CPRA: If You Buy an Elephant, You’ll Also Have to Feed It

Imagine if COVID-19 never happened and I asked you whether California could afford a new multimillion dollar enforcement agency, would you agree? Now imagine our current economy, 15.5% unemployment and a $54,000,000,000 state deficit. If I asked you whether California can afford to create and staff a brand new enforcement agency today, would you hesitate? Most people would.

On June 25, 2020, an investor from San Francisco announced that he had qualified his new privacy law (CPRA) for the November ballot. Now, it will be up to California to pay for this new idea. For those of us down on ground level, regardless of whether we think the CPRA is beneficial for Californians, the factual question remains: can the State really afford this? To be fair, the idea to create a new agency was developed far before the terrible economic situation we are facing today. But that’s just it – we are facing a terrible economic situation today.

CPRA’s new legal architecture is estimated to cost California’s private businesses billions of dollars in compliance and operationalization, not to mention years of hard work. In addition, CPRA is going to cost taxpayers millions of dollars each year into perpetuity. This is because CPRA, unlike its predecessor, requires Californians to pay for a brand new enforcement agency that comes with an old fashioned appetite for dollars. And as is typical, the agency’s appetite will likely grow over time as it requires more resources and human talent.

It should be noted, that tomorrow, July 1, 2020, the Attorney General (AG) will begin enforcing California’s existing privacy law – the California Consumer Privacy Act (CCPA).  Under the CCPA, the AG has the authority to investigate and cite businesses who fail to notify consumers of their privacy rights, the purpose for collecting any consumer personal data, and whether that data is being shared/sold to other companies.  So, if the CPRA doesn’t pass, California consumers are still protected.

CalChamber has not yet taken a formal position on the CPRA, including the creation of a new agency.  But, businesses are in a tough predicament on this issue.  The CPRA creates a new agency that will cost California’s general fund money.  When the state has a budget deficit, the state often looks to business to fill the hole through increased taxes – which it just did with the budget signed yesterday.  Given that the CPRA places an added burden on the general fund to support a new agency, it will likely lead to added tax pressure on business.  Conversely, if the CPRA does not pass and the AG does not have enough resources to enforce the CCPA, the next step is turning over enforcement of privacy laws to predatory trial attorneys, which is not a good alternative either.

Ultimately, this issue is now for the voters to decide in November when they choose whether to support or reject the CPRA. Like the old saying goes, “if you buy an elephant, you’ll also have to feed it.”