-China Label (by David Barboza, New York Times)

Governor Vetoes Bills on Job Outsourcing (by John M. Hubbell and Mark Martin, San Francisco Chronicle)

Is Schwarzenegger Outsourcing California? (by Anthony York, Political Pulse) (pdf)

Jerry Brown Vetoes Outsource Contract Reporting Measure  (by Jon Ortiz, Sacramento Bee)

New Law Closes Outsourcing Loophole (SEIU Union Update) (pdf)

The Rise of Outsourcing & Its Connection to Post-Industrial America (Modern America Wiki at New York University)

Services Offshoring: Background and Implications for California (John D. Haveman and Howard J. Shatz, Public Policy Institute of California) (pdf)

Outsourcing Is an Effective Way to Reduce State Costs

“They’ve produced a pretty impressive bridge for us,” Tony Anziano, a program manager at the California Department of Transportation, told The New York Times as he toured the state-owned Shanghai Zhenhua Heavy Industries Co. plant where the steel for the new Bay Bridge expanse was manufactured—a site carved out of orange groves expressly for the California project. California officials estimate the state saved at least $400 million by having so much of the work done in China.

“I don’t think the U.S. fabrication industry could put a project like this together,” Brian A. Petersen, project director for the American Bridge/Fluor Enterprises joint venture overseeing the contract, told The New York Times. “Most U.S. companies don’t have these types of warehouses, equipment or the cash flow. The Chinese load the ships, and it’s their ships that deliver to our piers.”

Such large and cheap capacity had a lot of appeal to companies and governments hungry for cost savings. Besides manufacturing, more and more information-related work was shipped overseas in the 2000s as high-speed imaging and communication technology made offshore work possible—especially in India—in software applications, data processing, accounting and customer service.

And California was hardly alone in seeking less expensive suppliers across the seas. In New York City alone, Chinese companies won contracts to help renovate the subway system, refurbish the Alexander Hamilton Bridge and build a new train platform near Yankee Stadium, according to The New York Times.

And as much as unions—and even patriotic citizens—have objected to such outsourcing,   the economic theory of comparative advantage supports the idea that international trade will, in the long run, make all parties better off. Developing countries improve their lot by providing something  “better” than industrialized nations,  such as quality work at a lower cost. Developed countries, the theory goes, will benefit because their workers can shift to jobs they do better.

Economists, including Jeffrey D. Sachs of Harvard and Paul Krugman of the Massachusetts Institute of Technology, say that low-wage plants making clothing and shoes for foreign markets are an essential first step toward modern prosperity in developing countries. When asked during a recent Harvard panel discussion whether there were too many sweatshops in such places, Sachs answered, “My concern is not that there are too many sweatshops but that there are too few.”

Americans benefit when countries trade, explains Charles K. Rowley, professor of economics at George Mason University. “You and I gain whenever a cheap Toyota car comes over here and lowers the price of autos,” he said. Those who criticize outsourcing as disloyal, he said, are trying to justify support for less competition in their industries.

A 2003 report by the McKinsey Global Institute concluded that global sourcing saves American companies an average of 58 cents for every dollar spent overseas, increasing productivity, profitability and competitiveness.

“Offshoring creates wealth for U.S. companies and consumers and therefore for the United States as a whole,” said the report. For every dollar that U.S. service providers spend offshoring, they purchase an additional 5 cents worth of U.S. goods and services, which in turn creates U.S. jobs. “Far from being bad for the United States, offshoring creates net additional value for the U.S. economy that did not exist before, a full 12-14 cents on every dollar offshored,” said the report.

Many state efforts to tamp overseas outsourcing are likely unconstitutional or violate trade agreements, said a 2004 legal analysis for the National Foundation for American Policy performed by Shannon Klinger and Lynn Sykes, attorneys with the Los Angeles law firm Alston & Bird. It concluded that state contract bans are legally suspect since states are not allowed to make their own trade or foreign policies.

Offshoring: Is it a Win-Win Game? (McKinsey Global Institute)

Bridge Comes to San Francisco With a Made-in-China Label (by David Barboza, New York Times)

In Principle, a Case for More ‘Sweatshops’ (by Allen R. Myerson, The New York Times)

Anti-Outsourcing Efforts Down but Not Out  (National Foundation for American Policy brief) (pdf)

Campaign Against Outsourcing: State Fails to Scrutinize Private Contracts (SEIU Local 1000)

Outsourcing Kills Jobs for Californians

The image of Chinese steelworkers building one of the state’s premier bridges (though somewhat less iconic than its neighboring Golden Gate) didn’t sit well with American unions.  They questioned the safety and quality of Chinese workmanship on such projects in the wake of China’s quality control problems with such things as tainted milk and poorly built schools.

The objections to the Bay Bridge contract fed on a decade of resentment over overseas outsourcing that many Americans blame for contributing to the country’s fall from   manufacturing greatness.

Not all California outsourcing is as obvious as having Chinese workers build bridge supports for shipment back to the Golden State. It can also take the form of  privatization as government looks for cheaper ways to do its job. California does not track in a public fashion where its contractors and subcontractors end up hiring their workers, nor does the federal government. But offshoring of white collar jobs of an administrative, accounting or clerical nature is not uncommon.

In a speech given during his 2004 presidential campaign, Democratic Senator John Kerry, declared, “When I am president, and with your help, we’re going to repeal every benefit, every loophole, every reward that entices any Benedict Arnold company or CEO to take the money and the jobs overseas and stick the American people with the bill.”

 By 2005, more than 80 anti-outsourcing websites had established themselves, most questioning the patriotism of companies and executives that hire employees or maintain facilities outside the United States. Over the course of the 2005-06 sessions, 190 bills were introduced in state legislatures to restrict or report on global sourcing, according the Economic Growth and American Jobs Coalition.

In California, Governor Schwarzenegger’s announcement that he was looking to outsource some state business to help trim the state’s budget—and his hiring of a Canadian firm to help the effort—ran up against the growing anti-outsourcing fervor.

While Schwarzenegger’s decision was meant to save the cash-strapped state millions, it will also cost Californians their jobs, Douglas Heller, executive director of the Foundation for Taxpayer and Consumer Rights, told the Pasadena Star News in 2004.

“Schwarzenegger has signed a contract with a company that specializes in sending local jobs overseas,” Heller said. “It completely contradicts the battle the governor has waged to keep jobs in California.”

Assembly Democrats passed a bill, AB 1829, sponsored by Assemblywoman Carol Liu, D-La Canada Flintridge, to ban state contractors from offshoring jobs, such as the contract California had with a company operating a call center in India for welfare and food stamp recipients. Schwarzenegger vetoed it.

After taking over the governor’s office in 2011, Jerry Brown did veto the outsource contract reporting bill backed by labor but signed into law a bill that forces state agencies to drop private contracts that are found to be illegal or improperly wasteful and instead use state employees for that work. The bill affects all outsourcing—domestic as well as overseas.

Service Employees International Union (SEIU) Local 1000, California’s largest state employee union representing 95,000 workers and a supporter of the bill, said in 2010 that independent studies show that much of the $34 billion in contract work given to contractors can be performed by state workers for less cost. 

“We need every state worker to be the eyes and ears of the union in the worksite to help identify wasteful contracting,” said Marie Harder, a Department of Public Health employee and a leader in Local 1000’s outsourcing fight.

Anti-outsourcing rhetoric cooled some as the decade progressed and globalization began to be seen as unstoppable and inevitable. The topic was touched on in several of the GOP debates throughout the primary season leading up to the 2012 election. But most Americans have gotten used to the idea that their iPads come from China and not a part of Apple’s sprawling Cupertino complex. They like the price tag, after all.

But the cost in jobs will continue to be tallied and debated.

According to a September 2011 study by the nonpartisan Economic Policy Institute, California saw 454,600 jobs displaced due to trade with China from 2001-10, about 2.74% of total state employment. The three hardest-hit congressional districts were in Silicon Valley.  

Calls to State Agencies Go Around the World (by Diane Lindquist, San Diego Union-Tribune)

Anti-Outsourcing Efforts Down but Not Out  (National Foundation for American Policy brief) (pdf)

Another Bad Bill: Legislature Bids to Ban Offshore Jobs (San Diego Union-Tribune editorial) 

Exporting the Law: A Legal Analysis of State and Federal Outsourcing Legislation (by Shannon Klinger and M. Lynn Sykes, National Foundation for American Policy) (pdf)

Outsourced Federal Jobs More Likely to Be Low-Wage (by Kathryn Anne Edwards, Economic Policy Institute)

Hired Firm out of Line With Governor’s Job Pledge (by Gary Scott, Pasadena Star-News) 

Growing U.S. Trade Deficit With China Cost 2.8 Million Jobs Between 2001 and 2010 (by Robert E. Scott, Economic Policy Institute)

Jerry Brown Vetoes Outsource Contract Reporting Measure (by Jon Ortiz, Sacramento Bee)

Identify Outsourcing and Save Our Jobs (SEIU Union Update) (pdf)

Outsourcing California Government Jobs: What Responsibility Does the Government Have Towards Its Citizens? (by Anamarie Farr, Wellsley College) (pdf)

Bill Leonard, 2010-2011

Fred Aguiar, 2009-2010. Aguiar left his first stint as agency secretary to serve as the governor’s cabinet secretary until 2007, when Schwarzenegger appointed him to the state Unemployment Insurance Appeals Board.

Rosario Marin, 2006-2009. A former U.S. Treasurer, Marin resigned as agency secretary after a Los Angeles Times inquiry revealed she had been paid thousands of dollars in speaking fees from drug companies within months of her agency urging less oversight of prescription drugs. According to the Times, among the fees Marin took was $15,000 from Pfizer Inc. for a speech in 2007 as the company was lobbying the Board of Pharmacy, a regulatory panel Marin oversaw. Bristol-Myers Squibb paid $13,500 to hear Marin speak within weeks of lobbying the agency.

Marin said her speeches were inspirational, delivering a message of hope based on her rise from poverty in her native Mexico. She said she had reported her speaking activities to the governor’s office. But state law bars officials from accepting fees for speaking engagements in most situations.

“I don’t know how you could justify that,” Assemblyman Hector De La Torre, D-South Gate, chairman of a legislative committee on accountability and oversight, told the Los Angeles Times. “The conflict is so clear, in my mind.”

Before she resigned her $175,000-a-year position, Marin was under investigation by the California Fair Political Practices Commission (CFPPC) for her speaking fees, the Times reported. Marin later settled with the CFPPC, admitting to three ethics violations of state law and paying a fine that was reduced after the commission conceded that she had received bad legal advice from state attorneys.

Fred Aguiar, 2003-2005

Aileen Adams, 1999-2003

Joanne Corday Kozberg, 1993-1998

Sandra Smoley, 1992-1993

Bonnie Guiton Hill, 1991-1992

Shirley Chilton, 1982-1990

Alice Lytle, 1979-1982

Leonard Grimes, 1977-1978

Schwarzenegger Cabinet Member Resigns after Accepting Speaking Fees (by Michael Rothfeld, Los Angeles Times)

Ex-Member of Governor’s Cabinet Pays $5,400 in Ethics Fines (by Michael Rothfeld, Los Angeles Times)

Governor Replaces Disgraced Cabinet Member  (by Matthew Yi, San Francisco Chronicle)