California Senate does not take up AB 1181 on 8/26, but does provide a carve out from GAAP for escrow companies.

Photo of desks on the floor of the California Senate. Lots of desks have a microphone on them to save the time of senators having to walk to a mic. Photo courtesy of Adobe Stock.

Although AB 1181 (which would change accounting for donated medicine which donors restrict from use in the U.S.) was scheduled for a vote today, the Senate choose not to take up the bill. They addressed maybe around half or more of the bills on the schedule.

Next session was announced as Friday, August 30. Perhaps they will address 1181 then.

Another carve out from GAAP

AB 412 was passed by the Assembly on 76-0 vote and passed today by the Senate overwhelmingly. Didn’t jot down the vote, but think there were probably zero votes in opposition.

Escrow companies in the state are required to have liquid assets greater than current liabilities by $25,000. Makes sense.

Escrow companies are required to submit audited financial statements that comply with GAAP.  Good idea.

However…

The big concern for small escrow companies is that adopting the new lease rules will require booking lots of assets and liabilities for cars, office rent, copiers, and such. Pulling the payments due in the next year into current liabilities but keeping the right-to-use assets as long term will cut down working capital, thus push lots of smaller companies into violation of state regulations, therefore put them out of business.

The solution is this legislation, which requires the calculation of working capital to exclude any liabilities related to leases.

Thus, GAAP is sidestepped for all escrow companies since GAAP lease accounting will cause adverse effects.

So, the idea of it being an unprecedented, unheard of idea for state legislatures to ever touch GAAP doesn’t quite hold up. This bill will not cause an irreparable rending of the space-time continuum. Not quite analogous to AB 1181 in terms of reach, but the state legislature obviously has no problem addressing GAAP requirements.

Micro-management of the economy

It was a great education watching the Senate in operation today. They moved fast and smoothly. I looked up several rules (move the call for example) and the proceedings made even more sense.

The education did not result in an overall improvement of my opinion of politicians.

Keep in mind these were Assembly bills that the Senate was considering for approval. A senator presented each bill on behalf of the Assembly author and addressed any questions which arose. Unfortunately, on three separate occasions, some other senator rose to raise a serious, substantive question about the bill, the answer to which might have changed the vote of one or many other senators.

Each of the three times the senator presenting the bill had to shrug his or her shoulders and respond with some short or long variation of I dunno. One senator was asked a question two different ways by different senators.  She had to answer I dunno each time. The questions all remained unanswered.

The micromanagement of every aspect of life was again visible. Two illustrations.

First, when the legislature passed the bill allowing recreational use of marijuana, the law required every product containing active marijuana ingredients to contain a specific symbol to identify the item contains marijuana. Good idea, especially for ingestibles (consider candy or baked goods) or liquids (consider infused sodas). Sounds like a mighty fine idea.

However…

The law specified the exact size of the symbol. I’ll guess it also specified the shape, font size, along with specific height, width, and even the thickness of border around the symbol.

Unfortunately…

Vape cartridges are too small to hold the mandatory symbol in the mandatory size.

So…

A new law is required which requires vape cartridges to carry a different specific, required size symbol.

Second, a new mandated warning label is required on the packaging for every firearm sold in the state giving the phone number for a specified national suicide prevention hotline.

The phone number must be listed on the instruction materials included with the weapon. And on all new signs installed by any gun shop.

I’ll make a guess the law specifies the font, size, ink color, and thickness of border around the disclosure for each place (box, instructions, or new sign) the disclosure must be made.

Finally, there is an old saying that one should never watch how sausage or legislation is made. Often it isn’t pretty. Today for example, the session was closed in honor of a beloved police officer who died in his sleep. A warm tribute was given to him. That was really nice.

Then the senate closed in memory of another person. Finally done? No. The senate then closed in memory of a beloved school board member with gracious tribute to his devotion to education and kids. And closed in memory of another dearly departed. And another tribute. And another. And another. And another, And another. And another.

All those families will be comforted by the news from their senator that the senate as its last item of the day closed the session in honor of their loved one.

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