CSHB 143 (L&C) specifically addresses the $500,000.00 Real Estate Surety Fund (Fund), its calculation and use and results from concerns expressed by a number of real estate licensees.

The purpose of the bill is to make changes in the way the Fund is administered. In addition to the biennial licensing fee, a real estate license also pays a fee to the Fund in lieu of obtaining a corporate surety bond. This fee may not exceed $125 per biennium but is adjusted as the balance of the Fund varies before setting the fee. The primary purpose of the Fund is to provide payments of up to $10,000 when a complaint against a real estate licensee is found to be justified. Expenditures from the Fund may also be made for real estate education purposes, staff to carry out those associated duties, and other associated costs.

CSHB 143 (L&C) addresses a number of concerns that the 2,000+ real estate licensees have regarding the Fund. The bill proposes to permit income on the Fund to be returned to the Fund. Money appropriated to the Fund would not lapse. The Fund may be appropriated for claims against the Fund, for hearing and legal expenses directly related to Fund operations and claims, and for real estate educational purposes. The additional language of CSHB 143 (L&C) makes it clear just what the Fund is to be used for and thus addresses licensee's concerns for accountability.

Additionally, the legislation provides that the Fund balance to be used for setting the surety fund fee will be an average balance during the two-year licensing cycle. This is important because currently, the fee is set based on the balance of the Fund at a certain time. Since the Fund balance fluctuates with the licensing cycle, a fee set on the Fund balance at a point in time would not reflect the true need of the Fund or a true fee for licensees. The Fund balance's floor and maximum levels will not change from the current $250,000 and $500,000. An important addition in this legislation is the requirement that the Department of Commerce and Economic Development provide the Real Estate Commission (Commission) with a quarterly report on the Fund's income, expenses, and balance.

Another important item that concerns licensees is the return to the Fund of money expended for certain items. For example, the Fund currently spends some $4,000 to $6,000 every two years publishing and updating the Landlord/Tenant Handbook. The Commission charges $1 for each Handbook but this money, which came out of the Fund, does not return to the Fund but instead goes to the General Fund. This is also true of any receipts from education seminars and instructor development courses sponsored by the Commission. A provision of this legislation indicates that when the Fund pays for something that it is reimbursed for, those moneys are returned to the Fund.

Currently one employee is 100% paid from the Fund. This employee can only perform Fund-related duties and is prohibited from assisting the Commission and its Executive Secretary in administrative activities. The Commission staff is small (3 individuals) and is currently experiencing a great turnover (the Executive Secretary is retiring, the publications specialist (paid for from the Fund) position has been vacant for some time, and the licensing examiner has transferred to another position. With the change in this legislation, the staff position paid for from the Fund could assist in other duties of Commission staff.

It is important to note that even with the changes in this bill, the Legislature retains the ultimate reins on Fund expenditures because the Legislature will still have to authorize the overall budget of the Commission and the Fund.

I would appreciate your support of this measure.