Backlog of CA business filings may get relief

March 19, 2013

By Katy Grimes

DebraBowen_CleanUpPoliticsSACRAMENTO — Operating more like the Dewey Decimal System, the California Secretary of State’s Office has been under a great deal of scrutiny lately for its historic backlog in processing business filings. And for good cause.

The recent reports of up to an 122-day backlog is not news to anyone in the private sector. This has only been a surprise to state lawmakers.

As an emergency stopgap measure, the Assembly voted Monday to immediately give $2 million to Secretary of State Debra Bowen. The funds are to be used to pay overtime for existing staff members and hire some temporary workers, with the goal of speeding up processing of permits to five days.

Slowing businesses from starting up

It may be only a quick fix, but some say it’s a very important quick fix. This prompted Assembly Speaker John Perez to fast-track AB 113. The bill “appropriates $2 million of business filing fees to the Secretary of State only to be used for overtime pay and temporary staffing to reduce business filing processing times by amending the 2012-13 Budget Act.”

The bill also requires the secretary of state to report monthly progress to the Joint Legislative Budget Committee.

Reports vary on exactly how many days business filings are backlogged.

The analysis of AB 113 says the standard is 20 days to process business filings. A Sacramento Bee report cited evidence putting the current average delay at 43 days. Assemblyman Bob Blumenfield, D-Los Angeles, said the current system can take up to 65 days to process the paperwork for a new business. AB 113 also says that last year, “budget cuts and insufficient staff pushed processing times to an all-time high of 85 days.” But the Secretary of State’s Office has said that at its worst, the backlog was 122 days.

Whatever figure is correct, the state is getting in the way of its own entrepreneurs and delaying future tax revenues.

It was not that long ago in California that an aspiring business owner could have his new business documentation filed by the Secretary of State’s Office while he waited.

Lawmakers seek to make state ‘a little bit better’

Fortunately, state lawmakers have realized that until a business is up and operating, the state isn’t getting its cut of revenue.

“This is our chance to make state government a little bit better,” Blumenfield said. “Five days or less [to process business permits] will make California one of the best.”

Every lawmaker who spoke in favor of the bill agreed. “California businesses face needless delays with the Secretary of State’s Office, due to budget cuts,” said freshman Assemblyman Jose Medina, D-Riverside. “These are the very people we should be supporting.”

It wasn’t just Medina who blamed the backlog on budget cuts. So did every Assembly Democrat who spoke on the bill. But other states have had revenue shortfalls as well during the national economic downturn. Yet in New York, it takes about five days to process a business permit. In Texas, it takes about three to five business days to process an application. For an extra $25, the state will process a business application in one business day. Texas also has its system automated online.

photo-6At a press conference Monday following AB 113’s passage, Assembly Speaker John Perez, D-Los Angeles, Blumenfield and Assemblyman Tom Daly, D-Anaheim, together with business stakeholders, hailed bipartisan support of AB 113 to “aid California businesses and help advance the state’s economic recovery.”

Representatives from the national Federation of Independent Business, California Manufacturers and Technology Association, The California Chamber of Commerce, Silicon Valley Leadership Group, and the California Business Roundtable attended the press conference in support of the bill.

John Kabateck with the NFIB called the delays  at the Secretary of State’s Office “outrageous,” and “an unnecessary burden on businesses in the state.”

Kabateck said there are 22,000 small businesses members in California and 300,000 members across the country.  There are 3.6 million small businesses in California. “We are very grateful to Speaker Perez for this much-needed fix.” Kabateck added, “Every big business was once a small business.”

Behind the problem: yet another state computer mess

But even with the announcement of help for the Secretary of State’s Office, some in the media still wanted to know how the office got so backlogged. According to Perez, “resource limitations” led to the backlog. “But we’re not here to assign blame,” he said.

Perez explained how his office decided last summer to lend the secretary of state $1.5 million out of Perez’s discretionary fund to clear up the backlog. He said he thought it was a one-time issue because of recent budget cuts.

However, lawmakers also want to give Bowen $8.9 million in the 2013-14 budget year to hire nearly 70 more staff members. Until a new computer system comes online in 2016, the Secretary of State’s Office would have to maintain the five-day processing standard, according to AB 113.

The new computer system is estimated to cost taxpayers $20 million. Initiated in 2011, the project is not expected to be completed until 2016.

Such delays are unheard of in the private sector, when months can matter in the life and death of a business, and extra employees can’t just be added to do the work.

The five-year time frame to implement a computer system has many scratching their heads, wondering how the state that is home to Silicon Valley can be so bungling and ineffectual with its computers. There have also been computer debacles with state attempts to upgrade its basic payroll system and with the Department of Motor Vehicles.


Write a comment
  1. us citizen
    us citizen 19 March, 2013, 13:15

    Sounds to me like there are just a bunch of lazy low lifes doing this work.

    Reply this comment
  2. John Galt
    John Galt 19 March, 2013, 13:58

    When Kabateck said “…there are 22,000 small businesses in California, and more than 300,000 small businesses across the country….” he probably meant member companies in his NFIB. Aren’t there about two million small businesses in California, and, approximately 15.0 million businesses nationwide?

    Reply this comment
  3. Diana
    Diana 19 March, 2013, 14:21

    Let me tell you what really is going on here. The Buildings that they are working out of do not have enough outlets for computers. Yes this is the truth. All the work is being done by hand with 3 by 5 cards. This is why they are going to have to hire more people and overtime. If they were smart which they are not. They would take that money and invest in outlets for computers and come into the 21st century,

    Reply this comment
  4. CalWatchdog
    CalWatchdog Author 19 March, 2013, 17:18

    Correction made Mr. Galt – thanks for catching this.

    Reply this comment
  5. Tom in SoCal
    Tom in SoCal 20 March, 2013, 08:47

    I have noticed over the past two years that it is taking the Secretary of State’s office 3-6 months just to process normal annual paperwork for corporations. Stuff they have had to do for years.

    Total incompetence.

    Reply this comment
  6. stevefromsacto
    stevefromsacto 20 March, 2013, 08:53

    “Behind the problem: yet another state computer mess”

    Just to remind you that the major problems in the state’s computer systems over the last 20 years were the results of screw-ups by private companies hired as government contractors.

    Reply this comment
  7. Hondo
    Hondo 20 March, 2013, 09:14

    Kalifornia is ground zero for the greatest minds in the computer business. Apple or Google could get a similar system( and just as big a system) up in running in 6 months. Or less. In 5 years, the system the state ordered, will be 5 years too old.
    It is beyond belief, that in the state that is the computer capitol of the world, the state can’t get an Atari system up, let alone a modern system.

    Reply this comment
  8. Tom in SoCal
    Tom in SoCal 20 March, 2013, 09:30

    It isn’t the contractors that are at fault. What I have read and suspected (I am in in the IT business) is that the state has unrealistic expectations of their projects. Also there have been many cases where project creep has taken hold. This increases the costs dramatically and if left unchecked can derail the entire project.

    Reply this comment
  9. C.J.
    C.J. 20 March, 2013, 23:01

    It is not beyond the realm of possibility that state booby-crats are delaying the processing of paperwork so that they can cherry-pick the good business ideas (and good business names).

    We’ve seem time and time again our state civil “servants” soliciting kickbacks from their pals in exchange for preferential treament.

    For a fee, they’ll put the good ideas on the backburner while their “friends” submit their own paperwork, which then gets processed ahead of the original ideas.

    I’ll bet a dollar…

    Reply this comment
  10. BobA
    BobA 21 March, 2013, 07:43


    What you are suggesting is that California is more or less ran like a banana republic where corruption is the norm rather than the exception.

    I’ve worked in countries where bribery is normal and expected and the only way to get things done. At least those countries are unpretentious about it unlike here where our city & state bureaucracies pretend to be moral and ethical and yet are every bit as corrupt as any 3rd world country (I call them “turd world” countries but that’s another story).

    Reply this comment
  11. Hondo
    Hondo 21 March, 2013, 09:42

    Of course the public union workers wouldn’t intentially screw up the system that would cost union jobs. Would they.

    Reply this comment

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