STATE BOARD OF COSMETOLOGY [ 49 PA. CODE CH. 7 ] Fees—Cosmetology [44 Pa.B. 2244]
[Saturday, April 12, 2014]The State Board of Cosmetology (Board) amends § 7.2 (relating to fees) to read as set forth in Annex A. The final-form rulemaking provides for an increase to the biennial license renewal fees for all licensees and increases certain application fees to cover the costs of processing those applications.
Effective Date
The final-form rulemaking will be effective upon publication in the Pennsylvania Bulletin. The new application fees will be implemented immediately upon publication of the final-form rulemaking. The new biennial renewal fees will be implemented with the license renewals that are due by January 31, 2015.
Statutory Authority
Section 16(c) and (d) of the act of May 3, 1933 (P. L. 242, No. 36) (63 P. S. § 522(c) and (d)), known as the Cosmetology Law (act), requires the Board to increase fees by regulation to meet or exceed projected expenditures if the revenues raised by fees, fines and civil penalties are not sufficient to meet expenditures over a 2-year period.
Background and Need for Amendment
Under section 16(d) of the act, the Board is required by law to support its operations from the revenue it generates from fees, fines and civil penalties. In addition, the act provides that the Board must increase fees if the revenue raised by fees, fines and civil penalties is not sufficient to meet expenditures over a 2-year period. The Board raises the vast majority of its revenue through biennial renewal fees. A small percentage of its revenue comes from application fees.
At the present fee level, the Board produces approximately $6.287 million in revenue over a 2-year period. Conversely, the Board is budgeted to spend $4.1 million in the current fiscal year and an estimated $4.223 million in Fiscal Year (FY) 2014-2015, or a deficit of over $2.036 million during the biennial cycle. The disparity in the amount of revenue capable of being produced over a 2-year period and the amount that is being expended requires the Board to now implement a 90% fee increase to sustain the required level of operations and eliminate mounting deficits. As of the end of FY 2012-2013, the Board has incurred deficits totaling nearly $3 million. The Department of State's Bureau of Finance and Operations (BFO) anticipates that the fees will enable the Board to recoup the existing deficits by the end of FY 2017-2018, avoid future deficits and place the Board back on solid financial ground. Without the increases to these fees, deficits will threaten the continuing viability of the Board.
Summary of Comments
The Board published the proposed rulemaking at 43 Pa.B. 1855 (April 6, 2013) with a 30-day public comment period. The Board did not receive public comments. On May 24, 2013, the Board received comments from the House Professional Licensure Committee (HPLC). On June 5, 2013, the Independent Regulatory Review Commission (IRRC) submitted comments to the Board.
The HPLC requested additional information pertaining to the major cost centers of the Board and explaining any significant increases in its expenditures. IRRC indicated that it would review the Board's response to the HPLC's comment as part of its determination of whether the rulemaking is in the public interest.
Response by the Board
In response, the Board first notes that it has been over 1 year since the BFO last met with the Board suggesting that the fee increase was necessary. Therefore, the Board asked the BFO to provide an updated analysis of the Board's fiscal situation based on current data. The BFO provided updated information to the Board which was discussed at the Board's regularly scheduled meeting on September 16, 2013. Although the renewable licensee count has increased slightly, there has not been appreciable improvement in the Board's financial condition since 1 year ago. At that time, the BFO projected that the total deficit balance in the Board's ''account'' at the end of FY 2012-2013 would be approximately $2,958,500; the actual balance as of June 30, 2013, is now projected to be in the area of $2,902,400. The Board attributes this $50,000 difference in part to the increase in renewable licenses from 131,335 to 134,035 over the past year. However, the increase is not statistically significant enough to warrant a change in the proposed fee increases. Based on the Board's current financial status, even with the increased fees, the Board will not have a positive balance in its account until FY 2017-2018.
As for the major cost centers of the Board, the largest cost center for the Board is ''enforcement and investigation'' which has averaged approximately $1.2 million annually since FY 2006-2007. All costs incurred by the regulatory enforcement inspectors and professional conduct investigators associated with inspections of salons and schools and investigations of complaints involving licensees of the Board, licensed salons and schools are included in this cost center. Enforcement and investigation costs account for about 1/3 of the Board's expenditures each year. Board administration costs and costs associated with the legal office combined account for another 35% of the Board's expenditures. Board administration costs include all costs associated with receiving and reviewing applications and issuing licenses. These costs have averaged slightly more than $1 million annually since FY 2006-2007. ''Legal office'' costs are those costs associated with the prosecution of disciplinary actions involving licensees of the Board and defending those actions on appeal. This cost center also includes the costs associated with the promulgating regulations pertaining to the practice of the profession. Legal office costs have averaged approximately $500,000 per year since FY 2006-2007. Finally, the costs associated with the Professional Compliance Office and hearing expenses average $200,000 and $135,000 per year, respectively. Together these five cost centers make up 80% of the Board's expenditures. The remaining 20% consists of costs associated with the Commissioner's office, revenue office, departmental services and Board member expenses.
The major driving force behind the fee increase is not significant increases in expenditures. In fact, expenditures have not increased appreciably since FY 2006-2007. Total expenditures follow: FY 2007-2008—$3,659,505.80; FY 2008-2009—$3,840,825.42; FY 2009-2010—$3,816,867.37; FY 2010-2011—$3,877,457.59; FY 2011-2012—$3,475,451.32; and FY 2012-2013—$3,868,533.90. The Board has held the line on expenditures over these years. The need for a fee increase became apparent in FY 2007-2008 when expenditures significantly outpaced revenues for the first time (by approximately $500,000). As a result, the Board began regulatory efforts to increase its fees in 2009 (anticipating that the new fees would be in place for the 2011 renewals). However, due to circumstances beyond the Board's control, that fee increase was not implemented. With the change in administration in 2011, the Board's efforts were refocused as the Board worked with the BFO to explore options to reduce expenditures to mitigate any necessary fee increase. As a result, in FY 2011-2012, expenditures dropped from the prior year by approximately $400,000. However, in FY 2012-2013, expenditures rebounded back to the prior level. Unfortunately, starting in FY 2007-2008, the Board began incurring annual deficits, where annual expenditures outpaced annual revenues by amounts averaging approximately $665,000 each year. As a result, the balance in the Board's account has been depleted, to the degree that the Board now has a negative ''balance'' of nearly $3 million. Because the increased biennial renewal fees are not expected to be implemented until the renewals in January 2015, the BFO projects the total deficit will reach nearly $4 million before the situation begins to turn around.
Description of Amendments
Based upon the previous expense and revenue estimates provided to the Board, the Board is amending § 7.2 to increase the biennial renewal fees for all classes of licensees. The biennial renewal fee for cosmetologists, nail technicians, estheticians and natural hair braiders will increase from $35 to $67. The biennial renewal fee for cosmetology and limited practice teachers will increase from $55 to $105. The biennial renewal fee for cosmetology and limited practice salons will increase from $60 to $114. Finally, biennial renewal of cosmetology school licenses will increase from $150 to $285.
In addition, as a result of the review of the application fees conducted by the BFO, the Board is increasing the fees for the processing of applications for initial licensure of cosmetology and limited practice salons from the current level of $55 to $100. The fee schedule would increase the fee for cosmetology schools from $160 to $180. In addition, the Board is increasing the fees required to process a change in a salon license when an inspection is required from $55 to $85 and for reinspection of a salon or school from $40 to $85. In addition, the fee for processing a change to a salon license when an inspection is not required is increasing from $15 to $30. Finally, the Board is increasing the fees for processing an application for licensure by reciprocity from $20 to $60.
Fiscal Impact
The final-form rulemaking will increase the biennial renewal fees for all licensee classifications. There are currently about 134,035 licensees expected to renew their licenses during the 2015 and 2016 renewal cycles. In addition, applicants for various licenses will incur greater costs associated with processing applications and conducting inspections. The final-form rulemaking should not have other fiscal impact on the private sector, the general public or political subdivisions.
Paperwork Requirements
The final-form rulemaking will require the Board to alter some of its forms to reflect the new fees. However, the final-form rulemaking will not create additional paperwork for the private sector.
Sunset Date
The act requires the Board to monitor its revenue and costs on a fiscal year and biennial basis. Therefore, a sunset date has not been assigned.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on March 25, 2013, the Board submitted a copy of the notice of proposed rulemaking, published at 43 Pa.B. 1855, to IRRC and the Chairpersons of the HPLC and the Senate Consumer Protection and Professional Licensure Committee (SCP/PLC) for review and comment.
Under section 5(c) of the Regulatory Review Act, IRRC, the HPLC and the SCP/PLC were provided with copies of the comments received during the public comment period, as well as other documents when requested. In preparing the final-form rulemaking, the Board has considered all comments from IRRC, the HPLC, the SCP/PLC and the public.
Under section 5.1(j.2) of the Regulatory Review Act (71 P. S. § 745.5a(j.2)), on February 26, 2014, the final-form rulemaking was deemed approved by the HPLC and the SCP/PLC. Under section 5.1(e) of the Regulatory Review Act, IRRC met on February 27, 2014, and approved the final-form rulemaking.
Contact Person
Further information may be obtained by contacting Kelly Diller, Board Administrator, State Board of Cosmetology, P.O. Box 2649, Harrisburg, PA 17105-2649, ra-cosmetology@pa.gov.
Findings
The Board finds that:
(1) Public notice of proposed rulemaking was given under sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1201 and 1202) and the regulations promulgated thereunder, 1 Pa. Code §§ 7.1 and 7.2.
(2) A public comment period was provided as required by law and no comments were received.
(3) This final-form rulemaking is necessary and appropriate for administering and enforcing the authorizing act identified in this preamble.
Order
The Board, acting under its authorizing statutes, orders that:
(a) The regulations of the Board, 49 Pa. Code Chapter 7, are amended by amending § 7.2 to read as set forth in Annex A.
(b) The Board shall submit this order and Annex A to the Office of General Counsel and the Office of Attorney General as required by law.
(c) The Board shall certify this order and Annex A and deposit them with the Legislative Reference Bureau as required by law.
(d) This order shall take effect on publication in the Pennsylvania Bulletin.
KARIE M. SCHOENEMAN,
Chairperson(Editor's Note: For the text of the order of the Independent Regulatory Review Commission relating to this document, see 44 Pa.B. 1534 (March 15, 2014).)
Fiscal Note: Fiscal Note 16A-4515 remains valid for the final adoption of the subject regulation.
Annex A TITLE 49. PROFESSIONAL AND VOCATIONAL STANDARDS PART I. DEPARTMENT OF STATE Subpart A. PROFESSIONAL AND OCCUPATIONAL AFFAIRS CHAPTER 7. STATE BOARD OF COSMETOLOGY GENERAL PROVISIONS § 7.2. Fees.
Fees charged by the Board are as follows:
Licensure of cosmetologist, nail technician,
esthetician or natural hair braider
$10Licensure of cosmetology teacher or limited
practice teacher
$10Licensure of cosmetology salon or limited
practice salon
$100Licensure of cosmetology school
$180Licensure by reciprocity
$60Registration of cosmetology apprentice
$70Biennial renewal of nail technician license
$67Biennial renewal of esthetician license
$67Biennial renewal of cosmetologist license
$67Biennial renewal of natural hair braider license
$67Biennial renewal of cosmetology teacher or
limited practice teacher license
$105Biennial renewal of cosmetology salon or
limited practice salon license
$114Biennial renewal of cosmetology school license
$285Approval of cosmetology school supervisor
$20Change in cosmetology salon or limited
practice salon (inspection required)
$85Change in cosmetology salon or limited practice
salon (no inspection required)
$30Change in cosmetology school (inspection
required)
$110Change in cosmetology school (no inspection
required)
$35Reinspection of cosmetology salon or limited
practice salon or cosmetology school
$85Certification of student or apprentice training
hours
$30Verification of license, registration, permit or
approval
$15[Pa.B. Doc. No. 14-765. Filed for public inspection April 11, 2014, 9:00 a.m.]
