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Will Demoting the DFI, DOC and DRE Matter?

The Governor's Reorganization Plan would demote the Department of Corporations and the Department of Financial Institutions to the status of divisions within the new Department of Business Oversight.  The new DBO would report to a new Business and Consumer Services Agency.  The Department of Real Estate will be downgraded to a bureau and join numerous other bureaus, boards and commissions with a new Department of Consumer Affairs, which will also be subordinate to the new Business and Consumer Services Agency.  See "The Department of Real Estate And The Naturopathic Medicine Committee – Separated At Birth?"  Consequently, there will be two levels of oversight (instead of the current one) between each of these departments and the Governor.

Also, new titles will be assigned to the heads of the DOC and DFI.  For example, instead of a Commissioner of Corporations, there would be a Deputy Commissioner of Business Oversight for the Division of Corporations (See Sections 40 & 41 of the Reorganization Plan).   Not only is that a mouthful, it clearly communicates a diminution in status.  As George McGovern once said "The longer the title, the less important the job".

Will this make a difference?  I think it will.  For licensees speaking with a Deputy Commissioner of a division who reports to a Commissioner won't be the same as speaking to a Commissioner.  Over the years, California has had a long tradition of eminent heads of both departments, such as California's first DOC Commissioner, Herschel L. Carnahan, who later became Lt. Governor.  More recently, the Conference of State Bank Supervisors selected then DFI Commissioner Bill Haraf to serve on the Financial Stability Oversight Council (FSOC) established by the Dodd-Frank Act and the North American Securities Administrators Association elected then DOC Commissioner Preston DuFauchard to serve as its president (See "From DFI to CSBS to FSOC" and "Kudos for California's Commissioner Commissioner of Corporations").

Some may be wondering why the Governor has not proposed demoting the Department of Alcoholic Beverage Control, which is also currently located within the Business, Transportation & Housing Agency.  The reason, I suspect, is that the California Constitution (Art. XX, § 22) specifically provides for a Department of Alcoholic Beverage Control and Government Code Section 12080.4 prohibits any reorganization plan from abolishing any agency created by the constitution.

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Correction:  Last week, I wrote that the deadline for submitting comments to the Little Hoover Commission was April 16.  However, I'm told that this was only the deadline for submissions by scheduled speakers.  So, the good news is that there is still time to weigh in on the reorganization plan.  Here is the link.

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30172DBAB0084D3A8F39D7AF0A8E79BC.ashx Keith Paul Bishop
Partner at Allen Matkins
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